ch12

If James's marginal and average costs are $10, James will maximize profit by charging a price of:

$13

Given the graph, a profit-maximizing firm in a perfectly competitive industry would charge a price of:

$20

Given the graph, if the monopolist maximizes profit, he will earn profit of:

$20,000

After Beth does the research for her new app, she learns that she will have 100 power users who would be willing to pay $5 and 400 casual users who would only be willing to pay $2. The marginal cost to provide the app to any one user is constant at $1 and there are no fixed costs. Suppose Beth cannot use price discrimination and she charges a price of $2 to all consumers. The consumer surplus would be _____.

$300

If James lowers his price from $11 to $10, the price effect is:

- $5

If James lowers his price from $7 to $6, the net result of the quantity effect and the price effect is:

- 3

Given the graph, if the monopolist perfectly price discriminates, consumer surplus will be $_____.

0

If James's marginal and average costs are $8, and his firm is in a perfectly competitive industry, James's maximum profit is $_____.

0

If James's marginal and average costs are $10, James will maximize profit by producing an output of _____ barrels

3

If the DeBeers diamond monopoly lowers the price of a diamond from $800 to $750 and sales increase from four to five diamonds, total revenue changes from $_____ to $_____.

3,200; 3,750

If James's firm operates in a perfectly competitive market, consumer surplus is $_____.

32

If James's marginal and average cost are $8, total cost at the profit-maximizing output is $_____.

32

If James's marginal and average costs is $8, and his firm is in a perfectly competitive industry, James's price is $_____ less than if the firm is a monopoly.

4

If the DeBeers diamond monopoly lowers the price of a diamond from $800 to $750 and sales increase from four to five diamonds, the marginal revenue of the fifth diamond is $

550

If James lowers his price from $7 to $6, the quantity effect is $_____.

6

If James's firm is a monopoly, consumer surplus is $_____.

8

f James's firm were to operate in a perfectly competitive market, the output would be _____ units in the market.

8

If James lowers his price from $7 to $6, the price effect is a loss of $_____.

9

Given the graph, if the market is a monopoly, consumer surplus is the area:

A

Given the graph, if the market is a perfectly competitive market, consumer surplus is the area:

A + B + D.

True or False: A monopoly in a small market, such as the only grocery store in an isolated rural community, is known as an oligopoly. This is _____.

False

True or False: An industry with many producers of identical products is monopolistic competition. This is _____.

False

True or False: De Beers is a natural monopoly because it controls a scarce natural resource. This is _____.

False

True or False: If a monopolist practices price discrimination, it will sell more units, but decrease profits. This is _____.

False

True or False: If a monopolized industry is not a natural monopoly, the best policy is for the government to avoid intervening and let the free market work. This is _____.

False

True or False: Most goods purchased by American consumers are made by perfectly competitive firms. This is _____

False

True or False: Natural monopolies usually have increasing returns to scale because they have low fixed costs. This is _____.

False

True or False: The industry demand curve for a perfectly competitive industry is perfectly elastic. This is _____.

False

True or False: The marginal revenue curve for a monopolist is perfectly elastic. This is _____.

False

Cable service in the United States is facing _____ competition.

Increasing

Given the graph, the monopolist will maximize profit at an output:

Of 1000

Given the graph, the monopolist will maximize profit at a price:

Of$40

Compared to consumer surplus in perfect competition, consumer surplus in a monopoly market is:

Smaller

True or False: A natural monopoly can produce a given quantity of output at a lower average total cost than can several smaller firms. This is _____.

True

True or False: A single-price monopolist offers its product to all consumers at the same price. This is _____.

True

True or False: An individual firm's demand curve in a perfectly competitive market is perfectly elastic. This is _____.

True

True or False: An industry with many producers of identical products is perfect competition. This is _____.

True

True or False: If the regulated price is M, the monopolist will incur a loss. This is _____

True

True or False: In the long run, monopolies earn economic profits. This is _____.

True

True or False: The best policy toward a monopoly depends on whether the industry is a natural monopoly. This is _____.

True

True or False: The marginal revenue curve for a perfectly competitive firm is horizontal. This is _____.

True

True or False: The profit-maximizing level of output for a monopolist is the output that generates the greatest difference between total revenue and total cost. This is _____.

True

When a coffee shop gives out a punch card offering the tenth coffee for free, it is implementing:

a volume discount.

Firms in the package-delivery industry are characterized by increasing returns to scale if:

average total cost falls as output increases.

Marginal revenue is the:

change in total revenue divided by the change in the quantity of output.

A natural monopoly is an industry:

characterized by increasing returns to scale. characterized by increasing returns to scale.

The market demand curve for a monopolist is:

downward sloping

The fact that it is a natural monopoly is revealed by the:

downward-sloping average total cost curve.

A natural monopoly:

has a declining average total cost curve.

Compared to a perfectly competitive firm, a monopolist in a retail market:

has higher prices.

A natural monopoly exhibits:

increasing returns to scale.

An insurance company that is the only company selling mandatory health insurance in a state is an example of which market structure?

monopoly

Assume that there is only one firm in your town that hires economists. This firm would be considered a(n) _____ in this town.

monopsony

Given the graph, a single-price monopolist would:

not sell to consumers willing to pay less than $40.

In the market for soft drinks, there are a small number of firms selling differentiated products. This is an example of:

oligopoly.

In the market for wheat, there are many farmers selling exactly the same type of wheat. This is an example of:

perfect competition.

The government generally _____ policy.

prevents monopolies by using antitrust

Which of the following is a strategy for dealing with a natural monopoly?

price regulation

Which of the following barriers to entry are MOST likely to be temporary?

technological superiority

A patent on a new type of electric motor would give the inventor a:

temporary monopoly.

At low levels of output

the quantity effect dominates the price effect.

These are the consumers who are:

willing to pay between $20 and $40.

If the firm were regulated to produce quantity F it:

would not be able to cover its costs.