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Exam 13: Monopoly

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Question 31

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If the demand for its product is elastic, a monopoly's

A) total revenue is unchanged when the firm lowers its price.
B) total revenue decreases when the firm lowers its price.
C) marginal revenue is positive.
D) marginal revenue is zero.

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Question 32

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-If an average cost pricing rule is imposed on the firm in the figure above, the firm will produce

A) 5 units.
B) 20 units.
C) 30 units.
D) 40 units.

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Question 33

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"Because of rent seeking, a monopoly may end up making zero economic profit." Is the previous statement correct or incorrect? Why?

-In the figure above, a perfectly price-discriminating monopoly will maximize profit by producing at amount of output equal to

-The figure above provides information about Light-U-Up Utilities, which is a natural monopoly that provides electricity. At the unregulated price and quantity, Light-U-Up's economic profit is equal to

How do the price, output, consumer surplus, economic profit, and total surplus for a single-price monopoly compare to that of a competitive industry?

The United States Mint is the only legal entity to produce circulating coinage for the United States. Michael Jackson's estate owns the copyrights to many of the Beatles songs. Xcel Energy is a public utility company who is the sole provider of electricity and natural gas in some states such as Colorado, New Mexico and Minnesota. Which of these entities, if any, is a natural monopoly?

What is the relationship between price, marginal revenue, and marginal cost when a single-price monopoly is maximizing profit?

-In the above figure, for a single-price monopolist producing at its profit-maximizing equilibrium price and quantity, the price elasticity of demand at this equilibrium will be

-In the above figure, if a single-price monopolist maximized its profit, the deadweight loss in the market is equal to the area

-La Bella Pizza is the only pizza place on Pepper Island. The figure above shows La Bella Pizza's demand curve, marginal revenue curve, and marginal cost curve. At La Bella Pizza's profit-maximizing output, its annual total revenue is

-The above figure shows the demand for cable and the cable company's cost of providing cable. a) What price and quantity will be produced if the company is unregulated and profit maximizes? b) What price and quantity will be produced if the company is regulated using the marginal cost pricing rule? c) What is the advantage of the marginal cost pricing rule? d) What price and quantity will be produced if the company is regulated using the average cost pricing rule? e) What is the advantage of the average cost pricing rule?

-The above table gives a monopolist's demand schedule. Complete the table by calculating the total revenue and the marginal revenue.

-The figure above shows the costs and demand curves for the Bigshow Cable Company. To avoid any deadweight loss in the market served by Bigshow, the regulator must set the price at

"Price discriminators lose money by being nice to their customers." Is the previous statement correct or incorrect?

Which of the following statements is true for both a competitive market and a single-price monopoly?

-If a marginal cost pricing rule is imposed on the firm in the figure above, the firm will produce

Suppose a new vaccine for Lyme disease is developed by Merck, a large drug company. Which of the following is most likely to occur?

Price discrimination by a monopoly

-Bob's Country Bunker is the only restaurant in town that serves fried rutabaga. Bob faces the demand schedule shown in the table above. a) What is Bob's marginal revenue from the 50th rutabaga? b) Bob has the cost schedule shown in the table above. Draw the demand curve faced by Bob and his marginal revenue curve. Draw Bob's marginal cost curve. If Bob wants to maximize his profit, how many fried rutabagas should he sell? c) What price will Bob charge? d) What is Bob's economic profit? e) Bob currently charges $3 per fried rutabaga. Is he maximizing his profit? Why or why not?