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Exam 15: Monopoly

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Question 61

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For a typical natural monopoly, average total cost is

A) rising, often because marginal costs are very large.
B) rising, often because fixed costs are very large.
C) declining, often because marginal costs are very large.
D) declining, often because fixed costs are very large.

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Question 62

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The three main sources of barriers to entry are monopoly resources, government regulation, and the firm's production process.

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Question 63

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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. How much profit will Mega Media Cable TV earn if it sets the price at $25?

Like competitive firms, monopolies choose to produce a quantity in which marginal revenue equals marginal cost.

Monopoly firms have

Table 15-19 A monopolist faces the following demand curve: -Refer to Table 15-19. If a monopolist faces a constant marginal cost of $9, how much output should the firm produce?

The output effect describes the situation when a monopolist sells more output and, all else equal, total revenue

Scenario 15-4 Suppose a monopolist has a demand curve that can be expressed as P=90-Q. The monopolist's marginal revenue curve can be expressed as MR=90-2Q. The monopolist has constant marginal costs and average total costs of $10. -Refer to Scenario 15-4. The profit-maximizing monopolist will produce an output level of

Monopolies are socially inefficient because the price they charge is

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 marginal revenue from selling the second unit of output is

Due to the nature of the patent laws on pharmaceuticals, the market for such drugs

When a single firm can supply a good or service to an entire market at a lower cost than could two or more firms, the industry is known as a

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

In order to sell more of its product, a monopolist must

The supply curve for a monopolist, in the short run, is defined in the same way as that for a competitive firm: it is the portion of the marginal cost curve above average variable cost.

Figure 15-3 -Refer to Figure 15-3. Which letter represents the profit-maximizing quantity chosen by the single price monopolist?

If a monopoly lowers its price, its

One characteristic of a monopoly market is that the product is virtually identical to products produced by competing firms.

The socially efficient quantity is found where the demand curve intersects the marginal cost curve.

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