Chapter 9 Micro

is the same as welfare loss

A deadweight loss

A

A monopolist has four distinct groups of customers: group A has an elasticity of demand of 0.2, group B has an elasticity of demand of 0.8, group C has an elasticity of demand of 1.0, and group D has an elasticity of demand of 2.0. The group paying the highest price for the product will be group:

relatively low marginal tax rates

All of these are barriers to entry into an industry, EXCEPT

an executive, at the corporation's expense, hiring a limousine to drive him one block whenever it is raining.

An example of x-inefficiency is

Yes; the industry is concentrated.

Assume that Coca-Cola has a market share of 40% and Pepsi has a market share of 30%. If Pepsi and Coca-Cola attempt to merge, will the Federal Trade

profit will increase.

Assume that at a given level of output, a monopoly firm has marginal revenue of $9, its average total cost is $9, and marginal cost is $7. If this firm were to continually increase its output, then

higher elasticities of demand than customers attending the evening shows.

At movie theaters, lower prices are charged for matinees than for evening shows of the same film. The customers attending the matinees have

12 units

Based on the graph, what is the equilibrium output for this monopolist?

Big John is not practicing price discrimination

Big John is a folk artist who works near Maggie Valley, North Carolina, in the Smoky Mountains. One of his most popular types of sculptures are bears he sculpts from tree stumps using a chain saw. He typically charges more for the larger sculptures. This is an example of which type of price discrimination?

maximize profit when MR = MC.

Both a monopoly and a perfectly competitive firm: For a competitive firm, the profit-maximizing quantity is found where marginal revenue (MR) equals marginal cost (MC). For a monopoly, the profit-maximizing quantity is where:

3,538 The HHI is determined by summing the squares of each firm's market share. The equation looks like: 502 + 252 + 202 + 32 + 22, or 2,500 + 625 + 400 + 9 + 4 = 3,538.

Five firms comprise the entire catfish farming industry. Each firm represents the following percentage of market share: firm 1, 50%; firm 2, 25%; firm 3, 20%; firm 4, 3%; and firm 5, 2%. What is the Herfindahl-Hirschman Index (HHI) for the catfish farming industry?

2050

If an industry is made up of five firms with market shares of 25%, 20%, 20%, 20%, and 15%, respectively, its Herfindahl-Hirschman Index is

average cost pricing rule

If the public utility commission allows a water company to earn a normal profit, then it is enforcing a(n)

Average Total Cost (ATC)

In the United States, regulated monopolists are typically subject to a rule that says price must be equal to

has market power

Ken's Barber Shop has a tremendous amount of power over the market equilibrium price for haircuts in its geographic area. This means that Ken's Barber Shop:

a patent.

Kip invents a device that extracts water from a tuna fish can after it is opened. Kip most likely has a monopoly on this invention because he has: August of 2010, Kodak and Apple were suing each other over the use of preview image technology:

third-degree price discrimination.

Large airlines might have come close to perfecting price discrimination by creating an incredibly complex pricing system designed to fill as many seats as possible. But once the Internet made it easier for flyers to compare fares, the strategy fell apart. Southwest Airlines founder Herb Kelleher said, "The high-fare, last-minute, walk-up business customer" is "gone forever." Kelleher is referring to what economists would call

occurs when a firm has some control over price.

Market power:

$0.75

Metropolitan Power and Light is a monopoly in the electrical generation and distribution industry. If it charges $1 per kilowatt hour, its marginal revenue could be:

$2

Metropolitan Power and Light is a monopoly in the electrical generation and distribution industry. If its marginal revenue equals $2 when its output is 100,000 kilowatt hours, what is its marginal cost if it is maximizing profits?

The monopolist will operate at a loss.

Metropolitan Power and Light is a monopoly in the electrical generation and distribution industry. In 2009, its output was at a point at which price was lower than average total cost. What happens to a monopolist in this situation?

rent seeking

Metropolitan Power and Light is a monopoly in the electrical generation and distribution industry. It has spent a tremendous amount of money in lobbying efforts to limit the number of permits granted for wind and solar power generators. The company fears that these generators will create competition in the market. This lobbying effort is an example of:

not change

Metropolitan Power and Light is a monopoly in the electrical generation and distribution industry. It was maximizing its profit when its output was 100,000 kilowatt hours. After the nuclear accident in Japan it was forced to install new equipment for backup cooling of its nuclear plants. Based on this information, its level of output in the short run should

there are close substitutes for the product or service it provides

Microsoft is not a monopoly in the tablet market because:

second-degree price discrimination

Suppose a water utility company charges a residential customer $1.50 per 1,000 gallons for the first 30,000 gallons of water used and $1.00 per 1,000 gallons for any amounts used in excess of 30,000 gallons of water. The water utility is practicing: When a business offers its customers bulk discounts, they are practicing:

$139

Suppose that a monopolist decides to produce and sell 10 units that can be sold in the market for $150 each. If the firm wishes to sell 11 units, it must charge $149 each. The marginal revenue from selling the 11th unit is

rent seeking.

The Archer Daniels Midland Company is an enormous conglomerate that grows and produces many food products. It is sometimes called the "supermarket to the world." The company has given large donations to politicians. If these donations affect policies regarding the environment or agricultural price supports, then these financial gifts are an example of

unfair competitive practices and deceptive acts.

The Federal Trade Commission Act prohibits:

the industry demand curve.

The demand curve for a monopolist is

abe

The following figure depicts a monopoly market. Which area represents deadweight loss from monopoly?

Q3

The following figure represents a natural monopoly. What is the level of output the monopoly will produce if it follows the average cost pricing rule?

Q5

The following figure represents a natural monopoly. What is the level of output the monopoly will produce if it follows the marginal cost pricing rule?

It would rise above $15.

The market price in a perfectly competitive market is $15 and 2,000 units are bought and sold.

The price would rise above $15 and the number of units sold would fall below 2,000 units.

The market price in a perfectly competitive market is $15 and 2,000 units are bought and sold. Assume the market becomes monopolized. What would you expect to happen?

It is reduced to Zero

What happens to consumer surplus when a firm engages in perfect price discrimination?

Some customers must have a greater willingness to pay for the product than other consumers, and the firm must be able to know what prices customers are willing to pay. A firm must possess market power The firm must be able to divide up, or segment, the market. Sellers must have some market power.

Which of the following is a requirement for successful price discrimination?

a movie theater that offers a student discount

Which of the following is an example of price discrimination?

a restaurant that offers early-bird specials

Which of the following is an example of price discrimination?

Under perfect competition, the demand curve is perfectly elastic; under a monopoly, the demand curve has elastic, unit-elastic, and inelastic portions

Which of the following statements is TRUE about the relationship between a firm's demand curve under perfect competition and monopoly?

The product must be a durable good.

Which of these is NOT a condition necessary for price discrimination?