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Exam 15: Monopoly

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Question 71

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A monopolist earns higher profits by charging one price than by practicing price discrimination.

A) True
B) False

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Question 72

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The profit-maximization problem for a monopolist differs from that of a competitive firm in which of the following ways?

A) A competitive firm maximizes profit at the point where marginal revenue equals marginal cost; a monopolist maximizes profit at the point where marginal revenue exceeds marginal cost.
B) A competitive firm maximizes profit at the point where average revenue equals marginal cost; a monopolist maximizes profit at the point where average revenue exceeds marginal cost.
C) For a competitive firm, marginal revenue at the profit-maximizing level of output is equal to marginal revenue at all other levels of output; for a monopolist, marginal revenue at the profit-maximizing level of output is smaller than it is for larger levels of output.
D) For a profit-maximizing competitive firm, thinking at the margin is much more important than it is for a profit-maximizing monopolist.

E) A) and D)
F) All of the above

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Question 73

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Figure 15-9 ​ ​ -Refer to Figure 15-9. How much consumer surplus results if this single-price monopolist profit-maximizes?

If the ABC company owns the exclusive rights to mine land in Afghanistan for Lapis Lazuli, a rare stone used in jewelry which is found only in Afghanistan, the company benefits from a barrier to entry.

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

What are the three main sources of barriers to entry for monopolies?

Scenario 15-3 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: $\begin{array} { | l | l | l | } \hline \text { Passen ger Type } & \text { Willingness to Pay } & \text { Demand per day } \\\hline \text { Adults } & \$ 18 & 70 \\\hline \text { Children } & \$ 10 & 25 \\\hline \text { Senior Citizens } & \$ 12 & 55 \\\hline\end{array}$ 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 15-3. Vincent uses a pricing practice called

A monopolist maximizes profit by producing an output level where marginal cost equals price.

When a firm operates under conditions of monopoly, its price is

A monopolist's supply curve is horizontal.

A movie theater can increase its profits through price discrimination by charging a higher price to adults and a lower price to children if it

Figure 15-7 -Refer to Figure 15-7. To maximize its profit, a monopolist would choose which of the following outcomes?

Figure 15-12 ​ ​ -Refer to Figure 15-12. If a regulator requires this firm to charge a fair return price, which letter represents the amount of output it will produce?

​The best option to control the behavior of a natural monopoly is to use public ownership of the monopoly.

A key for a monopoly that wants to practice price discrimination is to be able to control the resale of its product. ​

For a monopoly, marginal revenue is often greater than the price it charges for its good.

The De Beers Diamond company is not worried about differentiating its product from all other gemstones.

A common solution to monopoly in European countries is public ownership.

Which of the following is not one of the ways that antitrust laws promote competition?

A firm cannot price discriminate if