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Exam 14: Monopoly

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Question 71

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Figure 15-3 -Refer to Figure 15-3. Which of the following statements is correct?

A) Panel C represents the typical demand curve for a perfectly competitive firm, and Panel B represents the typical demand curve for a monopoly.
B) Panel B represents the typical demand curve for a perfectly competitive firm, and Panel A represents the typical demand curve for a monopoly.
C) Panel A represents the typical demand curve for a perfectly competitive firm, and Panel C represents the typical demand curve for a monopoly.
D) Panel C represents the typical demand curve for a perfectly competitive firm, and Panel D represents the typical demand curve for a monopoly.

E) None of the above
F) B) and C)

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Question 72

Multiple Choice

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For a typical natural monopoly, average total cost is

A) rising, often because marginal costs are very large.
B) rising, often because fixed costs are very large.
C) declining, often because marginal costs are very large.
D) declining, often because fixed costs are very large.

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

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Question 73

Multiple Choice

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Table 15-17 A monopolist faces the following demand curve: -Refer to Table 15-17. Which of the following statements best describes the relationship between the price and the marginal revenue associated with values in the table?

Figure 15-24 -Refer to Figure 15-24. Use the letters in the figure to identify the area of deadweight loss for the single price monopolist.

A monopoly firm is a price

Table 15-17 A monopolist faces the following demand curve: -Refer to Table 15-17. If the marginal cost of production is constant at $18 per unit, this profit-maximizing monopolist will choose to produce

Scenario 15-7 Black Box Cable TV is able to purchase an exclusive right to sell a premium movie channel PMC) in its market area. Let's assume that Black Box Cable pays $150,000 a year for the exclusive marketing rights to PMC. Since Black Box has already installed cable to all of the homes in its market area, the marginal cost of delivering PMC to subscribers is zero. The manager of Black Box needs to know what price to charge for the PMC service to maximize her profit. Before setting price, she hires an economist to estimate demand for the PMC service. The economist discovers that there are two types of subscribers who value premium movie channels. First are the 4,000 die-hard TV viewers who will pay as much as $150 a year for the new PMC premium channel. Second, the PMC channel will appeal to 20,000 occasional TV viewers who will pay as much as $20 a year for a subscription to PMC. -Refer to Scenario 15-7. If Black Box Cable TV is able to price discriminate, what would be the maximum amount of profit it could generate?

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.

Which of the following is not an example of a barrier to entry?

Which of the following statements is not correct?

Figure 15-24 -Refer to Figure 15-24. Which letter represents the profit-maximizing price chosen by the single price monopolist?

Antitrust laws allow the government to

A monopolist produces where P > MC = MR.

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

Price discrimination

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 are Sally's fixed costs?

In the majority of cases where there is a natural monopoly in the United States, the government usually deals with the problem

Figure 15-7 -Refer to Figure 15-7. A profit-maximizing monopolist would incur total costs of

A monopolist will choose to increase output when

The fundamental cause of monopolies is barriers to entry.