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Exam 15: Monopoly

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Question 241

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Table 15-4 A monopolist faces the following demand curve: -Refer to Table 15-4. The monopolist will not produce

A) 5 units or fewer under any circumstances.
B) 7.5 units or fewer under any circumstances.
C) 7.5 units or more under any circumstances.
D) 10 units or more under any circumstances.

E) A) and B)
F) A) and C)

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Question 242

Multiple Choice

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Table 15-1 -Refer to Table 15-1. If the monopolist sells 8 units of its product, how much total revenue will it receive from the sale?

A) $14
B) $40
C) $112
D) $164

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

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Question 243

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Figure 15-4 -Refer to Figure 15-4. If the monopoly firm wants to maximize its profit, it should operate at a level of output equal to

A monopoly is an inefficient way to produce a product because

If the distribution of water is a natural monopoly, then (i) multiple firms would likely each have to pay large fixed costs to develop their own network of pipes. (ii) allowing for competition among different firms in the water-distribution industry is efficient. (iii) a single firm can serve the market at the lowest possible average total cost.

Table 15-20 A monopolist faces the following demand curve: -Refer to Table 15-20. If a monopolist faces a constant marginal cost of $20, how much output should the firm produce in order to maximize profit?

Suppose that a professional photographer takes a prize-winning digital photo. She can sell a 5"x7" color print of the photo for $10. She can also sell the digital file for $20. There are 500 people willing to buy the color print and 2,000 people willing to buy the digital file. Assume the costs to the photographer are zero and that the people who purchase the digital file cannot resell the file itself or any prints made from it. What should she do in order to maximize her profits?

When an industry is a natural monopoly,

Which of the following is a characteristic of a monopoly?

Scenario 15-7 Black Box Cable TV is able to purchase an exclusive right to sell a premium movie channel (PMC) in its market area. Let's assume that Black Box Cable pays $150,000 a year for the exclusive marketing rights to PMC. Since Black Box has already installed cable to all of the homes in its market area, the marginal cost of delivering PMC to subscribers is zero. The manager of Black Box needs to know what price to charge for the PMC service to maximize her profit. Before setting price, she hires an economist to estimate demand for the PMC service. The economist discovers that there are two types of subscribers who value premium movie channels. First are the 4,000 die-hard TV viewers who will pay as much as $150 a year for the new PMC premium channel. Second, the PMC channel will appeal to 20,000 occasional TV viewers who will pay as much as $20 a year for a subscription to PMC. -Refer to Scenario 15-7. If Black Box Cable TV is unable to price discriminate, what price will it choose to maximize its profit, and what is the amount of the profit?

Table 15-6 A monopolist faces the following demand curve: -Refer to Table 15-6. What is the marginal revenue from the sale of the 2nd unit?

Table 15-10 The monopolist faces the following demand curve: -Refer to Table 15-10. If the monopolist has total fixed costs of $40 and a constant marginal cost of $5, how much profit can the firm earn at the profit-maximizing level of output?

Table 15-17 A monopolist faces the following demand curve: -Refer to Table 15-17. Which of the following statements best describes the relationship between the price and the marginal revenue associated with values in the table?

When a firm experiences continually declining average total costs,

Give some examples of the benefits and costs of antitrust laws.

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 engage in price discrimination?

For a monopolist, when the output effect is greater than the price effect, marginal revenue is

The monopolist's profit-maximizing quantity of output is determined by the intersection of which of the following two curves?

Figure 15-4 -Refer to Figure 15-4. If this firm profit maximizes, which letter represents the quantity it will produce?

Which of the following is not an example of a barrier to entry?