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Exam 15: Monopoly

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Question 171

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Patent and copyright laws encourage

A) creative activity.
B) research and development.
C) competition among firms.
D) Both a and b are correct.

E) All of the above
F) None of the above

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Question 172

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Which of the following can eliminate the inefficiency inherent in monopoly pricing?

A) arbitrage
B) cost-plus pricing
C) price discrimination
D) regulations that force monopolies to reduce their levels of output

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

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Question 173

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Figure 15-19 -Refer to Figure 15-19. If the monopoly firm is not allowed to price discriminate, then the deadweight loss amounts to

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

A monopolist will choose to increase output when

Price discrimination is a rational strategy for a profit-maximizing monopolist when

Price discrimination explains why Ivy League universities often base tuition costs on students'

Allowing an inventor to have the exclusive rights to market her new invention will lead to (i) a product that is priced higher than it would be without the exclusive rights. (ii) desirable behavior in the sense that inventors are encouraged to invent. (iii) higher profits for the inventor.

Scenario 15-10 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 15-10. Vincent is considering changing his pricing strategy. Which of the following options results in the highest profit per day?

When deciding what price to charge consumers, the monopolist may choose to charge them different prices based on the customers'

Table 15-3 Consider the following demand and cost information for a monopoly. -Refer to Table 15-3. The marginal cost of the 4th unit is

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 revenue from selling 6 pairs of shoes?

Table 15-1 -Refer to Table 15-1. Assume this monopolist's marginal cost is constant at $12. What quantity of output (Q) will it produce and what price (P) will it charge?

One example of price discrimination occurs in the publishing industry when a publisher initially releases an expensive hardcover edition of a popular novel and later releases a cheaper paperback edition. Use this example to demonstrate the benefits and potential pitfalls of a price discrimination pricing strategy.

A profit-maximizing monopolist charges a price of $14. The intersection of the marginal revenue curve and the marginal cost curve occurs where output is 15 units and marginal cost is $7. What is the monopolist's profit?

Figure 15-18 -Refer to Figure 15-18. If there are no fixed costs of production, monopoly profit without price discrimination equals

For a monopoly, the level of output at which marginal revenue equals zero is also the level of output at which

Figure 15-18 -Refer to Figure 15-18. If the monopoly firm perfectly price discriminates, then consumer surplus amounts to

Table 15-13 The following table gives information on the price, quantity, and total cost of production for a monopolist. -Refer to Table 15-13. If the monopolist maximizes profits, he will charge a price of

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?