Homework 9

What is the consumer surplus under perfect price discrimination? consumer surplus:

$0

What is the total welfare under a single‑price monopoly? total welfare:

$294

What is the total welfare under perfect price discrimination? total welfare:

$392

What is the consumer surplus under a single‑price monopoly? consumer surplus:

$98

a. Price discrimination is illegal under all circumstances. True False

False

c. Firms do not have an incentive to price discriminate because it results in some groups paying a lower price than others. True False

False

d. Perfect price discrimination occurs when perfectly competitive firms charge some people higher prices than others. True False

False

f. Price discrimination only occurs with natural monopolies. True False

False

b. Airlines are often able to price discriminate. True False

True

e. All else being equal, single price monopolists earn lower profits than firms that can price discriminate. True False

True

Generally, _______________________ will be more able to earn long-run profits than ________________________________ due to _______________________

a) Monopolies b) Perfectly Competitive Firms c) Barriers to Entry

The graph illustrates a monopoly with constant marginal cost and zero fixed cost. Use the graph to show the profits and deadweight loss (DWL) for this firm. Assume that potential competitors to the monopoly face prohibitive barriers to entry. These profits are a) economic. b) accounting. c) economic and accounting, which are the same for monopolies. In the long run, economic profits for this monopoly will be a) zero. b) negative. c) increasing. d) positive.

a) economic. d) positive.

The price of pumpkins is currently below the min of average total costs. What is likely to happen on the pumpkin market in the Long Run? a) The firms are making positive profits so some firms will enter the market, which will decrease prices and bring profits to zero. b) The firms are making zero profits already so there will be no exit or entry of firms. c) The firms are making losses so some firms will exit the market, which will increase prices and bring profits to zero. d) The firms are making positive profits so some firms will enter the market, which will increase prices and bring profits to zero.

c) The firms are making losses so some firms will exit the market, which will increase prices and bring profits to zero.

Consider a constant cost industry. Which of the following will describe the Long Run supply curve? a) The marginal cost curve above the minimum of average variable costs b) The long run supply curve will be a horizontal line at P>minATC c) The long run supply curve will be a horizontal line at P=minATC d) The long run supply curve will be a horizontal line at P=minATC

c) The long run supply curve will be a horizontal line at P=minATC

The graph shows the demand curve faced by a pure monopolist. a. Move the interactive point to identify where marginal revenue (MR) is equal to marginal cost (MC) for this monopolist, use the shape to identify the firm's profits, and then answer the question and complete the sentence. b. What is the monopolist's profit‑maximizing output, price, and profit?

output: 40 Units Price: $60 Profits: $800