Assignment 7

Which of the below shows the correct relationship between demand and marginal revenue?

B

Which is true with respect to the demand of a monopolist?

Marginal revenue is less than price

As new firms enter a monopolistically competitive market, profits of existing firms

decline, and product diversity in the market increases

If the monopoly firm is currently producing Q3 units of output, then a decrease in output will necessarily cause profit to

decrease

Based upon the information shown, what price will Bearclaws charge to maximize profits?

$14

Allowing an inventor to have the exclusive rights to market her new invention will lead to (i) a product that is priced higher than it would be without the exclusive rights. (ii) desirable behavior in the sense that inventors are encouraged to invent. (iii) higher profits for the inventor.

(i), (ii), and (iii)

Which of the following markets impose deadweight losses on society? (i) perfect competition (ii) monopolistic competition (iii) monopoly

(ii) and (iii) only

Drug companies are allowed to be monopolists in the drugs they discover in order to

- increase the availability of expensive but useful medications . - increase the overall welfare of society through better health because drug companies continually produce better medications. - encourage research.

Welfare loss of monopoly is the area of:

0J

Based on the graph below, what is the difference between the perfectly competitive equilibrium level of output and the pure monopolist equilibrium level of output?

20

Based on the diagram below, what is the difference between the perfectly competitive level of output and the pure monopolist level of output?

50

Refer to the below graph. The monopolist's profits:

Cannot be determined from the information given

Suppose that a monopolist calculates that at present output and sales, marginal cost is $1.00 and marginal revenue is $2.00. He or she could maximize profits by:

Decreasing price and increasing output

Refer to the below graph. This monopolist:

Has a loss per unit equal to DE

Suppose that a monopolist calculates that at present output and sales levels, marginal revenue is $1.00 and marginal cost is $2.00. He or she could maximize profits or minimize losses by:

Increasing price and decreasing output

Which area represents the deadweight loss from monopoly?

J+H

To maximize profit, a monopolist would choose what on a graph?

MC = MR

Many people believe that monopolies charge any price they want to without affecting sales. Instead, the output level for a profit-maximizing monopoly is determined by:

Marginal cost = marginal revenue

A profit-maximizing monopoly will charge a price of

P2

Refer to the below graph. The pure monopolist firm will charge a price of:

P3

A profit-maximizing monopolist facing the situation shown in the graph below for long run should:

Shut down and exit the market

Total cost formula

TC= TVC + FC or TC= VC (Q) +FC

A benefit of a monopoly is

greater creativity by authors who can copyright their novels

An oligopoly

is a type of imperfectly competitive market

A monopoly is an inefficient way to produce a product because

it produces a smaller level of output than would be produced in a competitive market

Because a monopolist must lower its price in order to sell another unit of output,

marginal revenue is less than price

An oligopoly is a market in which

there are only a few sellers, each offering a product similar or identical to the products offered by other firms in the market

Economic welfare is generally measured by

total surplus

Welfare loss of monopoly is the area of:

triangle above equilibrium next to MC curve

Based up on the information shown, what is total revenue for Bearclaws, given that it maximizes profits?

​$980

The profit-maximizing monopolist will usually set a price:

In the elastic portion of the demand curve

Compared to the perfectly competitive firm, a pure monopoly:

Is able to use barriers to entry and maintain positive economic profits in the long run

Which panel could represent the demand curve facing a local cable television provider if that firm in a monopolist?

Panel A

Entry and exit drive each firm in a monopolistically competitive market to a point of tangency between its

demand curve and its average total cost curve

When the market for a good is a natural monopoly, this results in

dominance by a single producer of the good

A monopolistically competitive market

is imperfectly competitive, but not all imperfectly competitive markets are monopolistically competitive