PrQ13: Practice Quiz - Ch. 13: Monopoly

Under monopoly, the firm produces the output where _____, and in perfect competition, the firm produces the output where _____.

P > MR = MC; P = MR = MC

(Figure: Computing Monopoly Profits for Exxon Mobile Gas) Use Figure: Computing Monopoly Profits for Exxon Mobile Gas. At the profit-maximizing output, total cost is:

P20QF.

(Figure: The Existential Monopolist) Use Figure: The Existential Monopolist. If this market became perfectly competitive, total market output in the long run would be _____ units, and the market price would be _____.

Q3; P3

A market in which there is one buyer is:

a monopsony.

The MAIN reason a monopoly engages in price discrimination is:

to increase its profits.

(Table: Demand and Total Cost for Asgard) Use Table: Demand and Total Cost for Asgard. Valkyrie runs a natural monopoly that produces electricity for a small mountain village near Asgard. The table shows the demand facing Valkyrie and Valkyrie's total costs. The table shows the demand facing Valkyrie and Valkyrie's total costs. The firm's maximum profit is: Table: Demand and Total Cost for AsgardQuantity (megawatts)Price per MegawattTotal Cost1$550$1,00025001,07534501,20044001,37553501,60063001,87572502,20082002,575

$225.

(Figure: Pay Per View Movies on Xfinity Cable) Use Figure: Pay Per View Movies on Xfinity Cable. The figure shows the demand and marginal revenue curves for on-demand movie rentals on Xfinity. Assume that marginal cost and average cost are constant at $20. If the cable company is a monopoly, how much total surplus is there when the monopolist maximizes profit?

$270

(Table: Demand and Total Cost for Asgard) Use Table: Demand and Total Cost for Asgard. Valkyrie runs a natural monopoly that produces electricity for a small mountain village near Asgard. The table shows the demand facing Valkyrie and Valkyrie's total costs. The marginal cost of the second unit of output is: Table: Demand and Total Cost for AsgardQuantity (megawatts)Price per MegawattTotal Cost1$550$1,00025001,07534501,20044001,37553501,60063001,87572502,20082002,575

$75.

(Figure: The Environmental Monopolist) Use Figure: The Environmental Monopolist. The deadweight loss associated with this monopoly can be measured as the area:

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

(Figure: Monopoly Model in the Market for Electricity) Use Figure: Monopoly Model in the Market for Electricity. When the firm is in equilibrium—maximizing economic profit—its total cost is represented by:

0SBJ.

(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

A monopolist with a linear demand curve will not produce on the inelastic portion of the demand curve, since in that range:

MR<0.

(Figure: Short-Run Monopoly in the Market for Electricity) Use Figure: Short-Run Monopoly in the Market for Electricity. The profit-maximizing rule is satisfied by the intersection at point:

R.

The demand curve for a monopoly is:

above the marginal revenue curve.

A monopoly is an industry structure characterized by:

barriers to entry and exit.

The demand for air travel in the tourism industry tends to be relatively ______. Thus, small _____ in air fares will result in relatively _____ in air travel.

elastic; reductions; large increases

A(n) ______ gives an inventor a temporary monopoly on the use or sale of an invention.

patent

(Table: Lunch on the Lake with William) Use Table: Lunch on the Lake with William. The table shows the market demand for afternoon picnic lunches for visitors who take all-day canoeing trips on Lake Campbell. William's firm provides lunches to visitors at a constant marginal cost and a constant average cost of $4. If William's firm is one of many firms in a competitive market, what price will he charge for a lunch in the long run? Table: Lunch on the Lake with WilliamPriceQuantity Demanded$100910820730640550460

$4

Suppose the GoLogos logo monopoly is broken up. and the logo industry becomes perfectly competitive. We would expect _____ surplus to increase and _____ surplus to decrease after the breakup.

consumer and total; producer

A monopoly responds to a decrease in marginal cost by _____ price and _____ output.

decreasing; increasing