Chapter 13 Monopoly
(Figure: Maximize Monopoly Profits) Refer to the figure. The monopolist will maximize its profit by producing at output equal to:
Q2.
A monopolist maximizes profits where marginal revenue equals marginal cost.
True
A monopolistic industry will have lower output and higher prices than a competitive industry.
True
A monopoly is a firm with market power, and market power may arise from economies of scale, patent protection, and innovation.
True
A monopolist can raise its price further above marginal cost, the more ______ is the ______ for its product.
inelastic; demand
(Figure: Monopoly Markup) Refer to the figure. Consumer surplus under monopoly is represented by:
triangle abc.
(Figure: Monopoly Markup) Refer to the figure. Consumer surplus under competition is represented by:
triangle adf.
(Figure: Monopoly Markup) Refer to the figure. The deadweight loss attributable to monopoly is:
triangle cef.
For a monopolist, MR is always less than P because:
when a monopolist lowers the price to sell more units, it must lower the prices of all units sold.
(Figure: Maximum Willingness to Pay) Refer to the figure. What is the profit-maximizing quantity for this monopolist?
110
(Figure: Monopoly 8) If the government set price equal to average cost, the natural monopolist in this figure would produce:
14 units of output.
(Figure: Monopoly 8) The natural monopolist in this figure would produce:
9 units of output.
(Figure: Monopoly 6) If the market in this figure is a competitive market, consumer surplus is given by area(s):
A + B + C.
(Figure: Monopolist 3) In this figure, the monopolist's maximum profit is:
$45.
If this figure represents the demand and cost curves for a firm with market power, what price should the firm charge to maximize profits?
$60
Refer to the figure. The competitive industry level of output is:
80.
(Figure: Monopolist 3) In this figure, the profit-maximizing monopolist sells:
9 units of output at $11 per unit.
(Figure: Monopoly 6) If the market in this figure is a monopoly, the consumer surplus is area ______, and the deadweight loss is area ______.
A; C
A firm will attain more monopoly power as demand for its product becomes more elastic.
False
A firm with no competition faces a perfectly inelastic demand curve.
False
A monopoly maximizes profit by finding the output level where the difference between marginal revenue and marginal costs is as large as possible.
False
A profit-maximizing monopolist chooses the output level where MR = MC and chooses the corresponding price from the marginal revenue curve.
False
Deadweight loss is present in both competitive and monopoly markets.
False
For a monopoly, the entire consumer surplus is transferred to the monopolist as profit.
False
A government can maximize efficiency in monopoly markets by setting prices equal to the monopolist's average cost of production albeit at the cost of reduced long term innovation.
True
For a linear demand curve, the marginal revenue curve has:
twice the slope.
(Figure: Maximum Willingness to Pay) Refer to the figure. What is the maximum price that the consumer is willing to pay for 100 units?
$100
What is the profit or loss for this monopoly?
$100,000
(Figure: Paint Market 2) What is the deadweight loss (if any) from the monopoly in this diagram relative to its optimum quantity?
$125,000
(Figure: Monopoly Profits) Refer to the figure. The monopolist earns a profit of:
$420.
In this figure, the monopolist's marginal revenue curve is:
MR2.
(Figure: Monopoly Profits) Refer to the figure. What is the monopolist's optimal price and output level?
P = $16.50; Q = 40
(Figure: Maximize Monopoly Profits) Refer to the figure. The monopolist will maximize its profit by charging a price equal to:
P2.
Refer to the figure. Which of the following answers correctly indicates the profit earned by this monopolist at the profit-maximizing quantity?
area A
Refer to the figure. The monopolist's price markup is:
b - d.
Refer to the figure. Deadweight loss caused by monopoly pricing is represented by the area:
def.
Economists call a single firm that can supply the entire market at a lower cost than two or more firms a __________ monopoly.
natural
(Figure: Paint Market 2) If the fixed costs were halved, deadweight loss would:
not change.
A natural monopoly occurs when:
there are economies of scale over the relevant range of output.