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Exam 14: Monopoly

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Question 151

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Figure 14-16 -Refer to Figure 14-16.If the monopoly firm is not allowed to price discriminate,then consumer surplus amounts to

A) $0.
B) $1,562.50.
C) $3,125.
D) $6,250.

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

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Question 152

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Additional firms often do not try to compete with a natural monopoly because

A) they fear retaliation in the form of pricing wars from the natural monopolist.
B) they are unsure of the size of the market in general.
C) they know they cannot achieve the same low costs that the natural monopolist enjoys.
D) the natural monopoly does not make a large profit.

E) A) and B)
F) All of the above

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Question 153

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Figure 14-3 -Refer to Figure 14-3.The marginal cost curve for a monopoly firm is depicted by curve

Microsoft faces very little competition from other firms for its Windows software.Why isn't the price of the software $1,000 per copy?

Figure 14-2 -Refer to Figure 14-2.Which of the following statements is correct?

Table 14-4 A monopolist faces the following demand curve: -Refer to Table 14-4.If the monopolist produces 5 units,what is its marginal revenue?

A monopolist's average revenue is always

Scenario 14-7 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 14-7.What is the deadweight loss associated with the nondiscriminating pricing policy compared to the price discriminating policy?

Figure 14-1 -Refer to Figure 14-1.The shape of the average total cost curve in the figure suggests an opportunity for a profit-maximizing monopolist to take advantage of

If a monopolist sells 100 units at $8 per unit and realizes an average total cost of $6 per unit,what is the monopolist's profit?

Assume that a monopolist decides to maximize revenue rather than profit.How does this operating objective change the size of the deadweight loss? If you are a "benevolent" manager of a monopoly firm and are interested in reducing the deadweight loss of monopoly,should you maximize profits or maximize revenue? Explain your answer.

Figure 14-1 -Refer to Figure 14-1.Considering the relationship between average total cost and marginal cost,the marginal cost curve for this firm

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?

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

Which type of public policy toward monopolies is much more common in Europe than in the United States?

Which of the following is an example of a barrier to entry? (i) A key resource is owned by a single firm. (ii) The costs of production make a single producer more efficient than a large number of producers. (iii) The government has given the existing monopolist the exclusive right to produce the good.

Figure 14-6 -Refer to Figure 14-6.In order to maximize profits,the monopolist should charge a price of

For a monopoly market,total surplus can be defined as the value of the good to

Scenario 14-4 Suppose a monopolist has a demand curve that can be expressed as P=90-Q.The monopolist's marginal revenue curve can be expressed as MR=90-2Q.The monopolist has constant marginal costs and average total costs of $10. -Refer to Scenario 14-4.The profit-maximizing monopolist will have a deadweight loss of

For a monopolist,when the price effect is greater than the output effect,marginal revenue is