Chapter 8. Monopoly, Oligopoly, and Monopolistic Competition
Bob owns a trout farm with monopoly power in North Carolina. Bob's optimal output occurs where marginal revenue _____. Because of monopoly power, Bob's supply curve _____. A. equals marginal cost; does not exist B. exceeds marginal cost; does not exist C. Equals marginal cost; is upward-sloping D. exceeds marginal cost; is perfectly inelastic
A
Suppose a monopoly can separate its customers into two groups. If the monopoly practices price discrimination, it will charge the lower price to the group with: A. the higher price elasticity of demand. B. the lower price elasticity of demand. C. the fewer close substitutes. D. The answer cannot be determined with the information given.
A
A monopolist sells cable subscriptions in a small town and finds that it can sell 100 subscriptions when the price is $15 a week and an additional 75 subscriptions when the price is $10 a week. The MC for the provision of the cable is $5 a week. There are no fixed costs.Look at the scenario A Small-Town Monopolist. Compared to charging a single price, the deadweight loss: A. increases when this monopolist price-discriminates. B. decreases when this monopolist price-discriminates. C. stays the same when this monopolist price-discriminates. D. is equal to zero.
B
In 1999, a judge declared that Microsoft was a monopolist. Assuming that Microsoft has a linear demand curve and that it is maximizing its profits at its current level of output, we may conclude that if Microsoft were to increase its price, its total revenue would: A. rise. B. fall. C. remain unchanged. D. There is insufficient information to make a determination.
B
The main reason a monopoly engages in price discrimination is that: A. it wants to discriminate against a particular ethnic group. B. doing so increases its profits. C. it wants to discourage potential competitors. D. by charging a lower price to some people, it may succeed in discouraging efforts to regulate it.
B
If a firm wants to charge different customers different prices, it must be: A. a price taker. B. in perfect competition. C. a price setter. D. a price setter in perfect competition.
C
If a monopolist is producing a quantity that generates MC < MR, then profit: A. is maximized. B. is maximized only if MC = P. C. can be increased by increasing production. D. can be increased by decreasing production.
C
Marginal revenue for a monopolist is: A. equal to price. B. greater than price. C. less than price. D. equal to average revenue.
C
Suppose that you build a high-speed, magnetically powered transportation system from New York to Los Angeles, and you are the only firm providing this service. High fixed costs resulting from the enormous quantity of capital used in this system enable decreasing average cost for any conceivable level of demand. Your monopoly would result from: A. control of a scarce resource or input. B. technological superiority. C. increasing returns to scale. D. government-set barriers.
C
Suppose that you build a new jumbo jet that can carry five times more passengers than any other competitor. You have high 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: A. sunk costs. B. location. C. economies of scale. D. government restrictions.
C
When a firm finds that its ATC of production decreases as it increases production, this firm is said to be experiencing: A. profit maximization. B. economic profit. C. economies of scale. D. a barrier to entry.
C
In contrast to perfect competition, a monopoly: A. produces more at a lower price. B. produces where MR > MC. C. may have lower economic profits in the long run. D. produces less at a higher price.
D