Exam 15: Monopoly

Scenario 15-1 Consider a transportation corporation named Reading's that has just completed the development of a new light rail system in Minneapolis. Currently, there are plenty of seats on the train, and it is never crowded. Its capacity far exceeds the needs of the city. After just a few years of operation, the shareholders of Reading's experienced incredibly high rates of return on their investment due to the profitability of the corporation. -Refer to Scenario 15-1. Which of the following statements is most likely to be true? (i)New entrants to the market know they will have a smaller market share than Reading's currently has. (ii)Reading's is a natural monopoly. (iii)Reading's is most likely experiencing increasing average total cost.

Some prescription drugs sell for more in the United States than they do in other countries. Which of the following statements about this issue is most likely to be true?

Government intervention is always preferable to doing nothing when reducing the social inefficiencies of monopoly.

When the government creates a monopoly, the social loss may include

Figure 15-17 -Refer to Figure 15-17. Which of the following areas represents the deadweight loss from this profit-maximizing monopolist?

When a monopolist is able to sell its product at different prices, it is engaging in

Figure 15-19 -Refer to Figure 15-19. If the monopoly firm perfectly price discriminates, then the deadweight loss amounts to

When a monopolist chooses the output that maximizes profits, we know that MR = MC and also that P > MR. This is inefficient because

Table 15-18 A monopolist faces the following demand curve: Suppose marginal cost is constant at $8 per unit. -Refer to Table 15-18 The monopolist's profit-maximizing level of output is

The fundamental cause of monopoly is

During the holiday season, high-end retailers frequently place a high price on merchandise on weekends and discount the price during the week. They do this because they believe that two groups of customers exist: shoppers with little free time and bargain hunters. Bargain hunters have time to shop around and frequently shop during the week. What do economists call this price strategy used by high-end retailers?

Figure 15-18 -Refer to Figure 15-18. If there are no fixed costs of production, monopoly profit without price discrimination equals

Because natural monopolies have a declining average cost curve, regulating natural monopolies by setting price equal to marginal cost would

Which of the following is not a characteristic of a monopoly?

A monopolist that can practice perfect price discrimination will not impose a deadweight loss on society.

For a monopolist, when does marginal revenue exceed average revenue?

Selling a good at a price determined by the intersection of the demand curve and the marginal cost curve is consistent with the (i)socially-optimal level of output. (ii)market solution for profit-maximizing competitive firms. (iii)market solution for a profit-maximizing monopoly.

Scenario 15-5 An airline knows that there are two types of travelers: business travelers and vacationers. For a particular flight, there are 100 business travelers who will pay $600 for a ticket while there are 50 vacationers who will pay $300 for a ticket. There are 150 seats available on the plane. Suppose the cost to the airline of providing the flight is $20,000, which includes the cost of the pilots, flight attendants, fuel, etc. -Refer to Scenario 15-5. How much additional profit can the airline earn by charging each customer their willingness to pay relative to charging a flat price of $300 per ticket?

Table 15-2 Tanya has the following demand curve for selling taffy. Assume that Tanya has a marginal cost of $3 per unit. -Refer to Table 15-2. What is Tanya's profit-maximizing price?

Table 15-17 A monopolist faces the following demand curve: -Refer to Table 15-17. If the marginal cost of production is constant at $18 per unit, this profit-maximizing monopolist will choose to produce