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Exam 15: Monopoly

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Question 171

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Table 15-2 Tanya has the following demand curve for selling taffy. Assume that Tanya has a marginal cost of $3 per unit. -Refer to Table 15-2. What is Tanya's profit-maximizing price?

A) $2
B) $4
C) $6
D) $8

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

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Question 172

Multiple Choice

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In a competitive market, a firm's supply curve dictates the amount it will supply. In a monopoly market the

A) same is true.
B) supply curve conceptually makes sense, but in practice is never used.
C) supply curve will have limited predictive capacity.
D) decision about how much to supply is impossible to separate from the demand curve it faces.

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

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Question 173

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

If a social planner were running a monopoly, that planner could achieve an efficient outcome by charging the price that is determined by the

Table 15-11 The following table shows quantity, price, and marginal cost information for a monopoly: -Refer to Table 15-11. What would be the firm's marginal revenue at the profit-maximizing level of output?

Scenario 15-2 Consider a local, privately-owned electrical cooperative named Poweshiek Power Company (PPCo) . PPCo has just completed a clean-coal-burning electrical power plant in Iowa. Currently, PPCo can meet the electricity needs of all residents in the county. In fact, its capacity far exceeds the needs of the county. After just a few years of operation, the shareholders of PPCo experienced incredibly high rates of return on their investment due to the profitability of the corporation. -Refer to Scenario 15-2. PPCo will continue to be a monopolist in the electricity industry only if

Scenario 15-5 An airline knows that there are two types of travelers: business travelers and vacationers. For a particular flight, there are 100 business travelers who will pay $600 for a ticket while there are 50 vacationers who will pay $300 for a ticket. There are 150 seats available on the plane. Suppose the cost to the airline of providing the flight is $20,000, which includes the cost of the pilots, flight attendants, fuel, etc. -Refer to Scenario 15-5. How much additional profit can the airline earn by charging each customer their willingness to pay relative to charging a flat price of $300 per ticket?

Monopolies use their market power to

A monopolist faces a

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

In many countries, the government chooses to "internalize" the monopoly by owning monopoly providers of goods and services. (In some cases these firms are "nationalized," and the government actually buys or confiscates firms that operate in monopoly markets). What would be the advantages and disadvantages of such an approach to ensure that the "best interest of society" is promoted in these markets? Explain your answer.

The deadweight loss for a monopolist equals one-half of its profits for any given level of output.

Which of the following is a characteristic of a monopoly?

The difference in total surplus between the socially efficient level of production and the monopolist's level of production is

Which of the following statements is true? (i) When a competitive firm sells an additional unit of output, its revenue increases by an amount less than the price.(ii) When a monopoly firm sells an additional unit of output, its revenue increases by an amount less than the price.(iii) Average revenue is the same as price for both competitive and monopoly firms.

A monopolist maximizes profit by producing an output level where marginal cost equals price.

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 marginal cost of the 6th pair of shoes?

Table 15-1 -Refer to Table 15-1. If the monopolist sells 8 units of its product, how much total revenue will it receive from the sale?

A firm cannot price discriminate if

Table 15-7 Sally owns the only shoe store in town. She has the following cost and revenue information. -Refer to Table 15-7. Sally will maximize her profits by selling