Chapter 12 quiz
Scenario: Mr. Olivander has a monopoly on supplying magic wands. The table shows the demand schedule for magic wands per day. Price Quantity Demanded $100 0 $90 1 $65 2 $55 3 $35 5 $20 9 $15 12 Mr. Olivander used to sell two wands per day. Now he plans to cut back his sale to only one wand. The price effect of this plan is a ________, and the quantity effect of this plan is a ________ in his revenue.
$25 increase, $65 decrease
is a market structure where only one firm provides a good or service that has no close substitutes.
A monopoly
Which of the following statements is true? A. A monopoly is a priceminusmaker because it faces a downwardminussloping demand curve. Your answer is correct.B. A perfectly competitive firm is a priceminusmaker because it faces a downwardminussloping demand curve. C. A perfectly competitive firm is a priceminustaker because it faces a downwardminussloping demand curve. D. A monopoly is a priceminustaker because it faces a downwardminussloping demand curve.
A monopoly is a price maker because it faces a downward-sloping demand curve
For a firm with market power, the price effect is the
Decrease in revenue arising from the reduction in price necessary to sell another unit of output
The monopoly market structure is characterized by
High barriers to entry
Which of the following is a key difference between perfect competition and monopoly?
In perfect competition, no one firm can influence price, but with monopoly, a single seller sets the price.
When a firm obtains market power through barriers to entry created not by the firm, but by the government, it is referred to as
Legal Market Power
The two types of market power that arise from barriers to entry are
Legal Market Power and Natural Market Power
Which of the following characterizes the relation between total revenue and marginal revenue for a firm with market power?
Marginal revenue is zero when total revenue is maximized
Greenaqua Corp. was given the exclusive right to produce and sell its newly introduced water purifier for 20 years. The right granted to Greenaqua is an example of a
Patent
When firms charge different prices to different consumers for the same good or service, it is referred to as ________.
Price discrimination
After the market changes from perfect competition to a monopoly,
Social surplus decreases
Second-degree price discrimination occurs when_______
consumers are charged different prices based on the characteristics of their purchases
Price discrimination is never perfect because it
is impossible to know every consumers' willingness to pay
If a monopoly engages in first-degree price discrimination,
deadweight loss is zero
At the profit-maximizing level of production of a monopolist,
marginal revenue equals marginal cost