Chapter 15

Refer to Figure 15-11. If the monopoly firm perfectly price discriminates, then consumer surplus amounts to

$0

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

Average total cost declines over large regions of output.

A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $30, its average revenue is $60, and its average total cost is $34. Refer to Scenario 15-2. At Q = 500, the firm's profit is

$13,000.

Refer to Figure 15-3. What area measures the monopolist's profit?

(B-G)*K

The monopolist has total fixed costs of $60 and has a constant marginal cost of $15. What is the profit-maximizing level of production?

4 units

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.

Refer to Figure 15-3. What price will the monopolist charge?

B

Which of the following statements is not correct?

Monopolists typically produce larger quantities of output than competitive firms.

When a monopolist increases the amount of output that it produces and sells, the price of its output

decreases.

Which of the following statements is correct for a monopolist? i) The firm maximizes profits by equating marginal revenue with marginal cost. ii) The firm maximizes profits by equating price with marginal cost. iii) Demand equals marginal revenue. iv) Average revenue equals price

i) and iv) only

Refer to Scenario 15-2. At Q = 500, the firm's marginal cost is

$30.

Scenario 15-2 A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $30, its average revenue is $60, and its average total cost is $34.

$60.

A profit-maximizing monopolist charges a price of $12. The intersection of the marginal revenue and marginal cost curves occurs where output is 10 units and marginal cost is $6. Average total cost for 10 units of output is $5. What is the monopolist's profit?

$70

Which of the following statements is true about patents and copyrights?

(i), (ii), and (iii)

Monopolies are inefficient because they (i) eliminate barriers to entry. (ii) price their product at a level where marginal revenue exceeds marginal cost. (iii) restrict output below the socially efficient level of production.

(iii) only

Which of the following statements is correct?

If the monopolist's marginal revenue is greater than its marginal cost, the monopolist can increase profit by selling more units at a lower price per unit.

Refer to Figure 15-3. How much output will the monopolist produce?

K

Angelo is a wholesale meatball distributor. He sells his meatballs to all the finest Italian restaurants in town. Nobody can make meatballs like Angelo. As a result, his is the only business in town that sells meatballs to restaurants. Assuming that Angelo is maximizing his profit, which of the following statements is true?

Meatball prices will exceed marginal cost.

Refer to Figure 15-2. Which of the following statements is correct?

Panel C represents the typical demand curve for a perfectly competitive firm, and Panel B represents the typical demand curve for a monopoly.