Monopolies in Economics
Economists consider monopolies to be
inefficient because they can earn
profits in the long run.
A.
True
B.
False
In equilibrium, the relationship between price
(P), marginal revenue (MR), and marginal cost
(MC) for a monopoly is: P < MR = MC.
A.
True
B.
False
A natural monopoly can supply a good to
the entire market at a lower cost than two
or more firms could.
A.
True
B.
False
In comparison to a perfectly competitive
firm, a monopolist charges a
A.
higher price and
produces a higher
quantity.
B.
higher price and
produces a lower
quantity.
C.
lower price and
produces a higher
quantity.
D.
lower price and
produces a lower
quantity.
Refer to the table which illustrates the demand curve for
a monopolist. Suppose the firm’s marginal cost is
constant at $5, and there are no fixed costs. This
monopolist will produce
A.
5 units of output and
charge a price of $10.
B.
4 units of output and
charge a price of $12.
C.
3 units of output and
charge a price of $14.
D.
2 units of output and
charge a price of $16.
Refer to the table which illustrates the demand curve for a
monopolist. Suppose the firm’s marginal cost is constant at
$5, and there are no fixed costs. By producing the profit-
maximizing output, this monopolist will earn total profits of
A.
$12.
B.
$27.
C.
$28.
D.
$37.
Suppose that a monopolist is producing a level of
output such that marginal revenue exceeds marginal
cost. To increase profits, this monopolist should
A.
increase output and
increase price.
B.
decrease output
and decrease price.
C.
increase output and
decrease price.
D.
decrease output
and increase price.
Refer to the figure. This
monopolist will charge a price
of:
A.
P
5
and produce quantity Q
3
B.
P
2
and produce quantity Q
2
C.
P
1
and produce quantity Q
1
D.
P
3
and produce quantity Q
2
Refer to the figure. The deadweight loss
for a profit-maximizing monopolist is the
area ________, and the profit per unit is
the distance______.
A.
ABEG; AF.
B.
ABC; AG.
C.
FBE; FE.
D.
GEC; BE.
Perfect price discrimination
A.
raises profit.
B.
raises total surplus.
C.
lowers consumer
surplus.
D.
All of the above are
correct.
Which of the following is
not
an
example of price discrimination?
A.
Nabisco provides cents-off
coupons for Oreos.
B.
Amtrak offers a lower
price for weekend travel
compared to weekday
rates on the same routes.
C.
Hotel rates are lower for
AAA members than for
nonmembers.
D.
Lamb’s wool sweaters are
less expensive than
cashmere sweaters.
When a movie theater offers a discounted ticket
price to moviegoers over the age of 65, it
engages in
A.
price discrimination and
increases the deadweight
loss.
B.
price discrimination and
decreases the deadweight
loss.
C.
revenue maximization and
decreases the deadweight
loss.
D.
perfect price
discrimination and
decreases the deadweight
loss.
“If regulators had not approved mergers in the past decade between
major networked airlines, travelers would be better off today.”
A.
agree
B.
disagree
C.
uncertain
Monopolies are considered inefficient because they can earn long-term profits. In a monopoly equilibrium, the relationship between price, marginal revenue, and marginal cost differs. Natural monopolies can supply goods at lower costs. Compared to perfectly competitive firms, monopolies charge higher prices. Analyzing demand curves for monopolies can determine optimal production levels and pricing strategies to maximize profits.
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Presentation Transcript
Economists consider monopolies to be inefficient because they can earn profits in the long run. A. True B. False
In equilibrium, the relationship between price (P), marginal revenue (MR), and marginal cost (MC) for a monopoly is: P < MR = MC. A. True B. False
A natural monopoly can supply a good to the entire market at a lower cost than two or more firms could. A. True B. False
In comparison to a perfectly competitive firm, a monopolist charges a A. higher price and produces a higher quantity. B. higher price and produces a lower quantity. C. lower price and produces a higher quantity. D. lower price and produces a lower quantity.
Refer to the table which illustrates the demand curve for a monopolist. Suppose the firm s marginal cost is constant at $5, and there are no fixed costs. This monopolist will produce A. 5 units of output and charge a price of $10. B. 4 units of output and charge a price of $12. C. 3 units of output and charge a price of $14. D. 2 units of output and charge a price of $16.
Refer to the table which illustrates the demand curve for a monopolist. Suppose the firm s marginal cost is constant at $5, and there are no fixed costs. By producing the profit- maximizing output, this monopolist will earn total profits of A. $12. B. $27. C. $28. D. $37.
Suppose that a monopolist is producing a level of output such that marginal revenue exceeds marginal cost. To increase profits, this monopolist should A. increase output and increase price. B. decrease output and decrease price. C. increase output and decrease price. D. decrease output and increase price.
Refer to the figure. This monopolist will charge a price of: A. P5and produce quantity Q3 B. P2and produce quantity Q2 C. P1and produce quantity Q1 D. P3and produce quantity Q2
Refer to the figure. The deadweight loss for a profit-maximizing monopolist is the area ________, and the profit per unit is the distance______. A. ABEG; AF. B. ABC; AG. C. FBE; FE. D. GEC; BE.
Perfect price discrimination A. raises profit. B. raises total surplus. C. lowers consumer surplus. D. All of the above are correct.
Which of the following is not an example of price discrimination? A. Nabisco provides cents-off coupons for Oreos. B. Amtrak offers a lower price for weekend travel compared to weekday rates on the same routes. C. Hotel rates are lower for AAA members than for nonmembers. D. Lamb s wool sweaters are less expensive than cashmere sweaters.
When a movie theater offers a discounted ticket price to moviegoers over the age of 65, it engages in A. price discrimination and increases the deadweight loss. B. price discrimination and decreases the deadweight loss. C. revenue maximization and decreases the deadweight loss. D. perfect price discrimination and decreases the deadweight loss.
If regulators had not approved mergers in the past decade between major networked airlines, travelers would be better off today. A. agree B. disagree C. uncertain
