Exam 15: Monopoly

Table 15-12 The following table provides information on the price, quantity, and average total cost for a monopoly. -Refer to Table 15-12. At what price will the firm maximize its profit?

A firm cannot price discriminate if it

Economists assume that monopolists behave as

Table 15-21 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 15-21. If the monopolist can engage in perfect price discrimination, what is total profit at the profit-maximizing quantity?

In order for a firm to maximize profits through price discrimination, the firm must have some market power and be able to prevent arbitrage.

Figure 15-21 -Refer to Figure 15-21. What is the price and quantity for this natural monopolist under socially optimal pricing?

A monopolist's supply curve is vertical.

Which of the following is an example of price discrimination?

Scenario 15-6 The concert promoters of a heavy-metal band, WeR2Loud, know that there are two types of concert-goers: die- hard fans and casual fans. For a particular WeR2Loud concert, there are 1,000 die-hard fans who will pay $150 for a ticket and 500 casual fans who will pay $50 for a ticket. There are 1,500 seats available at the concert venue. Suppose the cost of putting on the concert is $50,000, which includes the cost of the band, lighting, security, etc. -Refer to Scenario 15-6. How much profit will the concert promoters earn if they set the price of each ticket at $150?

When a firm experiences continually declining average total costs,

For a monopolist,

Scenario 15-2 Consider a local, privately-owned electrical cooperative named Poweshiek Power Company (PPCo). PPCo has just completed a clean-coal-burning electrical power plant in Iowa. Currently, PPCo can meet the electricity needs of all residents in the county. In fact, its capacity far exceeds the needs of the county. After just a few years of operation, the shareholders of PPCo experienced incredibly high rates of return on their investment due to the profitability of the corporation. -Refer to Scenario 15-2. 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 PPCo currently has. (ii) PPCo is a natural monopoly. (iii) PPCo would experience higher profits if it were government-run.

Which of the following is not correct?

Figure 15-20 -Refer to Figure 15-20. The consumer surplus at the monopolist's profit­maximizing price is

Microsoft faces very little competition from other firms for its Windows software. Why isn't the price of the software $1,000 per copy?

Table 15-6 A monopolist faces the following demand curve: -Refer to Table 15-6. Suppose the monopolist has total fixed costs equal to $5 and a variable cost equal to $4 per unit for all units produced. What is the profit-maximizing price?

Scenario 15-8 Mega Media Cable TV is able to purchase an exclusive right to sell a premium sports channel in its market area. Let's assume that Mega Media pays $100,000 a year for the exclusive marketing rights to the sports channel. Since Mega Media has already installed cable to all of the homes in its market area, the marginal cost of delivering the sports channel to subscribers is zero. The manager of Mega Media needs to know what price to charge for the sports channel service to maximize her profit. Before setting price, she hires an economist to estimate demand for the sports channel. The economist discovers that there are two types of subscribers who value premium sporting channels. First are the 3,000 die-hard sports fans who will pay as much as $150 a year for the new channel. Second, the premium sports channel will appeal to 20,000 occasional sports viewers who will pay as much as $25 a year for a subscription to it. -Refer to Scenario 15-8. If Mega Media Cable TV is able to price discriminate, what would be the maximum amount of profit it could generate?

A perfectly competitive market

Table 15-7 Sally owns the only shoe store in town. She has the following cost and revenue information. -Refer to Table 15-7. What is the total revenue from selling 8 pairs of shoes?

What is the shape of the monopolist's marginal revenue curve?