Monopoly homework

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If a profit maximizing monopolist sells 80 paintings at a price of ​$2,000 ​each, having bought them from various artists for a total cost of ​$88,000​, the monopolist has a profit of ?

72,000

According to the Copyright Act of​ 1790, a​ copyright's life was limited to 28​ years, including extensions.​ Today, copyrights are valid for the entire period of the​ author's life plus another 70 years. A copyright for a book that was published before 1923 is likely to have expired by​ now, but books published after 1923 are still under copyright protection. Research has shown​ that, of all the books that are in print​ today, a larger proportion were published before 1923. This is despite the fact that the number of books being published every year has been steadily increasing. What do you think could explain the fact that most of the books available today are from the period before​ 1923?

A copyright gives the owner an exclusive right to a piece of intellectual​ property, thus allowing them to act as a monopoly. Monopolists typically reduce quantity supplied to drive up the price of the good that they produce

Which of the following statements are true regarding a​ monopoly? A. The price chosen by the firm is the one that helps the firm earn the highest profit. B. The demand curve faced by a firm has a negative slope. C. The​ firm's equilibrium​ long-run profit is zero. D. The seller is concerned with the behavior of the other sellers.

A. The price chosen by the firm is the one that helps the firm earn the highest profit. B. The demand curve faced by a firm has a negative slope.

Which of the following statements are true regarding perfect​ competition? ​ A. The price of a good is equal to its marginal cost. B. There are significant restrictions on entry into the industry. C. The firms are price takers earning zero profits in the​ long-run. D. There are few firms each selling an identical product.

A. The price of a good is equal to its marginal cost. C. The firms are price takers earning zero profits in the​ long-run.

Which of the following are properties of a​ monopoly? ​ A. There is only one seller. B. ​Price-taker. C. ​Price-maker. D. There are high barriers to entry. E. There are a few close substitutes for the goods and services produced.

A. There is only one seller. C. ​Price-maker. D. There are high barriers to entry.

People who need​ life-saving drugs cannot do without them and surely will be willing to pay very high prices for them. So why​ can't producers of​ life-saving drugs charge any price that they wish​ to?

A​ monopolist, such as one selling​ life-saving drugs, still faces​ downward-sloping demand curves.

Both competitive firms and monopolies produce at the level where marginal cost equals marginal revenue. ​Then, other things remaining the​ same, why is price lower in a competitive market than in a​ monopoly?

Competitive markets face perfectly elastic demand and marginal​ revenue, while monopolies face​ downward-sloping demand and marginal revenue.

All of the following statements about the​ monopolist's demand curve are​ true except: If the price is above the​ mid-point of the demand​ curve, the quantity effect dominates. B. If the quantity effect​ dominates, lowering price increases revenue. C. If the price effect​ dominates, lowering price increases revenue. D. If the price is below the​ mid-point of the demand​ curve, the price effect dominates.

If the price effect​ dominates, lowering price increases revenue.

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.

Why is electricity generation better off as a natural​ monopoly?

Industries like electricity generation experience economies of scale since they have high fixed costs.​ Thus, it is cheaper to have a single firm provide a larger quantity.

How does a natural monopoly differ from a firm that becomes a monopoly due to network​ effects?

Natural monopolies result from economies of​ scale, while network effects come from the benefits to consumers from having many people use a service.

Edgar says that a single firm in the wind power industry is unlikely to have a significant degree of monopoly power for an extended period of time. Since the cost of producing an additional unit of wind energy is so​ low, a large number of firms can enter the market and compete away economic profits. Do you agree with this​ analysis?

No, Edgar's argument ignores potentially large fixed costs that will act as a barrier to entry

Janet knows a lot of people who do not like​ Marmite®, a yeast extract that is used as a spread on toast. She says that Marmite is so unpopular that​ Unilever, the company that manufactures​ Marmite®, cannot possibly have any monopoly power. Do you agree with this​ analysis?

No, monopoly power is based on whether a good has any close​ substitutes, not whether your friends like the product.

A significant difference between monopolies and competitive firms is that

a​ monopoly's demand curve is the​ industry's demand​ curve, while the competitive​ firm's demand curve is perfectly elastic.

A monopolist should continue to increase production until marginal

cost is equal to marginal revenue.

When a firm exercises its monopoly​ power, the cost to society is the​

deadweight loss

Monopolists do not use a supply curve because they

do not vary production based on market price.

By forcing monopolists to set price equal to marginal​ cost,

economic loss can occur.

First degree price discrimination

eliminates deadweight loss by producing to where marginal cost equals price.

The case for a natural monopoly is characterized by high ; costs and decreasing ; costs.

fixed; average

if a monopoly selling 300 computers at ​$3,000 decides to lower its price to ​$2,000 in order to sell 100 more​ computers, then the firm

has negative marginal revenue.

When compared to​ competition, monopoly prices are ? and quantity produced is ? The purpose of antitrust policy is to ? this situation.

higher; lower; reverse

Eliminating a monopoly

increases market quantity

Network externalities and economies of scale both can contribute to the formation of a monopoly.​ However, they differ in that network externalities deal with

increasing benefits and economies of scale deal with decreasing costs

A monopoly is selling workbooks to students in a college town and is currently maximizing profits by charging ​$70.00 per book. The marginal cost of textbooks

is less than $70

For a​ monopolist, total revenue ; calculated the same way as in perfect​ competition; marginal revenue ; equal to price.

is; is not

hen a firm exercises its monopoly​ power, social surplus is ? when compared to a perfectly competitive market.

lower

compared to a perfectly competitive​ market, consumer surplus is ? producer surplus is ? and deadweight loss is ?

lower; higher; higher

Natural market power is created by​ ___________, and arises due to​ ____________.

market forces; controlling a key resource

An example of an industry or service that is a natural monopoly is​ ____________.

national defense

A monopoly has ; and ; Price is set ; marginal cost.

one seller; many buyers; greater than

Total revenue for a monopolist is maximized

only if marginal revenue is 0

If Nike developed a particularly strong weave to the fabric used in their running​ shoes, they could petition the government for a ; in order to protect their profits. If a competitor tried to promote their brand of running shoes by using​ Nike's theme song in their​ commercial, Nike could sue for ; infringement.

patent; copyright

All of the following describe a monopoly market​ structure, except:

seller is a price taker

Legal market power is created by​ ___________, and arises due to​ ____________.

the government; patents

In​ reality, practicing price discrimination is difficult​ because:

the monopolist​ doesn't know each​ consumer's willingness to pay.

A social planner would choose the same outcome as that which results in ? ​equilibrium, because that outcome ? social surplus.

the perfectly competitive; maximizes

To say that a good has network effects means that the​ ____________.

value of the product increases as more people use it.

Market power relates to the ability of sellers to affect​ __________, and arises because of​ ____________.

​prices; barriers to entry.


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