Quiz #11

When natural monopolies are regulated, the goal is to: set price equal to marginal cost, even if marginal cost is less than average total cost. set price equal to average total cost, so as to maximize consumer surplus and allow the firm to break even. have the firm produce the quantity at which marginal revenue equals marginal cost. have the firm produce the quantity at which marginal revenue equals average total cost.

set price equal to average total cost, so as to maximize consumer surplus and allow the firm to break even.

What is the amount of profit earned by a monopolist producing 500 units with an average total cost of $30 per unit, if the current selling price is $38? $4,000 $11,000 $8,000 $19,000

$4,000

Why are monopoly firms able to earn long-run economic profits while perfectly competitive firms cannot? Monopolies can charge any price in the long run and earn an economic profit. Perfectly competitive firms have barriers to entry whereas monopolies do not. Monopolies have barriers to entry whereas perfectly competitive firms do not. Monopolies have easy exit strategies that allow firms to charge higher prices and generate profits in the long run.

Monopolies have barriers to entry whereas perfectly competitive firms do not.

See Lesson 31 Check-in, Question #3 for monopoly graph practice problem

See Lesson 31 Check-in, Question #3 for monopoly graph practice problem

See Quiz #11, Question #11 for monopoly cost curves practice problem

See Quiz #11, Question #11 for monopoly cost curves practice problem

See Quiz #11, Question #9 for monopoly cost curves practice problem

See Quiz #11, Question #9 for monopoly cost curves practice problem

A natural monopoly arises in an industry when: a firm has no sunk costs. a firm has large economies of scale. a firm has very low fixed costs. a firm has a perfectly elastic demand curve.

a firm has large economies of scale.

Effective price discrimination by a monopolist results in: a reduced deadweight loss and more profit for the monopolist. an increased deadweight loss and less profit for the monopolist. an increased deadweight loss and more profit for the monopolist. a reduced deadweight loss and less profit for the monopolist.

a reduced deadweight loss and more profit for the monopolist.

Which of the following is not an example of a barrier to entry? a copyright an innovative product a patent economies of scale

an innovative product

Which of these is an example of first-degree price discrimination? half-price discounts for children going to movies an owner of a rare stamp who offers it for auction on eBay a bulk discount on clothes after the purchase of a certain fixed amount early-bird discounts given to people who have dinner before 6 P.M.

an owner of a rare stamp who offers it for auction on eBay

A price ceiling imposed on a monopoly: always creates a surplus. always creates a shortage. can increase total surplus. can enhance the market power of the monopolist.

can increase total surplus.

If an airline wants to practice price discrimination so as to enhance its profit levels, it will: charge higher fares to those with a more elastic demand. charge higher fares to those with a less elastic demand. determine a fare for each passenger according to the costs of serving them. charge everyone the same fare.

charge higher fares to those with a less elastic demand.

Price discrimination is: charging different prices to different customers based on different costs of serving them. charging different prices to different customers based on their willingness to pay. an illegal practice. a practice that leads to the same outcome as would public ownership of a monopoly.

charging different prices to different customers based on their willingness to pay.

If a monopolist is currently producing at a point where marginal revenue is greater than marginal cost, then the firm: could increase profit by increasing price. could lower its total cost by producing more. could increase profit by producing more. could lower its total cost by increasing price.

could increase profit by producing more.

If a monopoly practices perfect price discrimination, it will: eliminate consumer surplus. maximize consumer surplus. eliminate producer surplus. erode its own market power.

eliminate consumer surplus.

If a monopolist engages in price discrimination, it is with the goal of: improving goodwill with the public. increasing profit. lowering cost. making the demand for its good less elastic.

increasing profit.

For a monopolist, marginal revenue is: less than price. equal to demand. equal to price. greater than demand.

less than price.

Compared to a firm in perfect competition, a monopoly produces a ________ quantity and charges a ________ price. lower; lower lower; higher higher; lower higher; higher

lower; higher

A regulatory agency has imposed marginal cost pricing on a natural monopolist. We should expect that the natural: monopolist's average total cost of production is rising over the relevant range of production. monopolist will eventually go out of business. monopolist will earn economic profits. monopolist will earn only a normal profit.

monopolist will eventually go out of business.

A movie theatre charges senior citizens lower ticket prices than it charges other moviegoers. Assuming that this pricing strategy increases the profits of the theatre, we can conclude that senior citizens must have a ________ for seeing movies than other moviegoers. greater demand lower demand more elastic demand less elastic demand

more elastic demand

Which one is NOT an example of rent-seeking behavior? recruiting the most talented management executives lobbying Congress for laws limiting imports hiring lawyers to extend patent protection securing a government franchise

recruiting the most talented management executives

All of the following describe the monopolists' ability to engage in price discrimination EXCEPT: the ability to resale the product. the ability to prevent arbitrage. ability to separate consumers in groups based on elasticity. market power.

the ability to resale the product.

If the regulated price for a natural monopoly is set equal to marginal cost: the firm will produce the socially efficient level of output. the firm will make either positive or zero economic profits. the firm will not cover all of its costs. other firms will seek to enter the industry and compete at this price.

the firm will not cover all of its costs.

One difference between a monopoly and perfect competition is that: a monopolist seeks to maximize profit; a perfect competitor does not. a perfect competitor seeks to maximize profit; a monopolist does not. the marginal revenue curve for a perfect competitor is downward sloping, and for a monopolist it is horizontal. the marginal revenue curve for a monopolist is downward sloping, and for a perfect competitor it is horizontal.

the marginal revenue curve for a monopolist is downward sloping, and for a perfect competitor it is horizontal.

A monopoly arises when: there is a firm desiring to compete in many markets. there is a firm wanting to maximize profits. there are barriers to the entry of other firms. there is government intervention to establish and enforce a price ceiling.

there are barriers to the entry of other firms.

Firms that offer discounts for students are practicing: first-degree price discrimination. third-degree price discrimination. price skimming. product differentiation.

third-degree price discrimination.