Ch. 10 h.w.

30 Monopolies will price discriminate if which of the following is true?

At the current price, one group of consumers is elastic while another group is not as responsive (inelastic)

.06 An increase in fixed costs for a monopoly will do which of the following?

decrease economic profit

09 A monopoly produces a level of output where demand is ______________ (elastic / inelastic / unit elastic).

elastic

10.02 Imagine two firms with identical cost structures that do not exhibit economies of scale at high levels of production. One is competing in a perfectly competitive market and one is a monopoly. In the long run which of the following is true?

he monopoly will charge a higher price than the perfectly competitive firm

.04 If a monopoly faces a demand curve that is downward-sloping, then marginal revenue will be which of the following?

less than the price For a firm facing a downward-sloping demand curve, to sell one more unit the firm has to decrease the price (and we assume the price is decreased for all units here). Since the marginal revenue depends on the change in total revenue, it is less than the price since the price was lowered for all units.

20 The market demand in a monopoly market differs from the demand the monopoly itself faces by

nothing; monopoly is the only firm in the market, so it does not differ.

18 Consider the following case: price is $100 and 20 units are sold, then price drops to $99 and 21 units are sold.Calculate the marginal revenue: $________.

79 Marginal revenue = change in revenue / change in quantity. Revenue increases from $2,000 ($10020) to $2,079 ($9921) and quantity changes by 1. The change in revenue can also be broken down into a decrease in revenue of $20 from reducing the price from $100 to $99 for the original 20 units, along with an increase in revenue of $99 from the additional unit sold at that price. Together, this means that the change in revenue is $79 ($99-$20) because the revenue gained from selling that additional good is greater than the loss in revenue from reducing the price.

.05 All firms that are profit-maximizing, regardless of whether the demand curve is horizontal or downward-sloping, will produce where which of the following is true?

Marginal cost is equal to marginal revenue

21 If a monopoly is not producing at the profit-maximizing quantity, then it must be the case that which of the following is true?

Marginal cost is greater than marginal revenue b Marginal revenue is greater than marginal cost c Marginal revenue is negative d All of the above are possible

10.01 A profit-maximizing monopoly will produce where which of the following is true? Select all that apply.

Marginal revenue is less than the price bMarginal revenue is equal to the marginal cost cMarginal revenue is positive

29 If a monopoly increases the quantity above the profit-maximizing level which of the following will be true? Select all that apply.

Marginal revenue will be lower than before bMarginal cost will be greater than marginal revenue cPrice would decrease

If a monopoly faces a demand curve that is entirely above the average cost function, in the long run they will likely do what?

continue to operate

07 A decrease in variable costs will cause the monopoly to do what?

decrease the price

11 A movie theater price discriminates by charging children and seniors lower prices than adults. The theater is assuming that children and seniors have a more ______________(elastic / inelastic) demand than adults.

elastic. both change increase rev

08 A monopoly facing a demand curve lower than the average cost curve over wide ranges of output will likely do what?

go out of business

13 A monopoly will always charge a price that is ______________ (greater than / less than / equal to) marginal cost.

greater than

15 When comparing a monopoly and a perfectly competitive market where the costs are the same, the monopoly will produce a ______________ (greater / lower / same) quantity.

lower perfectly competitive market will produce where the quantity demanded equals the quantity supplied, while a monopoly will produce where marginal revenue is equal to marginal cost. Marginal revenue is less than the demand (price), so the profit-maximizing quantity will be less than that in a perfectly competitive market.

9 A monopoly would never produce where marginal revenue is negative because which of the following is true?

marginal cost is postive Because marginal cost is always positive, marginal revenue will always be positive. On top of that, if marginal revenue is negative, revenue is decreasing while costs are increasing, so profit is automatically falling.

14 The supply curve in a perfectly competitive market is the sum of all of the individual firm's marginal cost curves. What is the supply curve for a monopoly?

monoplogy has no supply curve

27 In the figure above, the firm's profit would be ______.

postive The monopoly price is above the average cost, leading to a positive economic profit.

26 In the figure above, if a monopoly charged the price of F and produced the monopoly quantity, then there would be a(n) ________.

shotratage then the quantity demanded would be greater than the monopoly quantity, thus there would be a shortage. This shortage would result in an ultimate increase in price.

16 monopoly producing where marginal revenue equals marginal cost will do which of the following? Select all that apply.

t cannot increase quantity and make a greater profit cIt is producing at the highest profit possible in their market dIt is producing where the additional revenue is just equal to the additional cost for each output

28 If a monopoly increased the price above the profit maximizing level, __________.

total rev decrease R = MC, and this point will be on the elastic portion of the demand curve. Any deviation from this point will decrease profits. Raising price on the elastic portion of the demand curve will also decrease revenues, since the increase in price is responded by a relatively large decrease in quantity.

22 Which situation would be labeled a "natural monopoly"?

A firm has large economies of scale, and is thus able to sell the good for a lower price than would if there were many firms.

10.25 25 In the figure above, the price the monopoly would charge would be ___ (E / F).

E. After choosing the quantity, the monopoly would set the price based on the demand curve (not the average cost curve).

10.03 f a firm faces increasing returns to scale, average costs will do which of the following?

above margianl cost Increasing returns to scale means that average costs are decreasing. Marginal cost is always less than average cost when average costs are decreasing.

12 A monopoly will not necessarily be technically efficient because which of the following is true?

bariiers to entry keep firms form entering

10.24 qty where a mnopoly will produce

c he monopoly will set the profit-maximizing quantity where marginal revenue equals marginal cost.

Copyrights on movies, books, and music act as a barrier to entry in order to give people what?

incentive to create