Question 1

Explain how a profit-maximizing monopolist chooses its level of output and the price of its goods.

Accepted Answer

A profit-maximizing monopolist produces

Question 2

A monopolist is able to choose whatever price that it wishes and is only constrained by its greed.
​

Accepted Answer

A) True 
 B)False

Question 3

Like competitive firms, monopolies charge a price equal to marginal cost.

Accepted Answer

A) True 
 B)False

Question 4

In the market for "home heating" consumers typically have several options (e.g., electricity, heating fuel, natural gas, propane, etc.), yet we often think of firms in this industry as behaving like monopolists. Discuss the context in which your electricity provider is a monopolist. Is this characterization universally applicable? Explain your answer.

Accepted Answer

In this case, the firms are monopolists

Question 5

For a monopolist, an increase in output sold causes marginal revenue to be negative when

Accepted Answer

A) the output effect is greater than the price effect. 
B) the price effect is greater than the output effect. 
C) the output effect is equal to the price effect. 
D) consumer surplus is negative. 
A) the output effect is greater than the price effect. 
B) the price effect is greater than the output effect. 
C) the output effect is equal to the price effect. 
D) consumer surplus is negative.

Question 6

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. One of Vincent's friends tells him he would be more profitable if he charged a single price of $18. Assuming no changes in consumer demand, what would Vincent's profit be if he charged every customer $18?

Accepted Answer

The answer of Scenario 15-3
Vincent operates a scenic tour business...

Question 7

Deadweight loss measures the loss in society's welfare that occurs because a monopolist does not produce the socially efficient level of output.

Accepted Answer

A) True 
 B)False

Question 8

Table 15-3
Tommy's Tie Company, a monopolist, has the following cost and revenue information. Assume that Tommy's is able to engage in perfect price discrimination.
​
​
   ​
-Refer to Table 15-3. If the monopolist can engage in perfect price discrimination, what is the total revenue when 3 ties are sold?

Accepted Answer

A) $140 
B) $420 
C) $450 
D) $620 
A) $140 
B) $420 
C) $450 
D) $620

Question 9

One problem with government operation of monopolies is that

Accepted Answer

A) a benevolent government is likely to be interested in generating profits for political gain. 
B) monopolies typically have rising average costs. 
C) the government typically has little incentive to reduce costs. 
D) a government-regulated outcome will increase the profitability of the monopoly. 
A) a benevolent government is likely to be interested in generating profits for political gain. 
B) monopolies typically have rising average costs. 
C) the government typically has little incentive to reduce costs. 
D) a government-regulated outcome will increase the profitability of the monopoly.

Question 10

Which of the following is not an example of price discrimination by a firm?

Accepted Answer

A) Children's meals at a restaurant 
B) A natural gas company charging all customers a higher rate in the winter than in summer 
C) Discounts for educators at a clothing store 
D) Bulk pricing for online retail 
A) Children's meals at a restaurant 
B) A natural gas company charging all customers a higher rate in the winter than in summer 
C) Discounts for educators at a clothing store 
D) Bulk pricing for online retail

Question 11

Figure 15-9
​   ​
-Refer to Figure 15-9. How much profit will this monopolist earn if it charges each consumer the same price?

Accepted Answer

The answer of Figure 15-9
​   ​
-Refer to Figure...

Question 12

Copyrights and patents are examples of barriers to entry that give firms monopoly pricing powers.

Accepted Answer

A) True 
 B)False

Question 13

State one benefit of government-granted monopolies like patents and copyrights.

Accepted Answer

increased

Question 14

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, how many units will Bearclaws produce to maximize profits?

Accepted Answer

A) 70 
B) 90 
C) 105 
D) 130 
A) 70 
B) 90 
C) 105 
D) 130

Question 15

Figure 15-4   ​
​
-Refer to Figure 15-4. What area measures the monopolist's profit?

Accepted Answer

A) (B − Z) × O 
B) (C − X) × N 
C) (B − Y) × O 
D) 0.5[(B − Z) × (P − N)] 
A) (B − Z) × O 
B) (C − X) × N 
C) (B − Y) × O 
D) 0.5[(B − Z) × (P − N)]

Question 16

Suppose a profit-maximizing monopolist faces a constant marginal cost of $10, produces an output level of 100 units, and charges a price of $50. The socially efficient level of output is 200 units. Assume that the demand curve and marginal revenue curve are the typical downward-sloping straight lines. The monopoly deadweight loss equals $2,000.

Accepted Answer

A) True 
 B)False

Question 17

A patent gives a single person or firm the exclusive right to sell some good or service for a specific period of time.

Accepted Answer

A) True 
 B)False

Question 18

​Since monopolists that practice price discrimination generally increase market output, compared to a monopoly that charges a single price, practicing price discrimination generally leads to a smaller deadweight loss.

Accepted Answer

A) True 
 B)False

Question 19

Table 15-4
 $$\begin{array} { | l | l | } 
\hline \text { Quantity } & \text { Price } \
\hline 10 & \$ 46 \
\hline 20 & \$ 42 \
\hline 30 & \$ 38 \
\hline 40 & \$ 34 \
\hline 50 & \$ 30 \
\hline 60 & \$ 26 \
\hline 70 & \$ 22 \
\hline 80 & \$ 18 \
\hline 90 & \$ 14 \
\hline 100 & \$ 10 \
\hline
\end{array}$$
-Refer to Table 15-4. The average revenue of the 50th unit of output is

Accepted Answer

The answer of Table 15-4
 \[\begin{array} { | l |...

Question 20

A natural monopoly occurs when

Accepted Answer

A) the product is sold in its natural state, such as water or diamonds. 
B) there are economies of scale over the relevant range of output. 
C) the firm is characterized by a rising marginal cost curve. 
D) production requires the use of free natural resources, such as water or air. 
A) the product is sold in its natural state, such as water or diamonds. 
B) there are economies of scale over the relevant range of output. 
C) the firm is characterized by a rising marginal cost curve. 
D) production requires the use of free natural resources, such as water or air.

Exam 15: Monopoly

Explain how a profit-maximizing monopolist chooses its level of output and the price of its goods.

A monopolist is able to choose whatever price that it wishes and is only constrained by its greed. ​

Like competitive firms, monopolies charge a price equal to marginal cost.

For a monopolist, an increase in output sold causes marginal revenue to be negative when

Deadweight loss measures the loss in society's welfare that occurs because a monopolist does not produce the socially efficient level of output.

One problem with government operation of monopolies is that

Which of the following is not an example of price discrimination by a firm?

Figure 15-9 ​ ​ -Refer to Figure 15-9. How much profit will this monopolist earn if it charges each consumer the same price?

Copyrights and patents are examples of barriers to entry that give firms monopoly pricing powers.

State one benefit of government-granted monopolies like patents and copyrights.

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, how many units will Bearclaws produce to maximize profits?

Figure 15-4 ​ ​ -Refer to Figure 15-4. What area measures the monopolist's profit?

A patent gives a single person or firm the exclusive right to sell some good or service for a specific period of time.

​Since monopolists that practice price discrimination generally increase market output, compared to a monopoly that charges a single price, practicing price discrimination generally leads to a smaller deadweight loss.

Table 15-4 Quantity Price 10 \ 46 20 \ 42 30 \ 38 40 \ 34 50 \ 30 60 \ 26 70 \ 22 80 \ 18 90 \ 14 100 \ 10 -Refer to Table 15-4. The average revenue of the 50th unit of output is

A natural monopoly occurs when

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Applications: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

Filters

A monopolist is able to choose whatever price that it wishes and is only constrained by its greed.

Figure 15-9 -Refer to Figure 15-9. How much profit will this monopolist earn if it charges each consumer the same price?

Figure 15-4 -Refer to Figure 15-4. What area measures the monopolist's profit?

Since monopolists that practice price discrimination generally increase market output, compared to a monopoly that charges a single price, practicing price discrimination generally leads to a smaller deadweight loss.