quiz 15

Perfect price discrimination

All of the above are correct.

When regulators use a marginal-cost pricing strategy to regulate a natural monopoly, the regulated monopoly

Select one: a. will experience a loss. b. will experience a price below average total cost. c. may rely on a government subsidy to remain in business. d. All of the above are correct.

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

a deadweight loss to society.

When we compare economic welfare in a monopoly market to a competitive market, the profits earned by the monopolist represent

a transfer of benefits from the consumer to the producer.

A movie theater can increase its profits through price discrimination by charging a higher price to adults and a lower price to children if it

a. can prevent children from buying the lower-priced tickets and selling them to adults. b. has some degree of monopoly pricing power. c. can easily distinguish between the two groups of customers. d. All of the above are correct.

The fundamental source of monopoly power is

barriers to entry.

A monopoly can earn positive profits because it

can maintain a price such that total revenues will exceed total costs.

A monopoly

can set the price it charges for its output but faces a downward-sloping demand curve so it cannot earn unlimited profits.

Marginal revenue for a monopolist is computed as

change in total revenue per one unit increase in quantity sold.

If the government regulates the price that a natural monopolist can charge to be equal to the firm's marginal cost, the firm will

earn negative profits, causing the firm to exit the industry.

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

encourage research.

When there are economies of scale over the relevant range of output for a monopoly, the monopoly

is a natural monopoly.

Exclusive ownership of a key resource

is a potential but rare cause of a monopoly.

A competitive firm

is a price taker, whereas a monopolist is a price maker.

For a firm to price discriminate,

it must have some market power.

For a monopolist, marginal revenue is

less than price, whereas marginal revenue is equal to price for a perfectly competitive firm.

Private ownership of a monopoly may benefit society because the monopoly will have an incentive to

lower its costs to earn a higher profit.

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

lower its price

A monopoly firm is a price

maker and has no supply curve

A profit-maximizing monopolist will produce the level of output at which

marginal revenue is equal to marginal cost.

Deadweight loss

measures monopoly inefficiency.

For a monopolist, when the output effect is greater than the price effect, marginal revenue is

positive.

What do economists call the business practice of selling the same good at difference prices to different customers?

price discrimination

Many economists criticize monopolists because they

produce less than the socially efficient level of output.

Price discrimination requires the firm to

separate customers according to their willingnesses to pay.

A government-created monopoly arises when

the government gives a firm the exclusive right to sell some good or service.

One problem with government operation of monopolies is that

the government typically has little incentive to reduce costs.

When a monopoly increases its output and sales,

the output effect works to increase total revenue, and the price effect works to decrease total revenue.

Many movie theaters allow discount tickets to be sold to senior citizens because

the theaters are profit maximizers.

A natural monopoly arises when

there are economies of scale over the relevant range of output.