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Exam 15: Monopoly

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Question 91

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Figure 15-11 ​ ​ -Refer to Figure 15-11. Which letter represents the profit-maximizing price chosen by the single price monopolist?

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Question 92

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A monopolist's profit is equal to (Price - Marginal Cost) × Quantity.

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Question 93

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Table 15-3 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 15-3. If the monopolist can engage in perfect price discrimination, what is the average revenue when 7 ties are sold?

Graphically depict the deadweight loss caused by a monopoly. How is this similar to the deadweight loss from taxation?

The deadweight loss for a monopolist equals one-half of its profits for any given level of output.

Monopolists can achieve any level of profit they desire because they have unlimited market power.

Figure 15-11 ​ ​ -Refer to Figure 15-11. Use the letters in the figure to identify the profit area if this firm were able to perfectly price discriminate.

If the government deems a newly-invented drug to be truly original, the pharmaceutical company is given the exclusive right to manufacture and sell the drug for 50 years.

A monopolist can sell 300 units of output for $50 per unit. Alternatively, it can sell 301 units of output for $49.60 per unit. The marginal revenue of the 301^st unit of output is

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. One of Vincent's friends tells him he would be more profitable if he charged a single price of $12. Assuming no changes in consumer demand, what would Vincent's profit be if he charged every customer $12?

The social cost of a monopoly is equal to its

A perfectly price-discriminating monopolist is able to

Price discrimination is prohibited by antitrust laws.

Figure 15-9 ​ ​ -Refer to Figure 15-9. If the monopolist uses perfect price discrimination, how much profit does the firm earn?

Figure 15-10 ​ ​ -Refer to Figure 15-10. What type of monopoly is shown in the figure?

In order to sell more of its product, a monopolist must

Figure 15-1 -Refer to Figure 15-1. The shape of the average total cost curve in the figure suggests an opportunity for a profit-maximizing monopolist to take advantage of

The distribution of water to residents of a town and an infrequently used bridge are examples of

Selling the same good at different prices to different customers is known as

Figure 15-5 The following graph depicts the market situation for a monopoly pastry shop called Bearclaws. -Refer to Figure 15-5. Based upon the information shown, what are total costs for Bearclaws, given that it maximizes profits?