Chapter 12 quiz

​Scenario: Mr. Olivander has a monopoly on supplying magic wands. The table shows the demand schedule for magic wands per day. Price Quantity Demanded ​$100 0 ​$90 1 ​$65 2 ​$55 3 ​$35 5 ​$20 9 ​$15 12 Mr. Olivander used to sell two wands per day. Now he plans to cut back his sale to only one wand. The price effect of this plan is a​ ________, and the quantity effect of this plan is a​ ________ in his revenue.

$25 increase, $65 decrease

is a market structure where only one firm provides a good or service that has no close substitutes.

A monopoly

Which of the following statements is​ true? A. A monopoly is a priceminusmaker because it faces a downwardminussloping demand curve. Your answer is correct.B. A perfectly competitive firm is a priceminusmaker because it faces a downwardminussloping demand curve. C. A perfectly competitive firm is a priceminustaker because it faces a downwardminussloping demand curve. D. A monopoly is a priceminustaker because it faces a downwardminussloping demand curve.

A monopoly is a price maker because it faces a downward-sloping demand curve

For a firm with market​ power, the price effect is the​

Decrease in revenue arising from the reduction in price necessary to sell another unit of output

The monopoly market structure is characterized by​

High barriers to entry

Which of the following is a key difference between perfect competition and​ monopoly?

In perfect​ competition, no one firm can influence​ price, but with​ monopoly, a single seller sets the price.

When a firm obtains market power through barriers to entry created not by the​ firm, but by the​ government, it is referred to as​

Legal Market Power

The two types of market power that arise from barriers to entry are​

Legal Market Power and Natural Market Power

Which of the following characterizes the relation between total revenue and marginal revenue for a firm with market​ power?

Marginal revenue is zero when total revenue is maximized

Greenaqua Corp. was given the exclusive right to produce and sell its newly introduced water purifier for 20 years. The right granted to Greenaqua is an example of a​

Patent

When firms charge different prices to different consumers for the same good or​ service, it is referred to as​ ________.

Price discrimination

After the market changes from perfect competition to a​ monopoly,

Social surplus decreases

Second-degree price discrimination occurs when_______

consumers are charged different prices based on the characteristics of their purchases

Price discrimination is never perfect because it

is impossible to know every consumers' willingness to pay

If a monopoly engages in first-degree price discrimination,

deadweight loss is zero

At the profit-maximizing level of production of a​ monopolist,

marginal revenue equals marginal cost