micro chapter 9

Both a perfectly competitive firm and a monopolist:

maximize profit by setting marginal cost equal to marginal revenue.

In contrast to a perfectly competitive firm, a monopolist earns:

positive economic profit in the long run.

A monopolist will maximize profits by:

producing the output where marginal revenue equals marginal cost.

Monopoly is a market structure characterized by a:

single firm that is not a price taker.

Although a monopoly can charge any price it wishes, it chooses:

the price that maximizes profit.

An example of price discrimination is the price charged for:

theater tickets that offer lower prices for children.

The maximum possible total monopoly profit in the above diagram is:

$12.

There is only one gas station within hundreds of miles. The owner finds that when she charges $3 a gallon, she sells 199 gallons a day, and when she charges $2.99 a gallon, she sells 200 gallons a day. The marginal revenue of the 200th gallon of gas is:

$2.99.

When the monopolist is maximizing total profit in the above diagram, the average total cost of producing that output level is:

$8.

Which of the following is true for the monopolist?

All of the above. a. The demand curve is downward sloping. b. Economic profit is possible in the long-run. c. Profit maximizing occurs when marginal revenue equals marginal cost.

____ is the act of buying a commodity in one market at a lower price and selling it in another market at a higher price.

Arbitrage.

Which of the following is true under natural monopoly?

Economies of scale exist.

Which of the following firms best fits the definition of a monopoly?

Local electric utility.

As shown in the above diagram, the profit-maximizing price for the monopolist is:

OP4.

The profit-maximizing output for the monopolist in the above diagram is:

OQ2

As shown in the above diagram, if the monopolist produces the profit-maximizing output, total revenue is the rectangular area:

OQ2DP4.

As shown in the above diagram, the monopolist's total cost is which of the following areas?

OQ2FP3.

Alcoa had a monopoly in the U.S. aluminum market from the late nineteenth century until the end of World War II. Which barrier to entry was the source of Alcoa's monopoly power?

Ownership of a vital resource.

In contrast to a perfectly competitive firm, a monopolist operates in the long run at a quantity of output at which:

P > MC.

In the above diagram, the economic profits of the monopoly are represented by the area:

P3FDP4.

Which of the following best explains why the monopolist's marginal revenue is less than the selling price (on the demand curve)?

To sell more units, the monopolist must reduce price on all units sold.

Price discrimination requires:

a firm to be able to segment its customers based on different price elasticities of demand.

Price discrimination occurs when:

a seller charges different prices to different consumers of the same product or service.

What should a profit maximizing monopolist do if she is currently producing where MC is less than MR?

a. Increase output until MC = MR.

A monopolized market is characterized by:

all of these. a. a sole seller of a product for which there are few suitable substitutes. b. very strong barriers to entry. c. a single firm facing the market demand curve.

A monopoly:

all of these. a. faces the market demand curve which is downward sloping. b. does not have to earn zero economic profits in the long run. c. will maximize profits by producing an output level where MR = MC.

A monopolist will earn economic profits as long as his price exceeds:

b. average total cost.

The monopolist's demand curve is:

identical to the market demand curve.

The strategy underlying price discrimination is to:

increase total revenue by charging higher prices to those with the most inelastic demand for the product and lower prices to those with the most elastic demand.

If pizza used to be produced in a perfectly competitive market, and now the pizza market has become a monopoly, we can expect:

less pizza to be sold at a higher price.

A monopoly firm can sell its fourth unit of output for a price of $250. In order to sell more than four units, it must expect to receive a price:

less than $250.