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Exam 15: Monopoly

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Question 101

Multiple Choice

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When a firm has a natural monopoly, the firm's

A) marginal cost always exceeds its average total cost.
B) total cost curve is horizontal.
C) average total cost curve is downward sloping.
D) marginal cost curve must lie above the firm's average total cost curve.

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

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Question 102

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If the government regulates the price a natural monopolist can charge to be equal to the firm's average total cost, the firm has no incentive to reduce costs.

A) True
B) False

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Question 103

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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.

Which of the following statements is true?

A government-created monopoly arises when

Airlines often separate their customers into business travelers and personal travelers by giving a discount to those travelers who stay over a Saturday night.

Figure 15-9 ​ ​ -Refer to Figure 15-9. If the monopolist uses perfect price discrimination, how much deadweight loss results?

Which of the following can defeat the profit-maximizing strategy of price discrimination?

The best solution to the problem of welfare loss from monopoly is public ownership.

Why might economists prefer private ownership of monopolies over public ownership of monopolies?

If the distribution of water is a natural monopoly, then

When deciding what price to charge consumers, the monopolist may choose to charge them different prices based on the customers'

A natural monopoly will always operate in the region of the long run average total cost curve where the cost per unit is constant. ​ ​

Figure 15-10 ​ ​ -Refer to Figure 15-10. If the firm profit-maximizes, what price will it charge?

Figure 15-9 ​ ​ -Refer to Figure 15-9. How much deadweight loss results if this single-price monopolist profit-maximizes?

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

Granting a pharmaceutical company a patent for a new medicine will lead to

Figure 15-9 ​ ​ -Refer to Figure 15-9. If the monopolist uses perfect price discrimination, what price will it charge?

Table 15-3 Tommy's Tie Company, a monopolist, has the following cost and revenue information. Assume that Tommy's is able to engage in perfect price discrimination. ​ ​ ​ -Refer to Table 15-3. If the monopolist can engage in perfect price discrimination, what is the marginal revenue from selling the 5th tie?

A monopolist produces an output level where marginal revenue equals marginal cost and charges a price where marginal cost equals average total cost.