Exam 10: Market Power

Use Figure: Payoff Matrix Alpha and Beta Motors I. The figure shows the payoff matrix where the hypothetical daily profits of Alpha Motor and Beta Motor (in millions of dollars) depend on each other's decision about whether to hold onto its inventories or release them at a discount at the end of the year. Based on the payoffs, Alpha Motor's dominant strategy is to_____ its inventory, and Beta Motor's dominant strategy is to _____ its inventory. ​ Figure: Payoff Matrix Alpha and Beta Motors I

If a monopolist that is maximizing its profits charges a price of $16, has an average total cost of $10 and a marginal cost of $8, and sells 50 units of output, then its marginal revenue is _____, and its profit is:

The difference between the price of a good and the average total cost of producing it is the:

Use Figure: Demand for Gasoline. The figure shows the demand curve for gasoline in a small town that has only one provider, which therefore is a monopolist. What is the marginal revenue for the monopolist from increasing its sales from two gallons to three gallons? ​ Figure: Demand for Gasoline

Use Figure: Monopoly Profit-Maximization and Deadweight Loss. The figure shows the demand curve, marginal revenue curve, marginal cost curve, and average total cost curve that are facing a monopolist. Suppose that the firm is NOT operating at the profit-maximization point and instead is operating at the socially optimal point. In this case, the firm must be producing _____ units of output and charging a price of: ​ Figure: Monopoly Profit-Maximization and Deadweight Loss

Which of the following statements is FALSE for a monopolist that practices perfect price discrimination?

Which of the following statements about oligopolies is FALSE?

Which of the following statements about economies of scale is NOT true?

Suppose that the total profit earned by a monopolist $100. It also is known that the monopolist sells 50 units of output at a price of $10 per unit. Given this information, we can conclude that the average total cost of producing 50 units is:

A perfectly competitive firm faces a _____ demand curve, and a monopolist faces a _____ demand curve.

Use Table: Demand and Cost for a Monopolist. The table shows the quantity demanded, price level, and total cost faced by a monopolist. ​A) Fill in the columns for total revenue, marginal revenue, marginal cost, and average total cost. B) What are the profit-maximizing price and the quantity for the monopolist? Explain. C) At the profit-maximizing point, what is the profit per unit for the monopolist? D) At profit-maximizing point, what is the total profit?

Use Figure: Profit-Maximizing Quantity and Price. The figure depicts the demand curve, marginal revenue curve, and marginal cost curve that are facing a monopolist. The profit-maximizing price for the monopolist is _____, and the profit-maximizing quantity is _____ units. ​ Figure: Profit-Maximizing Quantity and Price

In which one of the following markets do firms NOT face a downward-sloping demand curve?

A monopolist faces a _____ demand curve.

Which of the following statements is FALSE for a monopoly firm?

Use Figure: Monopoly Profit Maximization. The figure shows the demand curve, marginal revenue curve, marginal cost curve, and average total cost curve that are faced by a monopolist. At what price level is the marginal revenue of the firm zero? ​ Figure: Monopoly Profit Maximization

Which of the following statements is true for a monopolist that practices perfect price discrimination?

Suppose that a monopoly firm is operating at its profit-maximizing point. The profit-maximizing price is $12, and the profit-maximizing quantity is 100 units. If the total profit of the monopolist is $400, then the average total cost of production is _____, and the profit per unit is:

Use Figure: Payoff Matrix Alpha and Beta Motors II. The figure shows the payoff matrix where the hypothetical daily profits of Alpha Motor and Beta Motor (in millions of dollars) depend on each other's decision about whether to hold on to their inventories or release them at a discount at the end of the year. Based on the payoffs, Alpha Motor's dominant strategy is to_____ its inventory, and Beta Motor's strategy is to _____ its inventory. ​ Figure: Payoff Matrix Alpha and Beta Motors II

Use Figure: Payoff Matrix Shell and BP II. The figure shows the payoff matrix where the hypothetical daily profits of BP and Shell (in millions of dollars) depend on each other's decision about whether to lower prices. Based on the payoffs, BP's dominant strategy is _____, the price and Shell's dominant strategy is _____ the price. ​ Figure: Payoff Matrix Shell & BP II