Adaptive Learning Assignment 6.7

Which of the following is not a characteristic of monopoly? A)A market with barriers to entry B)Continuous economic profits C)A single seller D)A good or service for which there are no close substitutes E)The firm having significant price control

B)Continuous economic profits

The perfect monopoly extracts all surplus from consumers, yielding higher profits than any other pricing method when it employs which of the following? A)Open-tier price discrimination B)First-degree price discrimination C)Perfect price discrimination D)Personal pricing E)Perfectly competitive pricing

B,C,D

Price discrimination is only possible when a firm is a price_____

maker

_____ markets maximize the availability of goods and services and the consumers' ability to buy them.

Competitive

In economics, we refer to a situation in which there is only one firm but no real barriers to entry as a(n) _____ market.

Contestable

For a monopoly, the marginal revenue is below the demand curve because: A)the monopoly sells its goods at a lower price than that at which they are demanded. B)the demand for a monopolistic good is never satisfied at any given price. C)the total revenue curve lies below the demand curve. D)the monopoly has to lower the price on all units to sell more.

D)the monopoly has to lower the price on all units to sell more.

A natural monopoly is an industry in which _____ of scale are so extensive that the market is better served by a single firm.

economies

If the marginal revenue associated with selling one more unit of output is positive, the demand is:

elastic because this would increase total revenue.

The marginal revenue is the:

extra or additional revenue associated with the production of an additional unit of output

Total revenue minus the _____ and _____ costs of production is economic profit.

implicit ; explicit

Third-degree price discrimination charges different prices to different consumers in order to:

increase profits.

As the market price _____ , all else held constant, a profit-maximizing firm can afford to expand its production.

increases

The level of profit that occurs when the total revenue is less than the total cost is called an economic _____.

loss

A business will charge a(n) _____ price to the group with the relatively more elastic demand and a(n) _____ price to the group with the relatively more inelastic demand.

lower; higher

The extra or additional revenue associated with the production of an additional unit of output is the ______revenue.

marginal

One of the roles of a government is to limit the market power of monopolies or even to eliminate them entirely due to:

market inefficiencies.

Due to the market inefficiencies created by _____ , one of the roles of government is to limit their market power or even to eliminate them entirely.

monopolies

_____ reduce the availability of goods and services and consumers' ability to buy those goods.

monopolies

A market structure characterized by a single seller is a(n) _____

monopoly

A person who invents the ability to time travel will likely operate as a(n) _____ because there would be no substitutes and entering that market would be difficult for anyone else.

monopoly

A pure _____ is a price maker engaging in nonprice competition.

monopoly

When a regulated price results in a loss, the government is likely to subsidize a(n) _____ monopoly.

natural

If selling another unit of output increases revenue marginal, revenue is _____

positive

By charging consumers the highest price they are willing and able to pay, the pure monopoly extracts all surplus from consumers yielding higher _____ than any other pricing method available to the firm.

profits

The price that occurs where the demand and the marginal cost curves cross is called the:

regulated competitive price.

When a pure monopoly practices first-degree price discrimination, the demand curve becomes the _____ curve.

revenue

Profit equals total _________ minus total ________

revenue; cost

When a pure monopoly practices first-degree price discrimination,:

the demand curve becomes the marginal revenue curve.

The efficiency loss resulting from a monopolistic market is called a(n) _____ loss.

deadweight

Monopolies produce _____ output than competitive markets and are likely to hire _____ labor.

Less; Less

The level of profit that occurs when total revenue is equal to total cost is known as _____ profit.

Normal

The ability of a monopoly to influence prices by controlling the quantities that it produces in the market is called monopoly _____

Power

Compared to an unregulated natural monopoly, what is true about the price charged and quantity produced when a natural monopoly is regulated?

Price is lower and Quantity is higher

In a pure monopoly, the firm is willing to sell to anyone willing and able to pay at least the marginal cost of production.

The result is that output is produced where D = MC

There are important exceptions in which monopolies are actually encouraged to incentivize positive outcomes. (True or False)

True

Total revenue equals:

price times quantity.

Suppose Carl's Candies sells 100 boxes of candy for $4 each. The total fixed cost of the 100 boxes is $100 and the average variable cost of the 100 boxes is $1.50 per box. Carl's makes a total profit of:

$150

Suppose Carl's Candies sells 100 boxes of candy for $5 each. The total fixed cost of the 100 boxes is $100, and the average variable cost of the 100 boxes is $1.50 per box. Carl's makes a profit per unit of:

$2.50

The difference between the economic surplus when the market is at its competitive equilibrium and the economic surplus when the market is not in equilibrium is the:

deadweight loss.

A monopoly will charge consumers the price that they are willing and able to pay for the amount of output available which is shown along the _____ curve.

demand

A pure monopoly has the overall market _____ to itself because it is the only seller in a market.

demand

The _____ curve faced by a perfectly competitive firm is perfectly elastic.

demand

Pure monopolies do not achieve _____ efficiency meaning that they do not produce the amount of output that maximizes the sum of producer and consumer surplus.

allocative

Government regulation of _____ _____ can take several forms, such as imposing a normal profit price or a competitive price

natural monopolies

When regulators require a monopoly to charge the _____ profit price, the monopoly has little incentive to reduce its costs of production.

normal

The ____ _____ price occurs when the price is equal to the average total cost.

normal profit

The price that occurs where the demand and the average total cost curves cross is called the:

normal profit price.

The practice of charging each and every consumer the price she is willing and able to pay for a good or service describes:

perfect price discrimination. personal pricing. first-degree price discrimination.

_____ efficiency is producing output at the lowest possible average total cost of production.

productive

_____ equals the total revenue minus the total cost.

profit

Price discrimination is best described as:

the practice of selling the same good or service to different consumers at different prices.

Demand and Revenues for a Monopoly. Using the demand schedule, what is the marginal revenue (MR) for the 10th unit? Price (dollars): $40, $35, $30, $25, $20, $15 Quantity (units): 0, 5, 10, 15, 20, 25

$25 Reason: To find MR, you will first need to find Total Revenue at 5 units and 10 units. TR = P × Q. TR at 5 = (35)(5) = $175. TR at 10 = (30)(10) = $300. MR = change in TR/change in Q. At 10 units, MR = (300 − 175)/(10 − 5) = (125)/(5) = $25.

Suppose Carl's Candies sells 100 boxes of candy for $5 each. The total fixed cost of the 100 boxes is $100 and the average variable cost of the 100 boxes is $1.50 per box. Carl's makes a profit per unit of:

$250.

Demand and Revenues for a Monopoly. Using the demand schedule, what is the total revenue (TR) for the 15th unit? Price (dollars): $40, $35, $30, $25, $20, $15 Quantity (units): 0, 5, 10, 15, 20, 25

$375 Reason: To find total revenue, multiply the price and the quantity at 15 units. TR = ($25)(15) = $375.

Using the graph, what price should the monopoly charge for the profit-maximizing level of output?

$6 Reason: To find the profit maximizing quantity and price, first find where MR = MC. This is at a quantity of 7, which is the profit maximizing quantity. Then, find where 7 units intersects the demand curve, at a price of $6

Use the demand, costs, and revenues in the table to answer the following question for a pure monopoly. What is the profit maximizing quantity in the pure monopoly? Price (dollars): $40, $35, $30, $25, $20, $15 Quantity (units): 0, 5, 10, 15, 20, 25 Total Revenue (dollars): $0, $175, $300, $375, $400, $375 Marginal Revenue (dollars): -, $35, 25, 15, 5, -5 Marginal Cost (Dollars): 4, 11, 15, 18, 20

15

Referring to the graph, assume the government wants to regulate the market for cable television, a natural monopoly. Match the price to the unregulated monopoly price, the regulated normal profit price, and the regulated competitive price.

Unregulated monopoly price $60 Regulated Normal Profit price $40 Regulated competitive price $30

By charging consumers the highest price they are willing and able to pay, _____ extracts all surplus from consumers yielding higher profits than any other pricing method available to the firm.

a pure monopoly

For a monopoly, the marginal revenues per unit fall _____ the price per unit because when the price ____ , the monopoly gives up some revenue on units it could have sold at higher prices.

below; falls

Allocative efficiency occurs when the goods and services that are most wanted by consumers are produced in such a way that their marginal _____ equals their marginal _____

benefit; cost

Productive efficiency is:

using the fewest resources possible to produce a good or a service.

In a pure monopoly the firm is willing to sell to anyone willing and able to pay at least the marginal cost of production. The result is that output is produced where D = MC

which is allocatively efficient.

The practice of charging each and every consumer the price that she is willing and able to pay for a good or service describes first-degree price_____

discrimination

A company can break even and meet operating costs without a loss when it earns _____ economic profit.

zero