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Exam 15: Monopoly

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Question 31

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Figure 15-3 -Refer to Figure 15-3. Which panel could represent the demand curve facing the soybean industry?

A) Panel A
B) Panel B
C) Panel C
D) Panel D

E) B) and C)
F) C) and D)

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Question 32

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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) $1
B) $2
C) $3
D) $4

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

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Question 33

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Figure 15-19 -Refer to Figure 15-19. If the monopoly firm perfectly price discriminates, then the deadweight loss amounts to

Comparing firms in perfectly competitive markets to monopoly firms, which can earn economic profits in the long run?

For a monopoly firm, which of the following equalities is always true?

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

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?

Encouraging firms to invest in research and development and individuals to engage in creative endeavors such as writing novels is one justification for

For a long while, electricity producers were thought to be a classic example of a natural monopoly. People held this view because

State two examples of government-created monopolies.

Suppose when a monopolist produces 50 units its average revenue is $8 per unit, its marginal revenue is $4 per unit, its marginal cost is $4 per unit, and its average total cost is $3 per unit. What can we conclude about this monopolist?

Which of the following is not a reason for the existence of a monopoly?

Which of the following would be most likely to have monopoly power?

Figure 15-4 -Refer to Figure 15-4. The average total cost curve for a monopoly firm is depicted by curve

The De Beers Diamond company advertises heavily to promote the sale of all diamonds, not just its own. This is evidence that it has a monopoly position to some degree.

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 $50?

After the patent runs out on a brand name drug, generic drugs enter the market. What happens next in the market?

Figure 15-4 -Refer to Figure 15-4. The marginal cost curve for a monopoly firm is depicted by curve

In many countries, the government chooses to "internalize" the monopoly by owning monopoly providers of goods and services. (In some cases these firms are "nationalized," and the government actually buys or confiscates firms that operate in monopoly markets). What would be the advantages and disadvantages of such an approach to ensure that the "best interest of society" is promoted in these markets? Explain your answer.

Figure 15-19 -Refer to Figure 15-19. If the monopoly firm is not allowed to price discriminate, then consumer surplus amounts to