Ch. 15

Refer to figure 15-6. What is the monopoly price and quantity? -price = X; quantity = J -price = Y; quantity = K -price = Y; quantity = J -price = Z; quantity = J

price = X; quantity = J

Refer to figure 15-6. What is the socially efficient price and quantity? -price = X; quantity = J -price = Y; quantity = K -price = Y; quantity = J -price = Z; quantity = K

price = Y; quantity = K

Refer to Table 15-3. If the monopolist can engage in perfect price discrimination, what is the marginal revenue from selling the 5th tie? - $80 -$100 -$110 -$120

$120

Refer to table 15-1. At what price will the monopolist maximize his profit? -$6 -$12 -$18 -$24

$18

Refer to scenario 15-1. At Q=500, the firm's profit is -$18,000 -$20,000 -$22,000 -$40,000

$18,000

Refer to table 15-1. What is the maximum profit the monopolist can earn? -$10 -$20 -$30 -$40

$20

A monopolist can sell 300 units of output for $50 per unit. Alternatively, it can sell 301 units for $49.60 per unit. The marginal revenue of the 301st unit of output is - -$99.60 - -$70.40 - -$0.40 - $70.40

-$70.40

Refer to table 15-2. The monopolist has fixed costs of $1,000 and has a constant marginal cost of $2 per unit. If the monopolist were able to perfectly price discriminate, how many units would it sell? -400 -500 -900 -4,200

900

Which of the following is not an example of price discrimination? -A zoo charges a lower price for a child's ticket than for an adult's ticket -A design school rebates part of the cost of tuition in the form financial aid for underprivileged students -A local supermarket chain offers a "buy three get one free" deal -A bakery charges a higher price for brownies than for cookies

A bakery charges a higher price for brownies than for cookies

The profit maximization problem for a monopolist differs from that of a competitive firm in which of the following ways? -A competitive form maximizes profit at the point where marginal revenue equals marginal cost; a monopolist can maximize profit at the point where marginal revenue exceeds marginal cost. -A competitive form maximizes profit at the point where average revenue equals marginal cost; a monopolist can maximize profit at the point where average revenue exceeds marginal cost. -For a competitive firm, marginal revenue at the profit maximizing level of output is equal to marginal revenue at all other levels of output; for a monopolist, marginal revenue at the profit-maximizing level of outputs smaller than it is for larger levels of output. -For a profit-maximizing competitive firm, thinking at the margin is much more important than it is for a profit-maximizing monopolist.

A competitive form maximizes profit at the point where average revenue equals marginal cost; a monopolist can maximize profit at the point where average revenue exceeds marginal cost.

Which of the following would most likely be a monopoly power? -A large supermarket chain -A local cable TV provider -A large drug store -A gas station

A local cable TV provider

Which of the following statements is not correct? -Two examples of early antitrust laws are the Sherman and Clayton Antitrust Acts -Antitrust laws automatically prevent mergers between companies that produce similar products -Antitrust laws give the government power to increase competition -Antitrust laws can reduce social welfare if they prevent mergers that would lower costs through more efficient joint production

Antitrust laws automatically prevent mergers between companies that produce similar products

Refer to figure 15-4. What price will the monopolist charge in order to maximize profit? -X -Z -B -C

B

Which of the following governmental actions would eliminate some or all of the inefficiency that results from monopoly pricing? -Policymakers can regulate prices that the monopoly charges -Prohibit the monopoly from price discriminating -Force the monopoly to operate at a point where its marginal revenue is equal to its marginal cost -There is nothing the government can do to eliminate any inefficiency associated with a monopoly

Policymakers can regulate prices that the monopoly charges

Refer to figure 15-3. A profit-maximizing monopoly will produce an output level of -Q1 -Q2 -Q3 -Q4

Q3

Refer to figure 15-6. What is the area of deadweight loss? -The rectangle (X-Z) x J -The triangle 1/2[(X-Z) x (K-J)] -The triangle 1/2[(X-Y) x (K-J)] -the rectangle (X-Z) x J plus the triangle 1/2[(X-Z) x (K-J)]

The triangle 1/2[(X-Z) x (K-J)]

When an industry is a natural monopoly -it is characterized by constant returns to scale -it is characterized by diseconomies of scale -a larger number of firms may lead to a lower average total cost -a larger number of firms will lead to a higher average cost

a larger number of firms will lead to a higher average cost

Granting a pharmaceutical company a patent for a new medicine will lead to -a product that is priced higher than it would be without the exclusive rights -reduced incentives for pharmaceutical companies to invest in research and development -lower quantities of output than without the patent - lower prices than without the patent

a product that is priced higher than it would be without the exclusive rights

Which of the following can defeat the profit-maximizing strategy of price discrimination? -consumer surplus -deadweight loss -market power -arbitrage

arbitrage

In order for antitrust laws to raise social welfare, the government must -disallow synergy benefits from accruing to monopolists -disallow any mergers from taking place -be able to determine which mergers are desirable and which are not -always attempt to keep markets in their most competitive form

be able to determine which mergers are desirable and which are not

A movie theater can increase its profits through price discrimination by charging a higher price to adults and a lower price to children if it -only shows G rated movies -has no monopoly pricing power -cannot easily distinguish between the two groups of customers -can prevent children from buying the lower-priced tickets and selling them to adults

can prevent children from buying the lower-priced tickets and selling them to adults

The social cost of a monopoly is equal to its -economic profit -fixed cost -deadweight loss -variable cost

dead weight loss

When a monopolist increases the amount of output that it produces and sells, average revenue -increases, and marginal revenue increases -increases, and marginal revenue decreases -decreases, and marginal revenue increases -decreases, and marginal revenue decreases

decreases, and marginal revenue decreases

Refer to figure 15-1. The shape of the average total cost curve in the figure suggests an opportunity for a profit-maximizing monopolist to take advantage of -economies of scale -diseconomies of scale -diminishing marginal product -increasing marginal cost

economies of scale

Refer to figure 15-2. If the monopoly firm is currently producing Q4 units of output, then a decrease in output will necessarily cause profit to -remain unchanged -decrease -increase if the output is between Q3 and Q4 -increase regardless of the level

increase if the output is between Q3 and Q4

A firm cannot price discriminate if -it has declining marginal revenue -it operates in a competitive market -buyers only reveal the price they are willing to pay for the product -it has a constant marginal cost

it operates in a competitive market

Suppose people regard emeralds, rubies, and sapphires as close substitutes fir diamonds. Then DeBeers, a large diamond company, has -less incentive to advertise than it would otherwise have -less market power than it otherwise have -more control over the price of diamonds than it would otherwise have -higher profits than it would otherwise have

less market power than it otherwise have

If a pharmaceutical company discovers a new drug and successfully patents it, patent law gives the firm -partial ownership of the right to sell the drug for a limited number of years -partial ownership of the right to sell the drug for an unlimited number of years -sole ownership of the right to sell the drug for a limited number of years -sole ownership of the right to sell the drug for an unlimited number of years

sole ownership of the right to sell the drug for a limited number of years

The law passed in 1914 that strengthened the government's powers and authorized lawsuits was -the 14th amendment -the Sherman Antitrust act -the 19th amendment -the Clayton Antitrust act

the Clayton Antitrust act

A natural monopoly occurs when -the product is sold in its natural state, such as water or diamonds -there are economies of scale over the relevant range of output -the firm is characterized by a rising marginal cost curve -production requires the use of free natural resources. such as water or air

there are economies of scale over the relevant range of output

Refer to scenario 15-1. At Q=500, the firm's marginal cost is -less than $40 -$40 -$44 -greater than $44

$40

Which of the following is not an example of price discrimination by a firm? -Children's meals at a restaurant -A natural gas company charging all customer's a higher rate in the winter than summer -Discounts for educators at clothing stores -Online coupon codes

A natural gas company charging all customer's a higher rate in the winter than summer

If a profit-maximizing monopolist faces a downward-sloping market demand curve, its -average revenue is less than the price of the product -average revenue is less than marginal revenue -marginal revenue is less than the price of the product -marginal revenue is greater than the price of the product

marginal revenue is less than the price of the product

Suppose a monopolist is able to charge each customer a price equal to that customer's willingness to pay for the product. The monopolist is engaging in -marginal cost pricing -arbitrage pricing -voodoo economics -perfect price discrimination

perfect price discrimination

Which of the following is a necessary characteristic of a monopoly? -the firm is the sole seller of its product -the firm's product has many close substitutes -the firm's generates a large economic profit -the firm is located in a small geographic market

the firm is the sole seller of its product

Price discrimination is a rational strategy for a profit-maximizing monopolist when -the monopolist finds itself able to produce only limited quantities of output -consumers are unable to be segmented into identifiable markets -the monopolist wishes to increase the deadweight loss that results from profit-maximizing behavior -there is no opportunity for arbitrage across market segments

there is no opportunity for arbitrage across market segments

Which of the following statements is true? -when a competitive firm sells an additional unit of output, its revenue by an amount less than the price -average revenue is the same price for monopoly firms but not competitive firms -average revenue is the same price for competitive firms but not monopoly firms -when a monopoly firm sells an additional unit of output, its revenue increases by an amount less than the price

when a monopoly firm sells an additional unit of output, its revenue increases by an amount less than the price