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Exam 15: Monopoly

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Question 41

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For a long while, electricity producers were thought to be a classic example of a natural monopoly. People held this view because

A) the average cost of producing units of electricity by one producer in a specific region was lower than if the same quantity were produced by two or more producers in the same region.
B) the average cost of producing units of electricity by one producer in a specific region was higher than if the same quantity were produced by two or more produced in the same region.
C) the marginal cost of producing units of electricity by one producer in a specific region was higher than if the same quantity were produced by two or more producers in the same region.
D) electricity is a special non-excludable good that could never be sold in a competitive market.

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Question 42

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Which of the following can defeat the profit-maximizing strategy of price discrimination?

A) consumer surplus
B) deadweight loss
C) market power
D) arbitrage

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Question 43

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Customers who purchase an audio CD from Sally's Sounds are charged 20% more than customers who purchase the audio CD from the Sally's Sounds website. This is an example of

A monopoly is an inefficient way to produce a product because

Table 15-4 A monopolist faces the following demand curve: -Refer to Table 15-4. In order to maximize profits, the monopolist should produce

In a competitive market, a firm's supply curve dictates the amount it will supply. In a monopoly market the

Name brand drugs are able to continue capitalizing on their market power even after generic drugs enter the market because (i) almost all people fear the generic drug companies are devoting too few resources to research and development. (ii) some people fear that generic drugs are inferior. (iii) some people are loyal to the name brand.

The simplest way for a monopoly to arise is for a single firm to

Which of the following are necessary characteristics of a monopoly? (i) The firm is the sole seller of its product. (ii) The firm's product does not have close substitutes. (iii) The firm generates a large economic profit. (iv) The firm is located in a small geographic market.

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. One of Vincent's friends tells him he would be more profitable if he charged a single price of $18. Assuming no changes in consumer demand, what would Vincent's profit be if he charged every customer $18?

Table 15-7 Sally owns the only shoe store in town. She has the following cost and revenue information. -Refer to Table 15-7. What is the total variable cost of production when Sally produces six pairs of shoes?

For a monopoly firm, which of the following equalities is always true?

With no price discrimination, the monopolist sells every unit at the same price. Therefore

How does a competitive market compare to a monopoly that engages in perfect price discrimination?

With perfect price discrimination the monopoly

Figure 15-9 -Refer to Figure 15-9. The deadweight loss caused by a profit-maximizing monopoly amounts to

During the life of a drug patent, the monopoly pharmaceutical firm maximizes profit by producing the quantity at which marginal revenue equals marginal cost.

The deadweight loss associated with a monopoly occurs because the monopolist

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

Table 15-7 Sally owns the only shoe store in town. She has the following cost and revenue information. -Refer to Table 15-7. What is total profit at the profit-maximizing quantity?