Economics Quiz 9

1. When a monopolist practices price discrimination, compared with a single price monopolist, monopoly profits will

increase

1. (Figure: the profit maximizing output and price) Use figure. Assume that there are no fixed costs and AC=MC=$200. If this were a perfectly competitive industry, producer surplus would be:

$0

1. (Figure PPV) The figure 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 consumer surplus is there when the monopolist maximizes profit?

$80

1. Natural Monopolies are not likely to include:

A diamond mining company

1. (Figure: PPV) The figure 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, deadweight loss will be:

0$

1. (Table: Lunch) This table shows market demand for picnic lunches for people taking all day rafting trips on the river. Joe has a firm providing this service, and his marginal cost and average cost for each lunch are a constant $4. If hoe is a monopolist, how many lunches will he produce in the long run?

30

1. Critics of the NCAA argue that the NCAA monopolizes college athletics and prevents student athletes form earning money while in college if this is true what type of entry barrier does the NCAA have?

Control of a scare resource or input

The MAIN reason a monopoly engages in price discrimination is that:

Doing so increases its profits

1. Suppose that you build a new jumbo jet that fan carry five times more passengers than can any other competitor. You have 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:

Economics of scale

1. At the profit maximizing level of production, a perfectly competitive industry will produce an ___ amount of output, and a monopolist produces an ___ amount of output.

Efficient: inefficient

1. A monopolist responds to an increase in marginal cost by _______ price and _____ input.

Increasing; decreasing

1. If a monopolist is producing a quantity that generates MC=MR, then profit:

Is maximized

1. Most electric, gas, and water companies are examples of____ monopolies.

Natural

1. The market structure in which price discrimination cannot occur is:

Perfect competition

1. If a monopoly has a linear demand curve and is producing at the profit maximizing level of output, at that level of output demand is:

Price elastic

1. (Figure: Short-Run Monopoly) The profit maximizing quantity of output is quantity:

R

1. Suppose a perfectly competitive market is suddenly transformed into one that operates as a monopoly market. We would expect price to ___, output to___, consumer surplus to___, producer surplus to____, and deadweight loss to___.

Rise; fall; fall; rise; rise

1. If the regulation of a monopoly results in a price equal to marginal cost but the price is below the average total cost:

The firm will need subsidies to stay in business

1. Network Externalities exist when a good's value to the consumer rises as:

The number of people who use the good increases

1. A monopoly can choose the price, or it can choose the quantity, but it cannot choose price and quantity independent of each other.

True

1. A profit maximizing monopoly will never set price in the inelastic region of the demand curve.

True

1. An oligopoly that engages in price discrimination will charge higher prices to customers with the most inelastic demand.

True

1. Consumer surplus in monopoly is smaller than it is I the same industry operating under perfect competition.

True

1. Consumer surplus is higher under a single price monopoly than it is under a perfectly price discriminating monopoly.

True

1. when a monopolist practices price discrimination as opposed to setting a single price, the monopolist sells and increases profits.

True

A monopoly increases price by limiting the quantity supplied to a market.

True

1. If a product's usefulness increases with the number of users, it:

Has network externalities

Price Discrimination is the practice of:

Charging different prices to buyers of the same good