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Exam 14: Monopoly

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Question 231

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Figure 15-17 -Refer to Figure 15-17. If this firm were able to perfectly price discriminate, which of the following areas would represent the profit to this perfectly discriminating monopolist?

A) ABE
B) BCFE
C) EFG
D) ACG

E) A) and D)
F) B) and D)

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Question 232

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If a monopolist can sell 7 units when the price is $4 and 8 units when the price is $3, then the marginal revenue of selling the eighth unit is equal to

A) $3.
B) $4.
C) $24.
D) -$4.

E) A) and B)
F) A) and C)

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Question 233

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The reason to regulate utilities instead of using antitrust laws to promote competition is that a utility is usually a

Natural monopolies differ from other forms of monopoly because they are

Comparing firms in perfectly competitive markets to monopoly firms, which charges higher prices?

Firms with substantial monopoly power are quite common because many goods are unique.

Figure 15-22 -Refer to Figure 15-22. If the monopolist uses perfect price discrimination, how much output does the firm produce?

Table 15-21 Tommy's Tie Company, a monopolist, has the following cost and revenue information. Assume that Tommy's is able to engage in perfect price discrimination. -Refer to Table 15-21. If the monopolist can engage in perfect price discrimination, what is the marginal revenue from selling the 8th tie?

Figure 15-23 -Refer to Figure 15-23. If the firm profit-maximizes, what amount of output will it produce?

If the government regulates the price a natural monopolist can charge to be equal to the firm's average total cost, the firm has no incentive to reduce costs.

Patent and copyright laws encourage

A profit-maximizing monopolist charges a price of $14. The intersection of the marginal revenue curve and the marginal cost curve occurs where output is 15 units and marginal cost is $7. What is the monopolist's profit?

Scenario 15-11 Vincent operates a scenic tour business in Boston. He has one bus which can fit 50 people per tour and each tour lasts 2 hours. His total cost of operating one tour is fixed at $450. Vincent's cost is not reduced if he runs a tour with a partially full bus. While his cost is the same for all tours, Vincent charges each passenger his/her willingness to pay: adults $18 per trip, children $10 per trip, and senior citizens $12 per trip. At those rates, on a typical day Vincent's demand is: Assume that Vincent's customers are always available for the tour; therefore, he can fill his bus for each tour as long as there is sufficient total demand for the day. -Refer to Scenario 15-11. What is Vincent's cost of serving all passengers demanding a tour on a typical day?

Monopolies are inefficient because they i) eliminate barriers to entry. Ii) price their product at a level where marginal revenue exceeds marginal cost. Iii) restrict output below the socially efficient level of production.

The proper level of government intervention is unclear when dealing with a monopoly.

When a monopolist increases the amount of output that it produces and sells, the price of its output

Table 15-8 The following table provides information on the price, quantity, and average total cost for a monopoly. -Refer to Table 15-8. How much extra revenue does the monopolist earn when he lowers the price from $18 to $12?

Figure 15-8 -Refer to Figure 15-8. What area represents the total surplus lost due to monopoly pricing?

If a pharmaceutical company discovers a new drug and successfully patents it, patent law gives the firm

The collection of statutes aimed at curbing monopoly power is called