10: Pure Monopoly: Videos with Questions

Required information Marginal Revenue Video Which of the following statements about a monopolist is true, according to the video? Multiple Choice ◉ A monopolist's marginal revenue curve is a horizontal line at the market price. ◉ A monopolist's demand curve is a horizontal line at the market price. ◉ A monopolist's marginal revenue curve lies below its demand curve. ◉ A monopolist's marginal revenue curve is the same as its demand curve.

A monopolist's marginal revenue curve lies below its demand curve.

Required information Profit Maximization Video According to the video, how are monopolists similar to perfectly competitive firms? Multiple Choice ◉ They both can affect the market price by controlling the amount of output they product. ◉ They both produce where MR = MC. ◉ They both always have positive economic profit. ◉ They both face horizontal demand curves for their product.

They both produce where MR = MC.

Required information Regulation Video Based on the video, why are natural monopolies often regulated? Multiple Choice ◉ To ensure that the firm is able to charge a price high enough to stay profitable. ◉ To ensure that health and safety standards are being adhered to by the natural monopolist. ◉ To ensure that consumers receive lower prices than they would occur without regulation. ◉ To ensure that a quality product is being offered to consumers.

To ensure that consumers receive lower prices than they would occur without regulation.

Pure monopoly refers to Multiple Choice ◉ any market in which the demand curve to the firm is downward-sloping. ◉ a standardized product being produced by many firms. ◉ a single firm producing a product for which there are no close substitutes. ◉ a large number of firms producing a differentiated product.

a single firm producing a product for which there are no close substitutes.

The demand curve faced by a pure monopoly is Multiple Choice ◉ vertical. ◉ horizontal. ◉ upward-sloping. ◉ downward-sloping.

downward-sloping.

The problem with adopting a normal profit pricing policy for a natural monopoly is that Multiple Choice ◉ profits will be positive. ◉ losses will be large and sustained. ◉ it is allocatively efficient. ◉ it is not allocatively efficient.

it is not allocatively efficient.

Third-degree price discrimination is more common in service industries because Multiple Choice ◉ low price buyers will find it virtually impossible to resell the products of such industries to high price buyers. ◉ the costs of providing such industries' products to different groups of buyers vary dramatically. ◉ the price elasticity of demand is the same for all groups of buyers in these industries. ◉ all firms in these industries have significant monopoly power over price.

low price buyers will find it virtually impossible to resell the products of such industries to high price buyers.

Many people believe that pure monopolies charge any price they want to without affecting sales. Instead, the output level for a profit-maximizing pure monopoly occurs where Multiple Choice ◉ marginal cost equals average revenue. ◉ marginal revenue equals average cost. ◉ average total cost equals average revenue. ◉ marginal revenue equals marginal cost.

marginal revenue equals marginal cost.

Required information Economic Efficiency Video This video explains why: Multiple Choice ◉ monopolies are likely to be more allocatively efficient than perfectly competitive firms. ◉ monopolies are likely to be more productively efficient than perfectly competitive firms. ◉ there is no deadweight loss associated with a monopoly. ◉ monopolies are likely to be less allocatively efficient than perfectly competitive firms.

monopolies are likely to be less allocatively efficient than perfectly competitive firms.

Pure monopolies are said to be allocatively inefficient because Multiple Choice ◉ they produce where MR > MC. ◉ price is less than marginal cost. ◉ price is equal to marginal cost. ◉ price is greater than marginal cost.

price is greater than marginal cost.

Required information Characteristics of a Pure Monopoly Video Which of the following goods was not mentioned in this video? Multiple Choice ◉ satellite radio ◉ electricity ◉ natural gas ◉ pharmaceutical drugs

satellite radio

Required information Price Discrimination - Third Degree Video What example was used in the video? Multiple Choice ◉ why seniors often receive discounts at the movie theater ◉ why business class airline tickets cost more than coach airline tickets ◉ why students often pay less for popular software programs than the rest of the population ◉ why restaurants and bars often have a "Happy Hour" discount

why seniors often receive discounts at the movie theater