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Exam 15: Monopoly

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Question 31

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A rational pricing strategy for a profit-maximising monopolist is:

A) synergy pricing
B) price discrimination
C) price segregation
D) average cost pricing

E) None of the above
F) B) and C)

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Question 32

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Graph 15-2 This graph reflects the cost and revenue structure for a monopoly firm.Use the graph to answer the following question(s) . -Refer to Graph 15-2.Profit can always be increased by decreasing the level of output by one unit if the monopolist is currently operating at which of the following output levels? (i) q₀ (ii) Q₁ (iii) Q₂ (iv) Q₃

A) (i) or (ii)
B) (i) , (ii) or (iii)
C) (iii) or (iv)
D) (iv) only

E) A) and B)
F) All of the above

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Question 33

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Using the above information, how much higher would profit be if the publisher can price-discriminate?

Graph 15-6 This graph depicts the demand, marginal-revenue and marginal-cost curves of a profit-maximising monopolist.Use the graph to answer the following question(s) . -Refer to Graph 15-6.If the monopoly firm is NOT allowed to price discriminate, what will the consumer surplus be?

Another form of price discrimination is when a monopoly offers lower prices to customers who buy small quantities.

Graph 15-4 This graph depicts the demand and marginal-cost curves of a profit-maximising monopolist.Use the graph to answer the following question(s) . -Refer to Graph 15-4.A benevolent social planner would cause the monopoly firm to operate at an output level:

Suppose demand for a monopoly's product is perfectly elastic.In this case the monopoly should set P = MR = MC and the monopoly market outcome will be identical to the competitive market outcome.

Competitive firms maximise profit by setting MR = MC.This is not always true for monopoly firms.

Suppose a pesticide company discovers and patents a new weed killer.This patent gives the company:

Discount coupons have the ability to help a supermarket price discriminate.

Which of the following is likely to be a natural monopoly?

Because monopoly firms do not have to compete with other firms, the outcome in a market with a monopoly is often efficient, but not equitable.

Due to the nature of the patent laws on pharmaceuticals, the market for such drugs:

In a monopoly, the firm demand-curve and market demand-curve are identical.

A perfectly price-discriminating monopolist is able to:

Suppose the market for coffee cups is a monopoly.If a consumer's willingness to pay is below the market price, then it is not possible for a mutually beneficial trade to occur.

One example of price discrimination occurs in the publishing industry when a publisher initially releases an expensive hardcover edition of a popular novel, and later releases a cheaper paperback edition.Use this example to demonstrate the benefits and potential pitfalls of a price discrimination pricing strategy.

When a local grocery store offers discount coupons in the Sunday paper, it is most likely trying to:

Perfect price discrimination leads to zero consumer surplus.With this in mind, why do economists argue that perfect price discrimination maximises total welfare?

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.Using your understanding of monopoly, discuss the context in which your electricity provider is a monopolist.Is this characterisation universally applicable? Carefully explain your answer.