homework 9

A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $30, its average revenue is $60, and its average total cost is $34. Refer to Scenario 15-1. At Q = 500, the firm's marginal cost is a. $30. b. less than $30. c. greater than $34. d. $34.

a. $30.

Refer to Figure 15-5. Based upon the information shown, what are total costs for Bearclaws, given that it maximizes profits? a. $700. b. $490. c. $784. d. $980.

a. $700.

Which of the following is not an example of a barrier to entry? a. An entrepreneur opens a popular new restaurant. b. Mighty Mitch's Mining Company owns a unique plot of land in Tanzania, under which lies the only large deposit of Tanzanite in the world. c. A pharmaceutical company obtains a patent for a specific high blood pressure medication. d. A musician obtains a copyright for her original song.

a. An entrepreneur opens a popular new restaurant.

Refer to Figure 15-8.What is the socially efficient price and quantity for this natural monopolist? a. H and L b. D and J c. A and J d. F and K

a. H and L

Monopolies are socially inefficient because the price they charge is a. above marginal cost. b. equal to marginal revenue. c. equal to demand. d. above demand.

a. above marginal cost.

If government regulation sets the maximum price for a natural monopoly equal to its marginal cost, then the natural monopolist will a. earn economic losses. b. produce a lower quantity of output than is socially optimal. c. earn economic profits. d. earn zero economic profits.

a. earn economic losses.

A monopolist's profits with price discrimination will be a. higher than if the firm charged just one price because the firm will capture more consumer surplus. b. lower than if the firm charged a single, profit-maximizing price. c. higher than if the firm charged a single price because the costs of selling the good will be lower. d. the same as if the firm charged a single, profit-maximizing price.

a. higher than if the firm charged just one price because the firm will capture more consumer surplus.

If a profit-maximizing monopolist faces a downward-sloping market demand curve, its a. marginal revenue is less than the price of the product. b. average revenue is less than marginal revenue. c. average revenue is less than the price of the product. d. marginal revenue is greater than the price of the product.

a. marginal revenue is less than the price of the product.

A perfectly price-discriminating monopolist is able to a. maximize profit and produce a socially optimal level of output. b. maximize profit, but not produce a socially optimal level of output. c. exercise illegal preferences regarding the race and/or gender of its employees. d. produce a socially optimal level of output, but not maximize profit.

a. maximize profit and produce a socially optimal level of output.

Which of the following statements is true? a. Average revenue is the same as price for competitive firms but not monopoly firms. b. When a monopoly firm sells an additional unit of output, its revenue increases by an amount less than the price. c. When a competitive firm sells an additional unit of output, its revenue increases by an amount less than the price. d. Average revenue is the same as price for monopoly firms but not competitive firms.

b. When a monopoly firm sells an additional unit of output, its revenue increases by an amount less than the price.

For a monopolist, when the price effect is greater than the output effect, an increase in output sold causes marginal revenue to be a. maximized. b. negative. c. positive. d. zero.

b. negative.

Price discrimination is a rational strategy for a profit-maximizing monopolist when a. consumers are unable to be segmented into identifiable markets. b. there is no opportunity for arbitrage across market segments. c. the monopolist finds itself able to produce only limited quantities of output. d. the monopolist wishes to increase the deadweight loss that results from profit-maximizing behavior.

b. there is no opportunity for arbitrage across market segments.

Refer to Figure 15-4.What area measures the monopolist's profit? a. (K − C) × W b. 0.5[(K − C) × (Z − T)] c. (K − B) × W d. (L − A) × T

c. (K − B) × W

Which of the following is not an example of price discrimination by a firm? a. Children's meals at a restaurant b. Coupons in the Sunday newspaper c. A natural gas company charging all customers a higher rate in the winter than in the summer d. A senior citizens' discount

c. A natural gas company charging all customers a higher rate in the winter than in the summer

When a firm has a natural monopoly, the firm's a. marginal cost always exceeds its average total cost. b. total cost curve is horizontal. c. average total cost curve is downward sloping. d. marginal cost curve must lie above the firm's average total cost curve.

c. average total cost curve is downward sloping.

When a monopolist increases the amount of output that it produces and sells, average revenue a. increases, and marginal revenue increases. b. decreases, and marginal revenue increases. c. decreases, and marginal revenue decreases. d. increases, and marginal revenue decreases.

c. decreases, and marginal revenue decreases.

Refer to Figure 15-1. The shape of the average total cost curve in the figure suggests an opportunity for a profit-maximizing monopolist to take advantage of a. diseconomies of scale. b. increasing marginal cost. c. economies of scale. d. diminishing marginal product.

c. economies of scale.

Refer to Figure 15-5. Based upon the information shown, what price will Bearclaws charge to maximize profits? a. $10.50. b. $7. c. $12. d. $14.

d. $14.

Refer to Table 15-1. At what price will the monopolist maximize his profit? a. $24 b. $6 c. $12 d. $18

d. $18

Refer to Figure 15-5. Based upon the information shown, how many units will Bearclaws produce to maximize profits? a. 105. b. 90. c. 130. d. 70.

d. 70.

Which of the following can defeat the profit-maximizing strategy of price discrimination? a. Consumer surplus b. Deadweight loss c. Market power d. Arbitrage

d. Arbitrage

Refer to Figure 15-6. What is the monopoly price and quantity? a. Price = B; quantity = Y b. Price = C; quantity = X c. Price = B; quantity = X d. Price = A; quantity = X

d. Price = A; quantity = X

Refer to Figure 15-6. What is the socially efficient price and quantity? a. Price = B; quantity = X b. Price = C; quantity = Y c. Price = A; quantity = X d. Price = B; quantity = Y

d. Price = B; quantity = Y

Which of the following is a necessary characteristic of a monopoly? a. The firm is located in a small geographic market. b. The firm's product has many close substitutes. c. The firm generates a large economic profit. d. The firm is the sole seller of its product.

d. The firm is the sole seller of its product.

Refer to Figure 15-6.What is the area of deadweight loss? a. The triangle 1/2[(A − B) × (Y − X)] b. The rectangle (A − C) × X c. The rectangle (A − C) × X plus the triangle 1/2[(A − C) × (Y − X)] d. The triangle 1/2[(A − C) × (Y − X)]

d. The triangle 1/2[(A − C) × (Y − X)]