ECO 201 chapter 15.2 quiz

A monopoly chooses to supply the market with a quantity of a product that is determined by the intersection of the

marginal revenue and marginal cost curves

The first major piece of antitrust legislation was the

Sherman Act

Splitting up a monopoly is often justified on the grounds that

competition is inherently efficient

Which of the following is an example of public ownership of a monopoly?

U.S. Postal Service

If a monopoly market were to be transformed into a competitive market, the result would be that

- market output would increase - ​the market would be efficient, once the market reached the competitive output -​ the deadweight loss from the monopoly would be eliminated

The legislation passed by Congress in 1890 to reduce the market power of large and powerful "trusts" was the

Sherman Act

Refer to Figure 15-17. Which of the following areas represents the consumer surplus from this profit-maximizing monopolist?

ABE

Which of the following is an example of price discrimination?

Hotel rates for AAA members are lower than for nonmembers

The social cost of a monopoly is equal to its

deadweight loss

Suppose that a professional photographer takes a prize-winning digital photo. She can sell a 5"x7" color print of the photo for $10. She can also sell the digital file for $20. There are 500 people willing to buy the color print and 2,000 people willing to buy the digital file. Assume the costs to the photographer are zero and that the people who purchase the digital file cannot resell the file itself or any prints made from it. What should she do in order to maximize her profits?

earn $45,000 by selling both the color prints and the digital files at their respective prices

Deadweight loss

measures monopoly inefficiency

When a monopolist chooses the output that maximizes profits, we know that MR = MC and also that P > MR. This is inefficient because

the monopolist fails to make transactions where the marginal benefit is greater than the marginal cost