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Exam 13: Monopoly

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Question 281

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-Prime Pharmaceuticals has developed a new asthma medicine, for which is has a patent. An inhaler can be produced at a constant marginal cost of $2/inhaler. The demand curve, marginal revenue curve, and marginal cost curve for this new asthma inhaler are in the figure above. With its patent giving it a monopoly for its new inhaler, if Prime Pharmaceuticals operates as a single-price monopoly, then consumer surplus is ________ and producer surplus is ________.

A) zero; $64 million
B) $32 million; $32 million
C) $16 million; $32 million
D) $16 million; $48 million.

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Question 282

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Describe the main problem with rate of return regulation and name an alternative regulatory scheme that has been devised to deal with that problem.

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The main problem with rate of return reg...

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Question 283

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In Delaware County, Pennsylvania, all homes, businesses, and other organizations purchase their water from one seller, Philadelphia Suburban Water Co. (PSWCo) . Economists refer to public utility companies like PSWCo as natural monopolies because their

The marginal revenue curve for a single-price monopoly

In July 2008, the Federal Communications Commission approved the merger of satellite radio providers XM Satellite and Sirius Satellite Radio, establishing a single satellite radio company in America. If the new company was a natural monopoly, which of the following would be a regulation to ensure an efficient quantity of satellite radio service?

-The figure above shows the costs and demand curves for the Bigshow Cable Company. To avoid any deadweight loss in the market served by Bigshow, the regulator must set the price at

When natural or legal forces work to protect a firm from potential competitors, the market is said to have

When Dominant Pizza is willing to sell a pizza to a student who lives on-campus at a lower price than it sells the identical pizza to a student who lives a block away from the campus, the pizza firm is

-In the figure above, compared to a perfectly competitive industry with the same costs, a single-price, unregulated monopoly will decrease production by

A perfect price discriminator

-The above figure illustrates the market for electric power that is served by the one utility in Alberta, Canada. a) If the government did not regulate this utility, what would be the price of a kilowatt hour in this region and how much power would be generated? b) If the government regulates the utility and chooses an average cost pricing rule, what would be the price of a kilowatt hour and how much power would be generated? c) If the government regulates the utility and chooses a marginal cost pricing rule, what would be the price of a kilowatt hour and how much power would be generated?

Which produces more output: a perfectly price discriminating monopoly or a single-price monopoly?

The fundamental reason a single-price monopoly creates a deadweight loss is that compared to the efficient outcome, the single-price monopoly

-The table above shows the demand and total cost schedule for a monopolist hotel. What price should the monopolist charge if it is a single-price monopoly that maximizes its profit?

Methods of rent seeking include which of the following? I. Buying a monopoly II) Creating a monopoly III) Price discrimination

The value of resources devoted to rent seeking will

Compared to the profit-maximizing equilibrium of a natural monopoly, a price cap regulation ________ the firm's price and ________ the firm's output.

Which of the following is TRUE for a profit maximizing monopolist?

-In the above figure, if the natural monopoly is regulated with a marginal cost pricing rule, then the deadweight loss to society is

If the government grants a firm a public franchise to supply coal, a monopoly is created by