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Exam 15: Monopoly

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Question 51

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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

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Question 52

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Figure 15-11 ​ ​ -Refer to Figure 15-11. Use the letters in the figure to identify the area of deadweight loss for the single price monopolist.

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Question 53

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Figure 15-11 ​ ​ -Refer to Figure 15-11. Use the letters in the figure to identify the profit area for the single price monopolist.

Figure 15-9 ​ ​ -Refer to Figure 15-9. Which is more efficient, single price profit maximization or perfect price discrimination?

One characteristic of a monopoly market is that the product is virtually identical to products produced by competing firms.

Figure 15-3 -Refer to Figure 15-3. A profit-maximizing monopoly will produce an output level of

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.

Monopolists can practice price discrimination in all monopoly markets.​

Figure 15-11 ​ ​ -Refer to Figure 15-11. Which letter represents the profit-maximizing quantity chosen by the single price monopolist?

Figure 15-5 The following graph depicts the market situation for a monopoly pastry shop called Bearclaws. -Refer to Figure 15-5. Based upon the information shown, what is total revenue for Bearclaws, given that it maximizes profits?

Barriers to entry only exist for monopoly markets.

What is the deadweight loss due to profit-maximizing monopoly pricing under the following conditions: The price charged for goods produced is $10. The intersection of the marginal revenue and marginal cost curves occurs where output is 100 units and marginal revenue is $5. The socially efficient level of production is 110 units. The demand curve is linear and downward sloping, and the marginal cost curve is constant.

What are the four ways that government policymakers can respond to the problem of monopoly?

Figure 15-10 ​ ​ -Refer to Figure 15-10. If a regulator requires the firm to charge a marginal cost price, what quantity will the firm produce?

Scenario 15-3 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: $\begin{array} { | l | l | l | } \hline \text { Passen ger Type } & \text { Willingness to Pay } & \text { Demand per day } \\\hline \text { Adults } & \$ 18 & 70 \\\hline \text { Children } & \$ 10 & 25 \\\hline \text { Senior Citizens } & \$ 12 & 55 \\\hline\end{array}$ 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 15-3. What is Vincent's profit on a typical day?

Figure 15-2 ​ -Refer to Figure 15-2. A profit-maximizing monopoly's total revenue is equal to

When regulators use a marginal-cost pricing strategy to regulate a natural monopoly, the regulated monopoly

For a firm to price discriminate,

Figure 15-9 ​ ​ -Refer to Figure 15-9. If the monopolist uses perfect price discrimination, how much output does the firm produce?

Even with market power, monopolists cannot achieve any level of profit they desire because they will sell lower quantities at higher prices.