Mod 5 (Lesson 13)
Which of the following is NOT true? Both monopolies and monopolistically competitive firms can determine what price they will set. In the long run, both monopolies and monopolistically competitive firms earn no economic profit. Both monopolies and monopolistically competitive firms produce so that MR equals MC. In the short run, both monopolies and monopolistically competitive firms can earn an economic profit.
In the long run, both monopolies and monopolistically competitive firms earn no economic profit.
Which characteristic is associated with oligopoly? Price is set by the government. product differentiation small number of firms One family owns all the companies.
small number of firms
If the monopoly illustrated in the figure could engage in perfect price discrimination, then the lowest ticket price would be __________. $1.00 $2.00 $3.00 $3.50 Mod 5, Lesson 13, CGA, Q13
$2.00
In the figure, the total revenue for a single-price monopolist is shown by the area ___________. 0 P5f Q1 P2P4 e b 0 P3c Q1 0 P4e Q3 MOD 5, LESSON 13, PRE-TEST, Q14
0 P5f Q1
If the monopoly illustrated in the figure could engage in perfect price discrimination, then it would sell __________. 30 tickets 50 tickets 60 tickets 100 tickets Mod 5, Lesson 13, CGA, Q13 GRAPH
60 tickets
Which area(s) in the figure indicate(s) consumer surplus at the price and quantity that would be determined by a single-price monopoly? A + B A + B + C + D + E C + D C + D + E + F + G + H MOD 5, LESSON 13, PRE-TEST, Q8
A + B
Which area(s) in the figure indicates consumer surplus at the price and quantity that would be attained if the industry were characterized by perfect competition? A + B + C + D A + B + C + D + E F + G + H A + B + C + D + E + F + G + H MOD 5, LESSON 13, PRE-TEST, Q7
A + B + C + D + E
Perfect price discrimination ___________. achieves efficiency extracts the entire consumer surplus causes output to be produced where price equals marginal cost All of the above are correct.
All of the above are correct.
With competitive rent seeking under monopoly, __________. the monopolist's average total costs will increase so that its average total cost curve is tangent to the demand curve at the profit-maximizing price a monopoly uses all of what would be its economic profit to prevent other firms from taking its economic rent the full deadweight loss of monopoly is larger than in the absence of rent seeking All of the above are correct.
All of the above are correct.
Which of the following is possible if there are substantial economies of scale and scope in an industry? An increase in the output of a good or service brings a decrease in its average total cost of production. An increase in the range of goods produced brings a decrease in average total cost. It is possible that monopoly would yield a larger output and a lower price than under perfect competition. All of the above are possible.
All of the above are possible.
Using the figure, which of the following statements is true? At point f, the marginal revenue of the last unit produced is greater than the marginal cost; therefore, to maximize its profit, the firm should produce more. At point f, the marginal revenue of the last unit produced is equal to the marginal cost; therefore, to maximize its profit, the firm should produce no more nor less. At point e, the marginal cost of the last unit produced is equal to the price; therefore, to maximize its profit, the firm should produce no more nor less. At point d, the marginal revenue of the last unit produced is less than the marginal cost; therefore, the firm should produce more. MOD 5, LESSON 13, PRE-TEST, Q13
At point f, the marginal revenue of the last unit produced is equal to the marginal cost; therefore, to maximize its profit, the firm should produce no more nor less.
Compared to a perfectly competitive industry, a single-price monopoly with the same costs will __________. produce less output charge a higher price produce more output Both a and b are correct.
Both a and b are correct.
Compared to a perfectly competitive industry, a single-price monopoly with the same costs will __________. create less consumer surplus create less economic profit create a deadweight loss Both a and c are correct.
Both a and c are correct.
Price discrimination by a monopoly ___________. Increases consumer surplus decreases consumer surplus increases the firm's profit Both b and c are correct.
Both b and c are correct.
Which area(s) in the figure indicates a transfer from consumers to producers caused by production under a single-price monopoly instead of perfect competition? A + B C + D C + D + E E + H MOD 5, LESSON 13, PRE-TEST, Q9
C + D
Which area(s) in the figure indicate(s) producer surplus at the price and quantity that would be determined by a single-price monopoly? C + D C + D + E C + D + F + G C + D + F + G + I Mod 5, Lesson 13, CGA, Q19
C + D + F + G
Which area(s) in the figure indicate(s) the deadweight loss caused by production under a single-price monopoly instead of perfect competition? E E + H E + H + K E + H + K + J Mod 5, Lesson 13, CGA, Q20
E + H
Which area(s) in the figure indicate(s) producer surplus at the price and quantity that would be attained if the industry were characterized by perfect competition? A + B + C + D + E C + D + E + F + G + H F + G + H F + G + H + I + J + K Mod 5, Lesson 13, CGA, Q18
F + G + H
Which of the following is TRUE about a profit-maximizing, monopolistically competitive firm in its long-run equilibrium? P = MC P = MR ATC = MC P = ATC
P = ATC
The area of economic profit shown in the figure for the single-price monopolist is ___________. b e d P3P5f c 0 P5f Q1 0 P4e Q3 MOD 5, LESSON 13, PRE-TEST, Q15
P3P5f c
If the market illustrated in the above figure is a perfectly competitive market, with the MC curve being the sum of all individual firms' marginal costs, then the perfectly competitive price and quantity would be ___________. P3 and Q1 P5 and Q1 P1 and Q1 P4 and Q3 MOD 5, LESSON 13, PRE-TEST, Q16
P4 and Q3
In the figure, what price will the single-price monopoly set? P1 P2 P4 P5 MOD 5, LESSON 13, PRE-TEST, Q11
P5
In the figure, what quantity will the single-price monopolist produce, assuming profit maximization? Q1 Q2 Q3 Q4 MOD 5, LESSON 13, PRE-TEST, Q10
Q1
Which of the following is NOT necessary for a monopoly to increase its economic profit by discriminating among groups of buyers? The firm must be able to separate different buyer types. The firm must be able to identify each individual consumer's precise willingness to pay. Each group of buyers must have a different average willingness to pay. Resale of the product is difficult or unlikely.
The firm must be able to identify each individual consumer's precise willingness to pay.
If a perfectly competitive industry becomes a monopoly and the costs do not change, which of the following allocation of costs and benefits applies? The producer benefits, but consumers and society are harmed. The producer and society are harmed, but consumers benefit. The producer and society benefit, but consumers are harmed. The producer is harmed, but consumers and society benefit.
The producer benefits, but consumers and society are harmed.
If the monopoly illustrated in the figure could engage in perfect price discrimination, then each buyer would pay __________. $2.00 $3.00 $3.50 a different price Mod 5, Lesson 13, CGA, Q12
a different price
A barrier to entry is __________. a natural or legal impediment that makes it difficult for new firms to enter a market a necessary condition for perfect competition the result of highly elastic demand a brick wall that a firm places around its corporate headquarters
a natural or legal impediment that makes it difficult for new firms to enter a market
Consumer surplus is largest for __________. a perfectly competitive industry a single-price monopoly any price-discriminating monopoly a perfectly price-discriminating monopoly
a perfectly competitive industry
Market power is the __________. size of the market forces of supply and demand ability of a firm to set its price political power of monopolies
ability of a firm to set its price
A natural monopoly is defined as __________. a market in which competition and entry are restricted by the granting of a government license an industry in which one firm can supply the entire market at a lower price than two or more firms a market in which competition and entry are restricted by the granting of a patent any market where one firm constitutes the entire industry
an industry in which one firm can supply the entire market at a lower price than two or more firms
The single-price monopolist shown in the figure could increase its economic profit if ___________. it became a price discriminator if its costs of production were to decrease if the demand for its good were to increase any or all of the above were to occur MOD 5, LESSON 13, PRE-TEST, Q17
any or all of the above were to occur
A monopolist can ___________ sell as much as he or she wants at the chosen price because he or she is the only seller can increase price and quantity sold at the same time can increase price only if he or she is willing to decrease the quantity sold is not restricted by the law of demand
can increase price only if he or she is willing to decrease the quantity sold
If Prime Pharmaceuticals operates as a single-price monopoly, then ___________. consumer surplus equals zero and producer surplus is $64 million consumer surplus is $32 million and producer surplus is $32 million consumer surplus is $16 million and producer surplus is $32 million consumer surplus is $16 and producer surplus is $48 million MOD 5, LESSON 13, PRE-TEST, Q20
consumer surplus is $16 million and producer surplus is $32 million
Deadweight loss measures the inefficiency as the loss of __________. consumer surplus only consumer surplus minus producer surplus consumer surplus plus producer surplus producer surplus only
consumer surplus plus producer surplus
If a decrease in price causes total revenue to decrease, then ___________. demand is elastic demand is inelastic demand is unit elastic the law of demand is violated
demand is inelastic
In monopolistically competitive markets, products are ___________ and entry is ___________. identical; free differentiated; free identical; hard differentiated; hard
differentiated; free
To maximize its profit, the monopolist produces on the __________ portion of its demand where ___________. elastic; P = MC elastic; MR = MC inelastic; P = MC inelastic; MR = MC
elastic; MR = MC
For a single-price monopolist, price is ___________ marginal revenue. less than greater than equal to less than or equal to but never more than
greater than
In the figure, for a single-price monopolist producing at its profit-maximizing equilibrium price and quantity, the price elasticity of demand at this equilibrium will be ___________. greater than 1 and the monopolist's total revenue is maximized less than 1 and the monopolist's economic profit could be larger equal to 1 and the monopolist's total revenue is maximized greater than 1 and the economic profit is maximized but the total revenue is not MOD 5, LESSON 13, PRE-TEST, Q12
greater than 1 and the economic profit is maximized but the total revenue is not
If Prime Pharmaceuticals could practice perfect price discrimination, then which of the following is true? it would produce and sell 16 million inhalers it would produce and sell 20 million inhalers inhalers would sell for $2 each None of the above is correct. MOD 5, LESSON 13, PRE-TEST, Q21
inhalers would sell for $2 each
A monopolist maximizes profit by producing a level of output where ___________. total revenue equals total cost marginal revenue equals marginal cost marginal revenue equals zero price equals marginal cost
marginal revenue equals marginal cost
Single-price monopolies maximize profit at the level of output where ___________. total revenue is maximized price is equal to marginal cost price is equal to marginal revenue marginal revenue is equal to marginal cost
marginal revenue is equal to marginal cost
In which of the following market structures does a firm have the most market power? monopoly oligopoly monopolistic competition perfect competition
monopoly
In a small town, Marilyn's Christmas tree lot has a monopoly on sales of Christmas trees. In order to increase her sales from 100 trees to 101 trees, she must drop the price of all of her trees from $20 to $19. What is the marginal revenue? $2,000 $20 $19 negative $81
negative $81
Prime Pharmaceuticals has developed a new asthma medicine, for which they have a patent. An inhaler can be produced at a constant marginal cost of $2/inhaler. The demand curve, marginal revenue curve, and marginal cost curve for this new asthma inhaler are in the figure. With its patent giving it a monopoly for its new inhaler, if it is a single-price monopoly, Prime Pharmaceuticals will ___________. produce and sell 16 million inhalers at a price of $2 each produce and sell 10 million inhalers at a price of $5 each produce and sell 8 million inhalers at a price of $6 each produce and sell 8 million inhalers at a price of $2 each MOD 5, LESSON 13, PRE-TEST, Q19
produce and sell 8 million inhalers at a price of $6 each
Which characteristic is associated with monopolistic competition? collusion product differentiation small number of firms awareness of rival firms in the market
product differentiation
Rent seeking behavior by a monopolist means __________. searching for reduced rent on plant space making loans to other businesses pursuing an economic profit by price discrimination pursuing an economic profit by creating a monopoly
pursuing an economic profit by creating a monopoly
A deadweight loss occurs whenever __________. the total benefit of a good does not equal its total cost the marginal social benefit of a good does not equal its marginal social cost there is perfect price discrimination there is no consumer surplus
the marginal social benefit of a good does not equal its marginal social cost
If Prime Pharmaceuticals could practice perfect price discrimination, then consumer surplus would equal ___________. $64 million $16 million $32 million zero MOD 5, LESSON 13, PRE-TEST, Q22
zero