ME quiz 9

$4,800; $1,600; $3,200

(Figure: The Profit-Maximizing Output and Price in the Monopoly Diamond Market) Use Figure: The Profit-Maximizing Output and Price in the Monopoly Diamond Market. Assume there are no fixed costs and that AC = MC. At the profit-maximizing output for the monopolist, total revenue is _____, total cost is _____, and profit is _____. $4,800; $3,200; $1,600 $600; $200; $400 $1,600; $3,200; $1,600 $4,800; $1,600; $3,200

I THINK: $16

(Scenario: Cold Medicine for Pfizer) Use Scenario: Cold Medicine for Pfizer. Pfizer has developed a new cold medicine. For efficient delivery, the new medicine requires an inhaler, which can be produced at a constant marginal cost of $2 per inhaler. Pfizer has a patent that gives it a monopoly on its inhaler. If Pfizer behaves as a profit-maximizing monopolist, then monopoly profits will be: $8 $32 $16 $0

I THINK: (P1 - P4) × Q2.

(Figure: A Fly Fishing Salmon Monopoly) Use Figure: A Fly Fishing Salmon Monopoly. Andrew is the only licensed fly-fishing guide in Matane, Quebec. If Andrew maximizes profit, then he will earn profit equal to: (P1 - P4) × Q2. (P2 - P3) × Q3. (P4 - P5) × Q2. (P1 - P5) × Q2.

$30.

(Figure: Profit Maximization for SoCalGas - A Monopoly Firm) Use Figure: Profit Maximization for SoCalGas—A Monopoly Firm. SoCalGas's unit price is: $25. $35. $30. $20.

70; $2,450; $0; $0

(Figure: The Environmental Monopolist II) Use Figure: The Environmental Monopolist II. If this monopolist perfectly price-discriminates, then it will produce _____ units. This will lead to producer surplus equal to _____, consumer surplus equal to _____, and a deadweight loss equal to _____. 70; $2,450; $0; $0 50; $1,225; $0; $0 100; $1,500; $612.50; $612.50 35; $1,225; $612.50; $612.50

0.5 (P2 - P4)(Q4 - Q2).

(Figure: The Environmental Monopolist) Use Figure: The Environmental Monopolist. The deadweight loss associated with this monopoly can be measured as the area: 0.5 (P1 - P3)Q3. 0.5 (P1 - P3)Q2. 0.5 (P2 - P4)(Q4 - Q2). 0.5(P1 - P2)(Q2 - Q1).

$1,600.

(Figure: The Profit-Maximizing Output and Price in the Monopoly Diamond Market) Use Figure: The Profit-Maximizing Output and Price in the Monopoly Diamond Market. Assume that there are no fixed costs and that AC = MC = $200. At the profit-maximizing output and price for a monopolist, consumer surplus is: $1,000. $0. $1,600. $600.

$1,600.

(Figure: The Profit-Maximizing Output and Price in the Monopoly Diamond Market) Use Figure: The Profit-Maximizing Output and Price in the Monopoly Diamond Market. Assume that there are no fixed costs and that AC = MC = $200. At the profit-maximizing output and price for a monopolist, deadweight loss is: $3,200. $1,600. $6,400. $1,000.

$0.

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

not change; not change

A decrease in the fixed costs of a monopoly firm would _____ price and _____ quantity in the short run. decrease; decrease increase; increase increase; decrease not change; not change

a monopsony.

A market in which there is one buyer is: monopolistically competitive. a monopoly. a duopoly. a monopsony.

increasing; increasing

A monopolist responds to an increase in demand by _____ price and _____ output. increasing; decreasing increasing; increasing decreasing; decreasing decreasing; increasing

lower; increase

A monopolist's marginal cost curve shifts down, but the firm's demand curve remains the same. As a result of the fall in marginal cost, the monopolist will _____ its price and _____ its output. not change; decrease raise; decrease lower; increase raise; increase

increase output.

A monopoly is producing output, with an average total cost is $60, marginal revenue of $80, and a price of $100. If ATC is at its minimum, and the ATC curve is U-shaped, to maximize profits, this firm should: shut down. do nothing; it is already maximizing profits. increase output. reduce output.

generates more consumer surplus under average cost pricing than an unregulated monopolist would.

A natural monopoly: generates more consumer surplus under average cost pricing than an unregulated monopolist would. generates more consumer surplus than an unregulated monopolist would, if regulated to produce an output at which marginal cost equals marginal revenue. would incur an economic loss if regulated to charge a price equal to average total cost. would incur an economic profit if regulated to produce an output at which price is less than marginal cost.

the monopoly will go out of business in the absence of government intervention.

Assume that a monopoly firm is currently earning economic profits. If a permanent change in fixed cost raises average total cost above the demand curve: marginal cost will be greater than marginal revenue. more firms will enter the industry. price will fall and output will rise. the monopoly will go out of business in the absence of government intervention.

barriers to entry will prevent entry by rival firms.

For a monopoly, in the long run: barriers to entry will prevent entry by rival firms. economic profits are zero. economic profits will be reduced, but not eliminated, by the entry of rival firms. price will fall to the competitive market equilibrium level.

can be increased by decreasing production.

If a monopolist is producing a quantity where MC > MR, then profit: is maximized only if MC = P. is maximized. can be increased by decreasing production. can be increased by increasing production.

more elastic

Most large public transit systems charge lower rider fares to senior citizens, students, and children. If this pricing strategy increases the profits of the transit system, we can conclude that individuals in the reduced fare categories have a _____ demand for public transit service than other passengers have. greater lower more elastic less elastic

a ban on certain kinds of advertising

Which factor is NOT a barrier to entry? government-mandated limits on the number of sellers of a good economies of scale a ban on certain kinds of advertising control of an input essential to production