Exam 13: Monopoly

Use the following to answer questions: Figure: Monopoly Model -(Figure: Monopoly Model) Look at the figure Monopoly Model. When the firm is in equilibrium (that is, maximizing its economic profit), its total cost is the area of rectangle:

Use the following to answer questions: Figure: The Monopolist -(Figure: The Monopolist) Look at the figure The Monopolist. At the profit-maximizing level, this monopolist will:

Suppose that a monopoly firm is required to pay a new annual license fee to do business in its city and that the fee is somewhat less than the economic profit the firm is now earning. In response to the increase in fees, the firm will:

Use the following to answer questions: Figure: Water Works -(Figure: Water Works) Look at the figure Water Works, which describes a small town's water works, a natural monopoly. If regulators require the water works to charge the price that eliminates deadweight loss, the water works will serve _____ customers.

Use the following to answer questions: Figure: Water Works -(Figure: Water Works) Look at the figure Water Works, which describes a small town's water works, a natural monopoly. If regulators want the monopolist to cover average total cost, the monopolist will be allowed to charge a price of:

A monopoly's short-run marginal cost is constant at $10. This implies that its average variable cost is also constant and equal to $10.

Use the following to answer questions: Figure: PPV -(Figure: PPV) Look at the figure PPV, which shows the demand and marginal revenue for a pay-per-view football game on cable TV. Assume that the marginal cost and average cost are a constant $40. If the cable company is a single-price monopoly and maximizes profit, consumer surplus will be:

Use the following to answer questions: -(Table: Prices and Demand) Look at the table Prices and Demand. The New Orleans Saints have a monopoly on Saints logo hats. The marginal cost of producing a hat is $18. The Saints sell at most one hat to each customer, and the table shows each customer's willingness to pay. If the Saints were a perfectly competitive firm in a perfectly competitive industry, at their profit-maximizing price and output total surplus would be _____. If the Saints were a profit-maximizing monopoly, at their profit-maximizing price and output total surplus would be _____.

Suppose a monopoly is producing output so that marginal revenue equals marginal cost. If the monopolist reduces output, it:

When firms price-discriminate, people with _____ price elasticity of demand will pay _____ prices relative to those purchasing the same product who have a _____ price elasticity of demand.

Which of the following is NOT a barrier to entry?

All of the following are examples of price discrimination EXCEPT:

If a product's usefulness increases with the number of users, it:

Many hotel chains offer discounts to senior citizens. This is an example of _____ that is _____ in the United States.

Suppose the government is considering how to regulate a monopolist. An economist argues that the price should be regulated to maximize total welfare. The monopolist argues that the price should be regulated so that it can just cover all of its opportunity costs. Are they basically arguing the same point? How do they differ?

When a firm finds that its ATC of production decreases as it increases production, this firm is said to be experiencing:

If a monopolist can engage in perfect price discrimination:

Suppose that the Yankee Cap Company is a profit-maximizing firm with a monopoly in the production of baseball caps. The firm sells its baseball caps for $25 each. For this information, we can assume that the Yankee Cap Company is producing a level of output at which:

Use the following to answer questions: Scenario: A Small-Town Monopolist A monopolist sells cable subscriptions in a small town and finds that it can sell 100 subscriptions when the price is $15 a week and an additional 75 subscriptions when the price is $10 a week. The MC for the provision of the cable is $5 a week. There are no fixed costs. -(Scenario: A Small-Town Monopolist) Look at the scenario A Small-Town Monopolist. If this monopolist chooses to sell subscriptions at one price, it will sell _____ units at a price of _____ and earn economic profits equal to _____.

Compared to perfect competition, monopoly produces a net welfare gain for society.