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Exam 15: Monopoly

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Question 91

Multiple Choice

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For a monopoly,

A) average revenue exceeds marginal revenue.
B) average revenue equals marginal revenue.
C) average revenue is less than marginal revenue.
D) price equals marginal revenue.

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

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Question 92

Multiple Choice

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The simplest way for a monopoly to arise is for a single firm to

A) decrease its price below its competitors' prices.
B) decrease production to increase demand for its product.
C) make pricing decisions jointly with other firms.
D) own a key resource.

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

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Question 93

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When a monopolist increases the quantity that it sells, all else equal, total revenue increases, which is called the output effect.

Scenario 15-3 A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $30, its average revenue is $60, and its average total cost is $34. -Refer to Scenario 15-3. At Q = 500, the firm's total revenue is

Suppose a monopolist is able to charge each customer a price equal to that customer's willingness-to-pay for the product. Then the monopolist is engaging in

What do economists call the business practice of selling the same good at difference prices to different customers?

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 6 pairs of shoes?

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 15-9 Consider the following demand and cost information for a monopoly. -Refer to Table 15-9. At the profit-maximizing price, how much profit will the monopoly earn?

A monopolist can sell 300 units of output for $45 per unit. Alternatively, it can sell 301 units of output for $44.60 per unit. The marginal revenue of the 301^st unit of output is

Airlines often separate their customers into business travelers and personal travelers by giving a discount to those travelers who stay over a Saturday night.

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. What is the deadweight loss associated with the nondiscriminating pricing policy compared to the price discriminating policy?

Table 15-9 Consider the following demand and cost information for a monopoly. -Refer to Table 15-9. What is the marginal cost of the 4th unit?

The distribution of water to residents of a town and an infrequently used bridge are examples of

Which of the following is a characteristic of a monopoly market?

Which of the following statements is correct?

Figure 15-1 -Refer to Figure 15-1. How much consumer surplus results if this single-price monopolist profit-maximizes?

Comparing firms in perfectly competitive markets to monopoly firms, which charges higher prices?

Figure 15-4 -Refer to Figure 15-4. A profit-maximizing monopoly's total revenue is equal to

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