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Exam 14: Monopoly

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Question 201

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Figure 15-4 -Refer to Figure 15-4. The demand curve for a monopoly firm is depicted by curve

A) A.
B) B.
C) C.
D) D.

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

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Question 202

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Copyrights and patents are examples of barriers to entry that give firms monopoly pricing powers.

A) True
B) False

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Question 203

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

Scenario 15-5 An airline knows that there are two types of travelers: business travelers and vacationers. For a particular flight, there are 100 business travelers who will pay $600 for a ticket while there are 50 vacationers who will pay $300 for a ticket. There are 150 seats available on the plane. Suppose the cost to the airline of providing the flight is $20,000, which includes the cost of the pilots, flight attendants, fuel, etc. -Refer to Scenario 15-5. How much profit will the airline earn if it sets the price of each ticket at $600?

Table 15-14 The following table gives information on the price, quantity, and total cost of production for a monopolist. -Refer to Table 15-14. At what price does marginal revenue equal marginal cost?

Table 15-8 The following table provides information on the price, quantity, and average total cost for a monopoly. -Refer to Table 15-8. At what price will the monopolist maximize his profit?

Price discrimination can increase both the monopolist's profits and society's welfare.

Consider a profit-maximizing monopoly pricing under the following conditions. The profit-maximizing quantity is 40 units, the profit-maximizing price is $160, and the marginal cost of the 40th unit is $120. If the good were produced in a perfectly competitive market, the equilibrium quantity would be 50, and the equilibrium price would be $150. The demand curve and marginal cost curves are linear. What is the value of the deadweight loss created by the monopolist?

Suppose a profit-maximizing monopolist faces a constant marginal cost of $10, 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 $2,000.

Table 15-4 A monopolist faces the following demand curve: -Refer to Table 15-4. If the monopolist produces 10 units, what is its marginal revenue?

A fundamental source of monopoly market power arises from

Table 15-20 A monopolist faces the following demand curve: -Refer to Table 15-20. If a monopolist faces a constant marginal cost of $10, how much output should the firm produce in order to maximize profit?

A firm that is the sole seller of a product without close substitutes is

Figure 15-20 -Refer to Figure 15-20. The consumer surplus at the monopolist's profit­maximizing price is

There has been much discussion of deregulating electricity and natural gas delivery companies in the United States. Discuss the likely effect of deregulation on prices in these two industries.

Figure 15-25 -Refer to Figure 15-25. If this firm profit maximizes, which letter represents the quantity it will produce?

Suppose ABC Aluminum Inc. owns 80% of the world's bauxite, a mineral used in the production of aluminum. Which of the following reasons describes the fundamental barrier to entry for the aluminum industry?

Figure 15-18 -Refer to Figure 15-18. If the monopoly firm is not allowed to price discriminate, then the deadweight loss amounts to

When a firm has a natural monopoly, the firm's

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. Vincent uses a pricing practice called