Econ Homework 11 answers

Price discrimination is the business practice of

selling the same good at different prices to different customers.

Drug companies are allowed to be monopolists in the drugs they discover in order to

All of the above are correct

Patents, copyrights, and trademarks

All of the above are correct

Which of the following is not an example of price discrimination?

An ice cream parlor charges a higher price for ice cream than for sherbet

How does a competitive market compare to a monopoly that engages in perfect price discrimination?

In both cases, total social welfare is the same

Suppose a monopolist has a demand curve that can be expressed as P=90-Q. The monopolist's marginal revenue curve can be expressed as MR=90-2Q. The monopolist has constant marginal costs and average total costs of $10. The profit-maximizing monopolist will earn profits of

$1,600

What is the marginal revenue of the 3rd unit?

$12

The following table gives information on the price, quantity, and total cost of production for a monopolist

$3

What is the marginal revenue from the sale of the 3rd unit?

$3

A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $30, its average revenue is $60, and its average total cost is $34. At Q = 500, the firm's total revenue is

$30,000

A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $30, its average revenue is $60, and its average total cost is $34. The firm's profit-maximizing price is

$60

Suppose executives at an art museum know that 100 adults are willing to pay $12 for admission to the museum on a weekday. Suppose the executives also know that 200 students are willing to pay $8 for admission on a weekday. The cost of operating the museum on a weekday is $2,000. How much profit will the museum earn if it engages in price discrimination?

$800

Consider a local, privately-owned electrical cooperative named Poweshiek Power Company (PPCo). PPCo has just completed a clean-coal-burning electrical power plant in Iowa. Currently, PPCo can meet the electricity needs of all residents in the county. In fact, its capacity far exceeds the needs of the county. After just a few years of operation, the shareholders of PPCo experienced incredibly high rates of return on their investment due to the profitability of the corporation. Which of the following statements is most likely to be true? (i) New entrants to the market know they will have a smaller market share than PPCo currently has. (ii) PPCo is a natural monopoly. (iii) PPCo would experience higher profits if it were government-run.

(i) and (ii) only

If a monopolist faces a constant marginal cost of $9, how much output should the firm produce?

3 units

If a monopolist faces a constant marginal cost of $5, how much output should the firm produce in order to equate marginal revenue with marginal cost?

4 units

If a monopolist faces a constant marginal cost of $5, how much output should the firm produce in order to maximize profit?

4 units

Which of the following is an example of public ownership of a monopoly?

U.S. Postal Service

Monopoly pricing prevents some mutually beneficial trades from taking place. These unrealized, mutually beneficial trades are

a deadweight loss to society

Suppose marginal cost is constant at $8 per unit. The monopolist's marginal revenue is

always less than the price of its good, beyond the first unit.

A patent gives the inventor monopoly control over the patented good. Patents also

create incentives to develop new products

One method used to control the ability of firms to capture monopoly profit in the United States is through

enforcement of antitrust laws.

A monopolist's profits with price discrimination will be

higher than if the firm charged just one price because the firm will capture more consumer surplus

Because monopoly firms do not have to compete with other firms, the outcome in a market with a monopoly

is often not in the best interest of society

In order to sell more of its product, a monopolist must

lower its price

A monopolist maximizes profits by

producing an output level where marginal revenue equals marginal cost.