ECON-E201 Chapter 13 Homework
still faces a downward-sloping demand curve.
A firm with no competitors:
that sets price above marginal cost without concern that other firms will enter the industry.
A monopoly is a firm:
barriers to entry
In Chicago's Southside (and other places), auto mechanics (who work outside the formal sector, without a business license, advertising, or even a garage) will do work for gang members without charging them. In exchange, gang members chase away other mechanics who wish to operate in the area. These auto mechanics have monopoly power; what type of source does it come from?
the lure of above-normal profits may give a firm an incentive to develop new products and technologies.
In a monopoly market:
D - B
In this figure, the marginal revenue of the third unit is given by area:
MR2
In this figure, the monopolist's marginal revenue curve is:
one with few substitutes
In which of the following product markets should we see a higher price markup?
A competitive automobile company buys its steel from a competitive steel producer.
In which of the following scenarios will automobile prices be the lowest?
80
Refer to the figure. The competitive industry level of output is:
b - d
Refer to the figure. The monopolist's price markup is:
area A
Refer to the figure. Which of the following answers correctly indicates the profit earned by this monopolist at the profit-maximizing quantity?
4
Refer to the table. What is the monopolist's profit-maximizing level of output?
All are correct: There would be an increase in consumer surplus. The deadweight loss in the market would decline. The future supply of new drugs would decrease.
Suppose that the government decided to reduce pharmaceutical patent protection by requiring companies to sell their drugs at marginal cost. What are the likely consequences of such a policy?
until marginal cost is equal to marginal revenue.
To maximize profit, the monopolist increases output:
a single firm that can supply the market at a lower cost than two or more firms
Which of the following correctly defines a monopoly that arises from economies of scale?
P > MR
Which of the following is always TRUE for monopolies?
autos
Which of the following is an example of a good with economies of scale?
cable television providers
Which of the following is the best example of a natural monopoly?
triangle adf
(Figure: Monopoly Markup) Refer to the figure. Consumer surplus under competition is represented by:
triangle abc
(Figure: Monopoly Markup) Refer to the figure. Consumer surplus under monopoly is represented by:
triangle cef
(Figure: Monopoly Markup) Refer to the figure. The deadweight loss attributable to monopoly is:
$420.
(Figure: Monopoly Profits) Refer to the figure. The monopolist earns a profit of:
P = $16.50; Q = 40
(Figure: Monopoly Profits) Refer to the figure. What is the monopolist's optimal price and output level?
$2.63 and $2, respectively.
(Table: Profit-Maximizing Monopolist) Refer to the table. When this monopolist sells 8 units, its average cost and marginal cost per unit levels are:
P2
(Figure: Maximize Monopoly Profits) Refer to the figure. The monopolist will maximize its profit by charging a price equal to:
$850
(Figure: Regulated versus Unregulated Monopolist) Refer to the figure. Calculate the deadweight loss when this monopoly is unregulated.
the advantages of large-scale production that reduce average cost as quantity increases.
Economies of scale are:
only if the monopoly was natural
How could a monopoly offer a lower price than a scenario of intense competition?
greater than marginal revenue.
If a monopolist faces a straight-line negatively sloped demand curve, the price of the units it sells is always:
deadweight loss involved relative to a competitive firm.
The economic inefficiency of a monopolist can be measured by the:
Market Power
The power to raise price above marginal cost without fear that other firms will enter the market is:
natural monopoly
The stated reason for resorting to regulation of public utilities rather than promoting competition through antitrust is that the industry in question is believed to be a:
MR = MC
What is the profit-maximization condition for a monopolist?
will be lower, and monopoly price will be higher, than that of a competitive firm.
When comparing a monopoly with a competitive industry, monopoly quantity:
Some consumers are willing to pay more than the monopolist's marginal cost of production, but the monopolist does not produce these units.
Which of the following represents the nature of a monopolist's deadweight loss?
II and III only
Which of the following statements are TRUE?I. Monopolists can raise prices as high as they want and still earn economic profits.II. Even with no competitors, firms face a downward-sloping demand curve.III. Just like competitive firms, monopolists maximize profits where marginal revenue equals marginal cost.
Monopolies create incentives for additional research and development.
Which of the following statements is TRUE?
Monopolized economies tend to have more poverty and less economic growth.
Which of the following statements is TRUE?
The more inelastic the demand curve is, the greater is the monopolist's price markup.
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.
Which statement is TRUE?