practice quizzes 15

Refer to Figure 15-6. What is the area of deadweight loss?

The triangle 1/2[(X − Z) × (K − J)]

Which of the following is not an example of price discrimination?

NOT - A local supermarket chain offers a "buy three get one free" deal.

Refer to Figure 15-2. A profit-maximizing monopoly's total revenue is equal to

P5 × Q3.

Which of the following governmental actions would eliminate some or all of the inefficiency that results from monopoly pricing?

Policymakers can regulate prices that the monopoly charges.

Refer to Figure 15-6. What is the monopoly price and quantity?

Price = X; quantity = J

Which of the following can eliminate the inefficiency inherent in monopoly pricing?

Price discrimination

Refer to Figure 15-3. A profit-maximizing monopoly will produce an output level of

Q3

When a monopolist increases the amount of output that it produces and sells, average revenue

decreases, and marginal revenue decreases.

Refer to Figure 15-1. The shape of the average total cost curve in the figure suggests an opportunity for a profit-maximizing monopolist to take advantage of

economies of scale.

Refer to Figure 15-2. If the monopoly firm is currently producing Q4 units of output, then a decrease in output will necessarily cause profit to

increase if the output is between Q3 and Q4.

Which of the following would be most likely to have monopoly power?

A local cable TV provider

Refer to Table 15-1. At what price will the monopolist maximize his profit?

$18

Refer to Table 15-3. If the monopolist can engage in perfect price discrimination, what is the marginal revenue from selling the 5th tie?

$120

Refer to Table 15-3. If the monopolist can engage in perfect price discrimination, what is the average revenue when 7 ties are sold?

$130

Scenario 15-1 A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $40, its average revenue is $80, and its average total cost is $44. Refer to Scenario 15-1. At Q = 500, the firm's profit is

$18,000.

Refer to Scenario 15-1. At Q = 500, the firm's marginal cost is

$40.

Refer to Table 15-3. If the monopolist can engage in perfect price discrimination, what is the total revenue when 3 ties are sold?

$450

Refer to Figure 15-4. What area measures the monopolist's profit?

(B − Y) × O

A monopolist can sell 300 units of output for $50 per unit. Alternatively, it can sell 301 units of output for $49.60 per unit. The marginal revenue of the 301st unit of output is

-$70.40.

Refer to Table 15-2. The monopolist has fixed costs of $1,000 and has a constant marginal cost of $2 per unit. If the monopolist were able to perfectly price discriminate, how many units would it sell?

900

The profit-maximization problem for a monopolist differs from that of a competitive firm in which of the following ways?

A competitive firm maximizes profit at the point where average revenue equals marginal cost; a monopolist maximizes profit at the point where average revenue exceeds marginal cost.

Which of the following is not an example of price discrimination by a firm?

A natural gas company charging all customers a higher rate in the winter than in summer

Refer to Figure 15-2. The demand curve for a monopoly firm is depicted by curve

A.

Which of the following statements is not correct?

Antitrust laws automatically prevent mergers between companies that produce similar products.

Which of the following can defeat the profit-maximizing strategy of price discrimination?

Arbitrage

Refer to Figure 15-4. What price will the monopolist charge in order to maximize profit?

B

Which of the following is a necessary characteristic of a monopoly?

The firm is the sole seller of its product.

Which of the following statements is not correct?

The government may break up a natural monopoly to lower the price charged to customers.

Which of the following statements is true?

When a monopoly firm sells an additional unit of output, its revenue increases by an amount less than the price.

When an industry is a natural monopoly,

a larger number of firms will lead to a higher average total cost.

Granting a pharmaceutical company a patent for a new medicine will lead to

a product that is priced higher than it would be without the exclusive rights.

Monopolies are socially inefficient because the price they charge is

above marginal cost.

In order for antitrust laws to raise social welfare, the government must

be able to determine which mergers are desirable and which are not.

A movie theater can increase its profits through price discrimination by charging a higher price to adults and a lower price to children if it

can prevent children from buying the lower-priced tickets and selling them to adults.

If a monopolist is able to perfectly price discriminate,

consumer surplus and deadweight losses are transformed into monopoly profits.

For a firm to price discriminate,

it must have some market power.

A firm cannot price discriminate if

it operates in a competitive market.

If a profit-maximizing monopolist faces a downward-sloping market demand curve, its

marginal revenue is less than the price of the product.

The deadweight loss associated with a monopoly occurs because the monopolist

produces an output level less than the socially optimal level.

If a pharmaceutical company discovers a new drug and successfully patents it, patent law gives the firm

sole ownership of the right to sell the drug for a limited number of years.

The law passed in 1914 that strengthened the government's powers and authorized private lawsuits was

the Clayton Antitrust Act.

A government-created monopoly arises when

the government gives a firm the exclusive right to sell some good or service.

A natural monopoly occurs when

there are economies of scale over the relevant range of output.

Price discrimination is a rational strategy for a profit-maximizing monopolist when

there is no opportunity for arbitrage across market segments.