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Exam 15: Monopoly

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Question 31

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A monopolist does not have a supply curve because the firm's decision about how much to supply is impossible to separate from the demand curve it faces.

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B) False

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Question 32

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One example of price discrimination occurs in the publishing industry when a publisher initially releases an expensive hardcover edition of a popular novel and later releases a cheaper paperback edition. Use this example to demonstrate the benefits and potential pitfalls of a price discrimination pricing strategy.

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Question 33

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The fundamental cause of monopolies is barriers to entry.

Suppose a profit-maximizing monopolist faces a constant marginal cost of $20, produces an output level of 100 units, and charges a price of $50. The socially efficient level of output is 200 units. Assume that the demand curve and marginal revenue curve are the typical downward-sloping straight lines. The monopoly deadweight loss equals $1,500.

State two examples of government-created monopolies.

A benefit to society of the patent and copyright laws is that those laws

Figure 15-10 ​ ​ -Refer to Figure 15-10. If a regulator requires the firm to charge a marginal cost price, what price will the firm charge?

Figure 15-5 The following graph depicts the market situation for a monopoly pastry shop called Bearclaws. -Refer to Figure 15-5. Given that Bearclaws chooses the profit-maximizing price and quantity, what profit level will it obtain?

If a product can be produced by a natural monopoly, society will benefit in the form of lower prices if the monopolist is broken up into several smaller firms.

Deadweight loss measures the loss in society's welfare that occurs because a monopolist can earn profits without the concern of new firms entering its industry.

A monopolist that can practice perfect price discrimination will not impose a deadweight loss on society.

Figure 15-10 ​ ​ -Refer to Figure 15-10. If a regulator requires the firm to charge an average cost price, what quantity will the firm produce?

Figure 15-10 ​ ​ -Refer to Figure 15-10. If a regulator requires the firm to charge a marginal cost price, what is the amount of profit or loss earned by the firm?

If a profit-maximizing monopolist faces a downward-sloping market demand curve, its

When a single firm can supply a good or service to an entire market at a lower cost than could two or more firms, the industry is known as a

Table 15-4 $\begin{array} { | l | l | } \hline \text { Quantity } & \text { Price } \\\hline 10 & \$ 46 \\\hline 20 & \$ 42 \\\hline 30 & \$ 38 \\\hline 40 & \$ 34 \\\hline 50 & \$ 30 \\\hline 60 & \$ 26 \\\hline 70 & \$ 22 \\\hline 80 & \$ 18 \\\hline 90 & \$ 14 \\\hline 100 & \$ 10 \\\hline\end{array}$ -Refer to Table 15-4. The marginal revenue, when the quantity changes from 30 to 40 units, is

The government may choose to do nothing to reduce monopoly inefficiency because the "fix" may be worse than the problem.

Comparing firms in perfectly competitive markets to monopoly firms, which produces more output?

Describe how government is involved in creating a monopoly. Why might the government create one? Give an example.

Table 15-1 The following table provides information on the price, quantity, and average total cost for a monopoly. ​ ​ $\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Price } \\\text { (Dollars per unit) }\end{array} & \begin{array} { c } \text { Quantity } \\\text { (Units) }\end{array} & \begin{array} { c } \text { Average Total Cost } \\\text { (Dollars per unit) }\end{array} \\\hline 24 & 0 & - \\\hline 18 & 5 & 14.00 \\\hline 12 & 10 & 11.00 \\\hline 6 & 15 & 10.67 \\\hline 0 & 20 & 11.00 \\\hline\end{array}$ ​ -Refer to Table 15-1. At what price will the monopolist maximize his profit?