Chapters 15/16- Monopoly & Monopolistic Competition
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.
Refer to Figure 16-7. Which of the following areas represents the profit for this profit maximizing monopolistically competitive firm?
BCIJ
Which of the following statements is not correct?
Both monopolistic competition and perfect competition are characterized by product differentiation.
Monopolists can achieve any level of profit they desire because they have unlimited market power.
False
Refer to Figure 16-1. Which of the graphs illustrates the demand curve most likely faced by a firm in a monopolistically competitive market?
Graph (b)
Which of the following is true about a monopolistically competitive firm?
It can earn an economic profit in the short run, but not the long run.
Refer to Figure 15-4. What price will the monopolist charge in order to maximize profit?
K
To maximize total surplus with a monopoly firm, a benevolent social planner would choose the level of output where
MC intersects the demand curve.
In which of the following market structures can firms earn economic profits in the long run?
Monopoly only
Refer to Figure 15-2. Profit can always be increased by increasing the level of output by one unit if the monopolist is currently operating at
Q1 or Q2 only.
Which of the following is a necessary characteristic of a monopoly?
The firm is the sole seller of its product.
Refer to Figure 15-6. What is the area of deadweight loss?
The triangle 1/2[(A − C) × (Y − X)]
When existing firms lose customers and profits due to entry of a new competitor, a
business-stealing externality occurs.
Refer to Figure 15-2. If the monopoly firm is currently producing Q4 units of output, then a decrease in output will necessarily cause profit to
increase if the output is between Q3 and Q4.
In order to sell more of its product, a monopolist must
lower its price.
Refer to Figure 16-4. Graph (b) is consistent with a firm in a monopolistically competitive market that is
not in long-run equilibrium.
When a market is monopolistically competitive, the typical firm in the market is likely to experience a
positive or negative profit in the short run and a zero profit in the long run.
Delish, a moderately priced restaurant, has recently announced intentions to open a restaurant in Boston, MA. Assume that the restaurant market in Boston is characterized by monopolistic competition. Refer to Scenario 16-2. As a result of the new restaurant, consumers in Boston are likely to experience a
product-variety externality, which is a positive externality.
When a monopolistically competitive firm raises its price,
quantity demanded declines but not to zero.
A monopolistically competitive firm is currently producing 20 units of output. At this level of output the firm is charging the highest price it can at $20, has marginal revenue equal to $12, has marginal cost equal to $12, and has average total cost equal to $18. From this information we can infer that
the firm is currently maximizing its profit.
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. Refer to Scenario 15-1. At Q = 500, the firm's profit is
$13,000.
A monopolist can sell 300 units of output for $45 per unit. Alternatively, it can sell 301 units of output for $44.60 per unit. The marginal revenue of the 301st unit of output is
-$75.40.
Refer to Figure 16-2. How much consumer surplus will be derived from the purchase of this product at the monopolistically competitive price?
200
Refer to Figure 16-2. How much profit will the monopolistically competitive firm earn in this situation?
200
Refer to Figure 15-5. Given that Bearclaws chooses the profit-maximizing price and quantity, what profit level will it obtain?
280
