Chapter 8
D
Q: Marginal revenue for a monopolist is: a. equal to average revenue. b. equal to price. c. greater than price. d. less than price.
C
Q: If a monopolist is producing a quantity that generates MC < MR, then profit: a. is maximized. b. can be increased by decreasing production. c. can be increased by increasing production. d. is maximized only if MC = P.
A
Q: In 1999, a judge declared that Microsoft was a monopolist. Assuming that Microsoft has a linear demand curve and that it is maximizing its profits at its current level of output, we may conclude that if Microsoft were to increase its price, its total revenue would: a .fall. b. There is insufficient information to make a determination. c. remain unchanged. d. rise.
B
Q: In contrast to perfect competition, a monopoly: a. produces where MR > MC. b. produces less at a higher price. c. may have lower economic profits in the long run. d. produces more at a lower price.
B
Q: Look at the figure Demand, Revenue, and Cost Curves. Figglenuts-R-Us is a monopolist in the figglenut market. Figglenuts-R-Us will sell _____ figglenuts and set a price of _____ to maximize profits. a. 100; $50 b. 70; $65 c. 150; $46 d. 120; $40
A
Q: Look at the figure PPV, which shows the demand and marginal revenue for a pay-per-view football game on cable TV. Assume that the marginal cost and average cost are a constant $20. If the cable company is a monopoly, how much is producer surplus when the monopolist maximizes profit? a. $160 b. $0 c. $20 d. $80
D
Q: Look at the figure PPV, which shows the demand and marginal revenue for a pay-per-view football game on cable TV. Assume that the marginal cost and average cost are a constant $40. If the cable company practices perfect price discrimination, then it will sell _____ subscriptions. a. 10 b. 8 c. 0 d. 6
B
Q: Look at the figure The Monopolist. At the profit-maximizing level, this monopolist will: a. incur a loss equal to the area (P1 - P4) Q1. b. earn a profit equal to the area (P2 - P3) Q2. c. earn a profit equal to the area (P2 - P4) Q2. d. break even.
A
Q: Look at the figure The Profit-Maximizing Output and Price. Assume that there are no fixed costs and AC = MC = $200. The profit-maximizing output for a monopolist is: a. 8. b. 20. c. 0. d. 16.
B
Q: Look at the table Prices and Demand. Professor Dumbledore has a monopoly on magic hats. The marginal cost of producing a hat is $18. Suppose Dumbledore can perfectly price-discriminate. How many hats will he produce? a. 4 b. 6 c. 3 d. 5
D
Q: Suppose a monopoly can separate its customers into two groups. If the monopoly practices price discrimination, it will charge the lower price to the group with: a. The answer cannot be determined with the information given. b. the fewer close substitutes. c. the lower price elasticity of demand. d. the higher price elasticity of demand.
D
Q: Suppose that you build a high-speed, magnetically powered transportation system from New York to Los Angeles, and you are the only firm providing this service. High fixed costs resulting from the enormous quantity of capital used in this system enable decreasing average cost for any conceivable level of demand. Your monopoly would result from: a. control of a scarce resource or input. b. technological superiority. c. government-set barriers. d. increasing returns to scale.
D
Q: Suppose that you build a new jumbo jet that can carry five times more passengers than any other competitor. You have high fixed costs due to the quantity of capital used to build the jets, and average cost is decreasing for all levels of demand. In this case, your monopoly would result from: a. sunk costs. b. location. c. government restrictions. d. economies of scale.
D
Q: The main reason a monopoly engages in price discrimination is that: a. it wants to discriminate against a particular ethnic group. b. by charging a lower price to some people, it may succeed in discouraging efforts to regulate it. c. it wants to discourage potential competitors. d. doing so increases its profits.
D
Q: When a firm finds that its ATC of production decreases as it increases production, this firm is said to be experiencing: a. profit maximization. b. economic profit. c. a barrier to entry. d. economies of scale.
D
Q: A monopolist sells cable subscriptions in a small town and finds that it can sell 100 subscriptions when the price is $15 a week and an additional 75 subscriptions when the price is $10 a week. The MC for the provision of the cable is $5 a week. There are no fixed costs. Look at the scenario A Small-Town Monopolist. Compared to charging a single price, the deadweight loss: a. stays the same when this monopolist price-discriminates. b. is equal to zero. c. increases when this monopolist price-discriminates. d. decreases when this monopolist price-discriminates.
A
Q: Bob owns a trout farm with monopoly power in North Carolina. Bob's optimal output occurs where marginal revenue _____. Because of monopoly power, Bob's supply curve _____. a. equals marginal cost; does not exist b. equals marginal cost; is upward-sloping c. exceeds marginal cost; does not exist d. exceeds marginal cost; is perfectly inelastic
C
Q: If a firm wants to charge different customers different prices, it must be: a. a price taker. b. in perfect competition. c. a price setter. d. a price setter in perfect competition.