econ chapter 13 homework

(Figure: PPV): The figure shows the demand and marginal revenue for a pay-per-view football game on cable TV. Assume that the marginal cost and average cost are a constant $40. If the cable company practices perfect price discrimination, consumer surplus will be: a. $0. b. $100. c. $180. d. $40.

a. $0.

(Figure: The Profit-Maximizing Output and Price): Assume that there are no fixed costs and AC = MC = $200. If this were a perfectly competitive industry, deadweight loss would be: a. $0. b. $200. c. $3,200. d. $1,600.

a. $0.

(Figure: PPV): The figure shows the demand and marginal revenue for a pay-per-view football game on cable TV. Assume that the marginal cost and average cost are a constant $20. If the cable company is a monopoly, how much consumer surplus is there when the monopolist maximizes profit? a. $80 b. $160 c. $40 d. $20

a. $80

(Figure: Short-Run Monopoly): The marginal cost of producing the profit-maximizing quantity is cost: a. P. b. O. c. N. d. Q.

a. P.

The demand curve for a monopoly is: a. also the industry demand curve. b. identical to the MR curve. c. the MR curve above the horizontal axis. d. the MC curve above the AVC curve.

a. also the industry demand curve.

Diamond rings are relatively scarce because: a. diamond producers limit the quantity supplied to the market. b. of monopolistic competition. c. the demand for diamonds is so high. d. according to geologists, diamonds are less common than is any other gem-quality stone.

a. diamond producers limit the quantity supplied to the market.

Price discrimination can occur if: a. the market structure is monopolistic competition. b. producers are price takers. c. all consumers have the same willingness to pay for the good. d. there are many firms in the industry, all producing the same identical good.

a. the market structure is monopolistic competition.

(Scenario: A Small-Town Monopolist): If this monopolist must choose between selling 100 or 175 subscriptions, it will choose to sell _____ units at a price of _____ and earn economic profits equal to _____. A monopolist sells cable subscriptions in a small town and finds that it can sell 100 subscriptions when the price is $15 a week and 175 subscriptions when the price is $10 a week. The MC for the provision of the cable is $5 a week. There are no fixed costs. a. 175; $10; $500 b. 100; $15; $1,000 c. 175; $15; $1,000 d. 100; $10; $750

b. 100; $15; $1,000

You own a lemonade stand in a competitive market, and as such, you are a price-taking firm. Which event would MOST likely increase your market power? a. A booming economy increases the demand for lemonade and attracts entry into the market. b. You acquire exclusive rights to harvest lemons from all domestic citrus orchards. c. The average total cost curve for firms in the industry becomes horizontal. d. The government abolishes the system of patents and copyrights.

b. You acquire exclusive rights to harvest lemons from all domestic citrus orchards.

The demand curve for a monopoly is: a. the MR curve above the AVC curve. b. above the MR curve. c. the entire MR curve. d. the MR curve above the horizontal axis.

b. above the MR curve.

The GoSports Company is a profit-maximizing firm with a monopoly in the production of school team pennants. The firm sells its pennants for $10 each. We can conclude that GoSports is producing a level of output at which: a. average total cost is greater than $10. b. marginal cost equals marginal revenue. c. average total cost equals $10. d. marginal revenue equals $10.

b. marginal cost equals marginal revenue.

Suppose a monopoly can separate its customers into two groups. If the monopoly practices price discrimination, it will charge the lower price to the group with: a. the lower price elasticity of demand. b. the higher price elasticity of demand. c. the fewer close substitutes. d. The answer cannot be determined with the information given.

b. the higher price elasticity of demand.

(Figure: A Profit-Maximizing Monopoly Firm): This firm's cost per unit at its profit-maximizing quantity is: a. $15. b. $8. c. $18. d. $20.

c. $18.

(Figure: Monopoly Model): When the firm is in equilibrium (that is, maximizing its economic profit), its total revenue is the area of rectangle: a. IPDH. b. 0SBJ. c. 0PDJ. d. SPDB.

c. 0PDJ.

Large barriers to entry are one reason that a monopoly: a. maximizes its profits by producing where P = MC. b. produces with no fixed costs in the long run. c. produces at the minimum average total cost in the long run. d. earns an economic profit in the long run.

d. earns an economic profit in the long run.

Price discrimination leads to a _____ price for consumers with a _____ demand. a. higher; perfectly elastic b. higher; more elastic c. lower; less elastic d. higher; less elastic

d. higher; less elastic

(Figure: The Profit-Maximizing Output and Price): Assume that there are no fixed costs and AC = MC = $200. The profit-maximizing output for a monopolist is: a. 16. b. 0. c. 20. d. 8

d. 8