Microeconomics ch 16 - Monopoly
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Which of the following is always true for a single-price monopolist?
Group of answer choices
P = elasticity of demand
P > MR
P < MR
P = MR
None of the above answers is correct because none of them is always true.
P > MR
A single-price monopoly faces a linear demand curve. If the marginal revenue for the second unit is $20, then the marginal revenue for the
Group of answer choices
third unit is more than $20.
third unit is also $20.
first unit is less than $20.
third unit is less than $20.
more information is needed to determine if the marginal revenue for the third unit is more than, less than, or equal to $20.
third unit is less than $20.
A single-price monopoly can sell 10 units of its product at a price of $45 each but to sell 11 units, the monopoly must cut the price to $44. What is the marginal revenue of the extra unit sold?
Group of answer choices
$44
$450
$34
$484
-$1
$34
Price | Quantity demanded |
5 | 50 |
10 | 40 |
15 | 30 |
20 | 20 |
25 | 10 |
30 | 0 |
Christy's Haircuts, the sole supplier of haircuts in a small town, faces the demand schedule shown in the table above. What is Christy's marginal revenue from the 25th haircut?
Group of answer choices
$17.50
$50.00
$5.00
zero
$5.00
Price | Quantity demanded |
5 | 50 |
10 | 40 |
15 | 30 |
20 | 20 |
25 | 10 |
30 | 0 |
Christy's Haircuts, the sole supplier of haircuts in a small town, faces the demand schedule shown in the table above. What is Christy's marginal revenue from the 35th haircut?
Group of answer choices
$12.50
-$5.00
zero
$5.00
-$5.00
If the Boston Red Sox baseball team is currently charging a ticket price where its demand is inelastic, then the Red Sox's marginal revenue is
Group of answer choices
maximized.
zero.
positive.
undefined.
negative.
negative.
Use the figure above to answer this question. Mary is the only veterinarian in a small town. To maximize her profit, Mary will choose to treat ________ animals per hour and charge ________ per customer in order to ________.
Group of answer choices
6; $20; maximize profit
6; $20; minimize cost in order to attract more customers
6; $30; minimize average total cost
4; $50; operate on the inelastic portion of her demand curve
4; $50; maximize profit
4; $50; maximize profit
Use the figure above to answer this question. Mary is the only veterinarian in a small town and rents a space for her practice. If Mary's landlord decided to charge ________ per hour in rent, Mary would ________.
Group of answer choices
$30 more; operate on the inelastic portion of her demand curve
$20 more; earn $0 economic profit
$30 more; earn $0 economic profit
$10 less; raise her prices and earn a higher profit
$20 more; still earn an economic profit because she is a monopolist
$20 more; earn $0 economic profit
In order to maximize its profit, a single-price monopoly produces the amount of output so that
Group of answer choices
P = MR.
P = MC - MR.
P = MC.
MR = MC.
P = ATC.
MR = MC.
Suppose the Busy Bee Cafe
is the monopoly producer of hamburgers in Hugo, Oklahoma. The above figure represents the demand, marginal revenue, and marginal cost curves for this establishment. What quantity will the Busy Bee produce to maximize its profit?
Group of answer choices
0 hamburgers per hour.
20 hamburgers per hour
30 hamburgers per hour
10 hamburgers per hour
50 hamburgers per hour
20 hamburgers per hour
Suppose the Busy Bee Cafe
is the monopoly producer of hamburgers in Hugo, Oklahoma. The above figure represents the demand, marginal revenue, and marginal cost curves for this establishment. What price will the Busy Bee charge to maximize its profit?
Group of answer choices
$2.00 for a hamburger
$3.00 for a hamburger
$4.00 for a hamburger
$5.00 for a hamburger
$1.00 for a hamburger
$3.00 for a hamburger
Suppose the Busy Bee Cafe
is the monopoly producer of hamburgers in Hugo, Oklahoma. The above figure represents the demand, marginal revenue, and marginal cost curves for this establishment. In order to maximize profit, the Busy Bee produces ________ hamburgers per hour and sets a price of ________ per hamburger.
Group of answer choices
30; $2.00
20; $1.00
50; $5.00
30; $4.00
20; $3.00
20; $3.00
Suppose the Busy Bee Cafe
is the monopoly producer of hamburgers in Hugo, Oklahoma. The above figure represents the demand, marginal revenue, and marginal cost curves for this establishment. If the Busy Bee produces 40 hamburgers per hour, then
Group of answer choices
marginal revenue will be maximized.
profit will be maximized.
marginal revenue will be negative.
both the marginal revenue and the price will be negative.
marginal revenue will exceed marginal cost.
marginal revenue will be negative.
A single-price monopoly has marginal revenue and marginal cost equal to $19 at 15 units of output where the price on the demand curve is $38. At this output, average total cost is $15. What is the total profit earned?
Group of answer choices
$570
$345
$19
$225
$285
$345
In contrast to competitive firms, single-price monopolies
Group of answer choices
must take the price that is determined by the market demand and market supply.
sell only if demand is inelastic.
can never incur a loss.
do not have to worry about market demand.
can make an economic profit indefinitely.
can make an economic profit indefinitely.
When compared to a perfectly competitive market, a single-price monopoly with the same costs produces ________ output and charges ________ price.
Group of answer choices
a smaller; the same
the same; a higher
a smaller; a higher
a larger; a lower
a smaller; a lower
a smaller; a higher
Assume someone organizes all farms in the nation into a monopoly. Which of the following occurs?
i. | Consumer surplus decreases. |
ii. | Economic profit increases. |
iii. | A deadweight loss is created. |
Group of answer choices
i only
ii only
iii only
i and ii
i, ii, and iii
i, ii, and iii
Suppose the grocery store market in Kansas City is perfectly competitive. Then one store buys all the others and becomes a single-price monopoly. The figure above shows the relevant demand and cost curves. When the market is perfectly competitive, the price of a pound of steak is
Group of answer choices
$4.
$20.
$8.
$12.
$2.
$8
Suppose the grocery store market in Kansas City is perfectly competitive. Then one store buys all the others and becomes a single-price monopoly. The figure above shows the relevant demand and cost curves. When the market is a monopoly, the price of a pound of steak is
Group of answer choices
$20.
$8.
$12.
$4.
$2.
$12
Suppose the grocery store market in Kansas City is perfectly competitive. Then one store buys all the others and becomes a single-price monopoly. The figure above shows the relevant demand and cost curves. When the market is perfectly competitive, the price of a pound of steak is ________ and when it is a monopoly, the price of a pound of steak is ________.
Group of answer choices
$8; $4
$4; $12
$4; $8
$4; $20
$8; $12
$8; $12
Suppose the grocery store market in Kansas City is perfectly competitive. Then one store buys all the others and becomes a single-price monopoly. The figure above shows the relevant demand and cost curves. When the market is perfectly competitive, the quantity of steak is
Group of answer choices
2,000 pounds.
less than 2,000 pounds.
3,000 pounds.
5,000 pounds.
4,000 pounds.
3,000 pounds.
In a monopoly, producers ________ and consumers ________.
Group of answer choices
gain; lose
gain; gain
gain; do not gain or lose
lose; gain
lose; lose
gain; lose
Rent seeking is defined as
Group of answer choices
the act of obtaining special treatment by the government to create an economic profit.
charging higher prices for an apartment.
selling a greater quantity than is profitable.
charging different prices for different units of the good or service.
charging a price below marginal cost.
the act of obtaining special treatment by the government to create an economic profit.
Suppose the grocery store market in Kansas City is perfectly competitive. Then one store buys all the others and becomes a single-price monopoly. The figure above shows the relevant demand and cost curves. When the market is a monopoly, the quantity of steak is
Group of answer choices
5,000 pounds.
less than 2,000 pounds.
2,000 pounds.
4,000 pounds.
3,000 pounds.
2,000 pounds.
Suppose the grocery store market in Kansas City is perfectly competitive. Then one store buys all the others and becomes a single-price monopoly. The figure above shows the relevant demand and cost curves. When the market is perfectly competitive, the quantity of steak is ________ pounds, and when the market is a monopoly, the quantity of steak is ________ pounds.
Group of answer choices
5,000; 3,000
4,000; less than 2,000 pounds.
2,000; 4,000
3,000; 2,000
4,000; 4,000
3,000; 2,000
Which of the following is an example of a natural monopoly?
Group of answer choices
JCPenney, the large department store chain
the Pittsburgh Penguins hockey team, a National Hockey League team
Ford Motors, the large automobile producing company
Sony, the Japanese producer of the PS4
Florida Power and Light, an electric utility in Florida
Florida Power and Light, an electric utility in Florida
Is a single-price monopoly efficient?
Group of answer choices
No, because it creates a deadweight loss.
Yes, because consumers gain and producers lose some of their surpluses.
Yes, because it produces the quantity at which MR = MC.
Yes, because consumers lose and producers gain some of their surpluses.
Yes, because it creates a deadweight loss.
No, because it creates a deadweight loss.
Which of the following would create a natural monopoly?
Group of answer choices
a patent granted the producer of the good or service
an exclusive right granted to supply a good or service
technology enabling a single firm to produce at a lower average total cost than two or more firms
requirement of a government license before the firm can sell the good or service
ownership of all the available units of a necessary input
technology enabling a single firm to produce at a lower average total cost than two or more firms
Price | Quantity demanded |
5 | 50 |
10 | 40 |
15 | 30 |
20 | 20 |
25 | 10 |
30 | 0 |
Christy's Haircuts, the sole supplier of haircuts in a small town, faces the demand schedule shown in the table above. What is Christy's marginal revenue from the 25th haircut?
Group of answer choices
$50.00
$17.50
$5.00
zero
$5.00
The above figure represents the market for cable television in Oakland, Florida. Time Warner Communications (TWC) is the sole provider of cable television to the residents of this Central Florida community. If TWC operated under a marginal cost pricing rule, what is the price of cable television in Oakland?
Group of answer choices
$30
$0
$20
$40
$10
$10
If we compare a perfectly competitive market to a single-price monopoly with the same costs, the monopoly sells
Group of answer choices
a larger quantity at a higher price.
the same quantity at a higher price.
a larger quantity at a lower price.
a smaller quantity at the same price.
a smaller quantity at a higher price.
a smaller quantity at a higher price.
Under a marginal cost pricing rule, a natural monopoly
Group of answer choices
incurs an economic loss.
makes a reasonable profit.
earns accounting profits, but breaks even in economic terms.
makes an economic profit.
makes a normal profit, but it cannot be determined whether or not it makes an accounting profit.
incurs an economic loss.
Price cap regulation
Group of answer choices
sets the maximum price these firms can charge.
does not provide incentives to firms to minimize their costs because firms cannot change prices.
gives firms the incentive to exaggerate their costs.
Both answers A and C are correct.
Both answers A and B are correct.
sets the maximum price these firms can charge.
Under earnings-sharing regulation, if a firm's profits ________ above a certain level, they must be shared with the firm's ________.
Group of answer choices
fall; suppliers
rise; suppliers
rise; customers
rise; competitors
fall; customers
rise; customers
A single-price monopoly transfers
Group of answer choices
economic profit to consumers.
economic profit to deadweight loss.
consumer surplus to producers.
producer surplus to consumers.
economic profit to the government.
consumer surplus to producers.
Use the figure above to answer this question. If a monopoly maximized profit
Group of answer choices
1,000 units will be produced and a deadweight loss equal to area ABC will occur.
1,000 units will be produced and there is no deadweight loss.
800 units will be produced and a deadweight loss equal to area ABC will occur.
800 units will be produced and a deadweight loss equal to area EFB will occur.
1,000 units will be produced and a deadweight loss equal to area FBGA occurs.
800 units will be produced and a deadweight loss equal to area ABC will occur.
If we compare regulating a natural monopoly using a marginal cost pricing rule to using an average cost pricing rule, we see that output is
Group of answer choices
greater under average cost pricing, but profits are greater with marginal cost pricing.
the same under both cases, but the profit is greater with average cost pricing.
the same but profits are greater with marginal cost pricing.
greater with marginal cost pricing, but average cost pricing allows for costs to be covered.
greater with marginal cost pricing, and the firm's profit is larger with marginal cost pricing.
greater with marginal cost pricing, but average cost pricing allows for costs to be covered.
If a single-price monopoly is making a large economic profit, what keeps other firms from competing away the profit?
Group of answer choices
The market must be too small.
The existing firm's ATC must be too large to allow competitors to enter and earn an economic profit.
The monopoly must be keeping the amount earned secret.
There are barriers to entry.
Nothing, other firms will enter and will compete away the profit.
There are barriers to entry.
For a natural monopoly, economies of scale
Group of answer choices
as well as constant returns to scale and diseconomies of scale exist along the long-run average cost curve at least until it crosses the market demand curve.
lead to a legal barrier to entry.
and diseconomies of scale exist along the long-run average cost curve at least until it crosses the market demand curve.
are totally absent.
exist along the long-run average cost curve at least until it crosses the market demand curve.
exist along the long-run average cost curve at least until it crosses the market demand curve.
Capture theory is
Group of answer choices
an economic theory of regulation.
a theory that explains behavior of competitive firms.
a model about perfect competition.
the theory that regulators capture firms' attention by dictating a very low price.
the same as the public interest theory.
an economic theory of regulation.
The social interest theory of regulation assumes that
Group of answer choices
regulators are captured by the firms being regulated.
regulation is against the public interest.
regulation seeks an efficient use of resources.
the public cares deeply about regulation.
the public is indifferent to regulation.
regulation seeks an efficient use of resources.
Use the figure above to answer this question. If a monopoly controls the market and maximizes profit, the firm chooses price and output equal to ________. If the market operates competitively, price and output equal ________.
Group of answer choices
$40 and 800 units; $30 and 800 units
$20 and 1,000 units; $40 and 1,000 units
$30 and 800 units; $40 and 1,000 units
$40 and 800 units; $30 and 1,000 units
$30 and 1,000 units; $40 and 800 units
$40 and 800 units; $30 and 1,000 units
Assume someone organizes all farms in the nation into a monopoly. What is the monopoly's marginal cost curve?
Group of answer choices
It is a horizontal line at the competitive industry's price.
It is the formerly competitive industry's supply curve.
It is a vertical line at the formerly competitive industry's quantity.
It is the same as the formally competitive industry's average total cost curve.
It is a vertical line at the monopoly's chosen output level.
It is the formerly competitive industry's supply curve.
Total revenue is equal to
Group of answer choices
the change in the quantity sold when you change the price by one unit.
price multiplied by the quantity sold.
the amount people will buy at a given price.
the change in price resulting from a one-unit increase in quantity sold.
the price at which the good or service is sold.
price multiplied by the quantity sold.
The above figure represents the market for cable television in Oakland, Florida. Time Warner Communications (TWC) is the sole provider of cable television to the residents of this Central Florida community. If TWC is left unregulated, what is the price of cable television in Oakland?
Group of answer choices
$40
$20
$50
$30
$10
$30
Which of the following statements is FALSE?
Group of answer choices
A perfectly competitive firm produces where MR = MC but a monopoly produces where MR > MC.
In a perfectly competitive market, the price is equal to the marginal cost, but in a market with a single-price monopoly, price exceeds marginal cost.
The consumer surplus is smaller for a market with a monopoly than for a perfectly competitive market.
In the long run, a monopoly can earn a larger economic profit than can a perfectly competitive firm.
A perfectly competitive market produces more output and charges a lower price than a monopoly.
A perfectly competitive firm produces where MR = MC but a monopoly produces where MR > MC.
Patents
Group of answer choices
decrease the incentive to innovate.
remove legal barriers to entry.
are a legal barrier to entry.
are prohibited in the United States.
create economies of scale.
are a legal barrier to entry.
Use the figure above to answer this question. Pam gives the only piano lessons in town. In order to maximize profit, Pam should charge ________ per lesson and will earn a total economic profit of ________.
Group of answer choices
$20; $80
$30; $30
$40; $40
$40; $160
$30; $0
$40; $40
One of the tendencies that is common among firms regulated using rate of return regulation is to
Group of answer choices
incur an economic loss.
increase production to an inefficient level.
overstate their total revenue.
understate the costs of production.
inflate the costs of production.
inflate the costs of production.
A single-price monopoly has marginal revenue and marginal cost equal to $19 at 15 units of output where the price on the demand curve is $38. At what price will this firm sell the output?
Group of answer choices
$285
$19
$570
$38
There is not enough information given to answer the question.
$38