Econ final chapter 8

How much profit will the concert promoters earn if they set the price of each ticket at $50? a. $25,000 b. $75,000 c. $100,000 d. $150,000

a. $25,000

For a profit-maximizing monopolist, a. P > MR = MC. b. P = MR = MC. c. P > MR > MC. d. MR < MC < P.

a. P > MR = MC.

The fundamental source of monopoly power is a. barriers to entry. b. profit. .c. decreasing average total cost. d. a product without close substitutes.

a. barriers to entry.

Because a monopolist must lower its price in order to sell another unit of output, its a. marginal revenue is less than price. b. long-term economic profits will be zero .c. total revenue increases as price increases. d. average revenue is less than price.

a. marginal revenue is less than price.

What do economists call the practice of selling the same good at different prices to different customers? a. price discrimination b. collusion c. compensating differential d. predatory pricing

a. price discrimination

Price discrimination requires the firm to be able to a. separate customers according to their willingness to pay. b. differentiate between different units of its product. c. engage in arbitrage. d. use coupons.

a. separate customers according to their willingness to pay.

Public ownership of natural monopolies a. tends to be inefficient. b. usually lowers the cost of production dramatically. c. creates synergies between the newly acquired firm and other government-owned companies. d. does none of the above.

a. tends to be inefficient

31. How much profit will the concert promoters earn if they set the price of each ticket at $150? a. 75,000 b. $100,000 c. $150,000 d. $175,000

b. $100,000

How much profit will the concert promoters earn if they engage in price discrimination? a. $100,000 b. $125,000 c. $150,000 d. $175,000

b. $125,000

The market demand curve for a monopolist is typically a. unit price elastic. b. downward sloping. c. horizontal. d. vertical.

b. downward sloping.

A firm whose average total cost continually declines at least to the quantity that could supply the entire market is known as a a. perfect competitor. b. natural monopoly. c. government monopoly. d. regulated monopoly.

b. natural monopoly.

A monopoly is able to continue to generate economic profits in the long run because a. potential competitors sometimes do not notice the profits. b. there is some barrier to entry to that market. c. the monopolist is financially powerful. d. antitrust laws eliminate competitors for a specified number of years.

b. there is some barrier to entry to that market.

Suppose a monopolist charges a price of $27 for its product and sells 10 units at that price. At 10 units of production the firm has average fixed cost equal to $10 and average variable cost equal to $12. How much total profit is the firm earning at this price? a. $5. b. $25. c. $50. d. $140.

c. $50.

Which of the following statements is correct? a. Both a competitive firm and a monopolist are price takers. b. Both a competitive firm and a monopolist are price makers. c. A competitive firm is a price taker, whereas a monopolist is a price maker. d. A competitive firm is a price maker, whereas a monopolist is a price taker.

c. A competitive firm is a price taker, whereas a monopolist is a price maker.

Which of the following statements about price and marginal cost in competitive and monopolized markets is true? a. In competitive markets, price equals marginal cost; in monopolized markets, price equals marginal cost. b. In competitive markets, price exceeds marginal cost; in monopolized markets, price exceeds marginal cost. c. In competitive markets, price equals marginal cost; in monopolized markets, price exceeds marginal cost. d. In competitive markets, price exceeds marginal cost; in monopolized markets, price equals marginal cost.

c. In competitive markets, price equals marginal cost; in monopolized markets, price exceeds marginal cost.

The first major piece of antitrust legislation was the a. Clayton Act. b. Reagan-Bush Act. c. Sherman Act. d. Clinton-Gore Act.

c. Sherman Act.

Which of the following statements is correct? a. The demand curve facing a competitive firm is horizontal, as is the demand curve facing a monopolist. b. The demand curve facing a competitive firm is downward sloping, whereas the demand curve facing a monopolist is horizontal. c. The demand curve facing a competitive firm is horizontal, whereas the demand curve facing a monopolist is downward sloping. d. The demand curve facing a competitive firm is downward sloping, as is the demand curve facing a monopolist.

c. The demand curve facing a competitive firm is horizontal, whereas the demand curve facing a monopolist is downward sloping.

Which of the following is an example of public ownership of a monopoly?a. DeBeers b. Microsoft c. U.S. Postal Service d. AT&T

c. U.S. Postal Service

Microsoft faces very little competition from other firms for its Windows software. Why isn't the price of the software $1,000 per copy? a. because the government would not allow such a high price b. because stockholders would not allow such a high price c. because the company would sell so few copies that they would earn higher profits by selling at a lower price d. All of the above are correct.

c. because the company would sell so few copies that they would earn higher profits by selling at a lower price

A monopoly a. can set the price it charges for its output and earn unlimited profits. b. takes the market price as given and earns small but positive profits. c. can set the price it charges for its output but faces a downward-sloping demand curve so it cannot earn unlimited profits. d. can set the price it charges for its output but faces a horizontal demand curve so it can earn unlimited profits.

c. can set the price it charges for its output but faces a downward-sloping demand curve so it cannot earn unlimited profits.

Monopolies use their market power to a. charge prices that equal minimum average total cost. b. increase the quantity sold as they increase price. c. charge a price that is higher than marginal cost. d. dump excess supplies of their product on the market.

c. charge a price that is higher than marginal cost.

For a firm to price discriminate a. it must be a natural monopoly. b. it must be regulated by the government. c. it must have some market power to influence the price of the good. d. consumers must tell the firm what they are willing to pay for the product.

c. it must have some market power to influence the price of the good.

A profit-maximizing monopolist will produce the level of output at which a. average revenue is equal to average total cost. b. average revenue is equal to marginal cost. c. marginal revenue is equal to marginal cost. d. total revenue is equal to total opportunity cost.

c. marginal revenue is equal to marginal cost.

Which type of public policy towards monopolies is much more common in Europe than in the United States? a. antitrust laws. b. regulation c. public ownership d. "do nothing".

c. public ownership

Cengage Learning is a monopolist in the production of your text book because a. Cengage Learning owns a key resource in the production of text books. b. Cengage Learning is a natural monopoly. c. the government has granted Cengage Learning exclusive rights to produce this text book. d. Cengage Learning is a very large company.

c. the government has granted Cengage Learning exclusive rights to produce this text book.

Which of the following is not a barrier in a monopolized market? a. The government gives a single firm the exclusive right to produce some good. b. The cost of production makes a single producer more efficient than a large number of producers .c. A key resource is owned by a single firm. d. A single firm is very large.

d. A single firm is very large

Patents, copyrights, and trademarks a. are examples of government-created monopolies. b. are examples of barriers to entry. c. allow their owners to charge higher prices. d. All of the above are correct.

d. All of the above are correct.

Antitrust laws allow the government to a. prevent mergers. b. break up companies. c. promote competition. d. All the above are correct.

d. All the above are correct.

When deciding what prices to charge consumers, a price discriminating monopolist may choose to charge them different prices based on the customers' a. geographical location. b. age. c. income. d. All the above are correct.

d. All the above are correct.

A collection of statutes aimed at curbing monopoly power is called a. the 14th amendment. b. the Clayton Act. c. the Sherman Act. d. antitrust law.

d. antitrust law.

When a monopolist increases the number of units it sells, there are two effects on revenue. They are the a. demand effect and the supply effect. b. competition effect and the cost effect. c. competitive effect and the monopoly effect. d. output effect and the price effect.

d. output effect and the price effect.

Financial aid to college students, quantity discounts, and senior citizen discounts are all examples of a. competitive pricing. b. non-price competition. c. non-profit pricing strategies. d. price discrimination.

d. price discrimination.

Most markets are not monopolies in the real world because a. firms usually face a downward sloping demand curve. b. supply curves slope upward. c. firms usually equate price with marginal cost. d. there are reasonable substitutes for most goods.

d. there are reasonable substitutes for most goods.