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Exam 15: Monopoly

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Question 151

Multiple Choice

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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 total profit if she operates at her profit-maximizing price?

A) $1
B) $7
C) $9
D) $11

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

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Question 152

True/False

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Declining average total cost with increased production is one of the defining characteristics of a natural monopoly.

A) True
B) False

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Question 153

Multiple Choice

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A monopoly market is characterized by

Figure 15-23 -Refer to Figure 15-23. If a regulator requires the firm to charge an average cost price, what quantity will the firm produce?

Splitting up a monopoly is often justified on the grounds that

Figure 15-24 -Refer to Figure 15-24. Use the letters in the figure to identify the profit area for the single price monopolist.

Policymakers are discussing various proposals regarding how to deal with natural monopolies. Senator Huff wants to regulate natural monopolies by equating price with average total cost. Huff contends that such a policy will ensure that monopolies make every effort to reduce costs. Senator Puff wants the government to own natural monopolies. Puff argues that government-owned monopolies usually do a better job of holding down costs than privately owned monopolies. Which senator's argument is correct?

Figure 15-11 -Refer to Figure 15-11. Which area represents the deadweight loss from monopoly?

A monopolist produces an output level where marginal revenue equals marginal cost and charges a price where marginal cost equals 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?

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 average revenue when Sally sells 7 pairs of shoes?

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 are Sally's fixed costs?

A rational pricing strategy for a profit-maximizing monopolist is

When a certain monopoly sets its price at $8 it sells 64 units. When the monopoly sets its price at $9 it sells 62 units. The marginal revenue for the firm over this range is

Comparing firms in perfectly competitive markets to monopoly firms, which results in a deadweight loss?

State two examples of government-created monopolies.

Table 15-18 A monopolist faces the following demand curve: Suppose marginal cost is constant at $8 per unit. -Refer to Table 15-18. The monopolist's total revenue from selling 4 units of output is

Which of the following statements is not correct?

Table 15-13 The following table gives information on the price, quantity, and total cost of production for a monopolist. -Refer to Table 15-13. How much profit will the firm earn at the profit-maximizing price?

Table 15-18 A monopolist faces the following demand curve: Suppose marginal cost is constant at $8 per unit. -Refer to Table 15-18 The monopolist's profit­maximizing level of output is