ECON 2020 HW-7

monopoly has two key features, which are

barriers to entry and no close substitutes.

Which of the following firms is most likely to be a monopoly?

the local water company

When natural or legal forces work to protect a firm from potential competitors, the market is said to have

barriers to entry.

Which of the following is NOT a legal barrier to entry?

innovation

A market in which competition and entry are restricted by the granting of a public franchise, government license, patent, or copyright is called a

legal monopoly.

Patents create monopolies by restricting

entry.

Natural monopolies occur when there are

large economies of scale.

Given the market demand and cost data in the above figure, the existence of two firms equal sized firms producing a total of 8 million cubic feet of natural gas means that the long-run average cost of producing natural gas is

20 cents per cubic foot.

A single-price monopoly charges the same price

to all customers for each unit of output they buy.

A single-price monopoly's demand curve lies

above its marginal revenue curve.

For a single-price monopolist to sell one more unit of a good, it must

lower the price on all units sold.

Which of the following is TRUE for a single-price monopolist?

In the monopoly, the firm's marginal revenue curve is ________, while in a perfectly competitive market, each firm's marginal revenue curve is ________.

downward sloping; horizontal

Quantity(units)

Price(dollars per unit)

1

8

2

7

3

6

4

5

5

4

6

3

The table above gives the demand for a monopolist's output. Between which two quantities is marginal revenue equal to 0?

4 and 5

For a monopolist, on the inelastic range of its demand

marginal revenue is negative.

If a decrease in price decreases a monopolist's total revenue, then

demand is inelastic.

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

marginal revenue is positive.

A single-price monopolist will always produce where the elasticity of demand

is greater than 1.

The figure above shows a monopoly firm's demand curve. If the price and quantity of haircuts move from point t to point r, the monopoly's

total revenue will fall.

To maximize profit, the monopolist produces on the ________ portion of its demand where ________.

Suppose that a monopoly is currently producing the quantity at which marginal revenue is less than marginal cost. The monopoly can increase its profit by

raising its price and decreasing its output.

Monopolies can make an economic profit in the long run because there

is a barrier to entry.

Price(dollars per repair)

Quantity demanded (repairs per week)

Total cost (dollars)

100

0

400

90

10

800

80

20

1400

70

30

2200

60

40

3200

Dee's TV Repair is the only TV repair shop in a small town. Dee is a single-price monopolist. Based on the demand and cost information in the table above, what quantity of TV repairs should Dee undertake?

20 per week

Price(dollars per bottle)

Quantity demanded(bottles per day)

16

0

15

1

14

2

13

3

12

4

11

5

10

6

9

7

8

8

The table above gives the demand schedule for water bottled by Wanda's Healthy Waters. If the marginal cost is a constant $4 a bottle, Wanda's will produce ________ a day and charge ________ a bottle.

6 bottles; $10

The unregulated, single-price monopoly shown in the figure above will sell

30 tickets.

Compared to a single-price monopoly, a perfectly competitive market with the same costs produces ________ output and has a ________ price.

more; lower

A single-price monopoly causes a deadweight loss because it

restricts its output so it is less than the efficient quantity.

Price discrimination takes place when a firm

charges different prices for different units of its product.

Price discrimination allows firms to

turn consumer surplus into producer surplus.

A perfect price discriminator

charges the maximum price for each unit that consumers are willing to pay.

Which of the following is TRUE about a perfect price discriminating monopolist?

The firm produces the efficient level of output.

Today, you might be buying from a regulated natural monopoly when you purchase

natural gas or electricity.

In a regulated natural monopoly, a marginal cost pricing rule maximizes

total surplus.