Flashcards in Phase 2: HW 8 Deck (26):
Which is true with respect to the demand data confronting a monopolist?
a. Demand is perfectly price inelastic.
b. Price increases as the output of the firm increases.
c. Marginal revenue increases as price decreases.
d. Marginal revenue is less than price
nondiscriminating monopolist will find that marginal revenue:
exceeds average revenue or price.
b. is identical to price.
c. is sometimes greater and sometimes less than price.
d. is less than average revenue or price
When a perfectly competitive firm sells additional units, its total revenues always rise. When a monopolist sells additional units,
a. total revenues always rise.
b. total revenues always fall.
c. marginal revenues rise.
d. total revenues may rise, fall, or remain unchanged
The supply curve for a monopoly is:
a. the portion of the marginal cost curve that lies above the average variable cost curve.
b. the portion of the marginal cost curve that lies above the average total cost curve.
c. the portion of the marginal cost curve that lies above the average fixed cost curve.
d. not a curve but a single point
Which statement is correct?
a. In the short run, the pure monopolist will maximize total profits by producing at that level of output where the difference between price and average total cost is greatest.
b. In the short run, the pure monopolist will charge the highest price it can get for its product.
c. Because of its ability to administer prices, the pure monopolist can increase its price and increase its volume of sales simultaneously.
d. Pure monopolists do not always realize economic profits
A profit-maximizing firm should shut down in the short run if the average revenue it receives is less than:
a. average variable cost.
b. average total cost.
c. average fixed cost.
d. marginal cost.
If marginal costs decrease, a typical monopolist will:
a. reduce price and reduce quantity of output.
b. reduce price and increase quantity of output.
c. increase price and reduce quantity of output.
d. increase price and increase quantity of output.
Monopolists are said to be allocatively inefficient because:
a. they produce where MR > MC.
b. at the profit-maximizing output, price is greater than AVC.
c. they produce only the type of product they desire and do not consider the consumer.
d. at the profit-maximizing output, the marginal benefit to society from increasing output is greater than the marginal cost to society.
Assume the owners of the only gambling casino in Wisconsin spend large sums of money lobbying state government officials to protect their gambling monopoly. Economists refer to these expenditures as:
b. socially optimal pricing.
c. perfect price discrimination.
d. diseconomies of scale in production.
Efforts by corporate lobbyists to obtain a license that would give a firm a monopoly over the making of a product would be an example of:
b. price discrimination.
d. network effects.
Any activity designed to transfer income or wealth to a particular individual or firm at society's expense is called:
a. patent protection.
c. price discrimination.
Compared to the case in which a monopolist does not price discriminate, a method of price discrimination usually _____ consumer surplus and _____ producer profits.
a. decreases; increases
b. increases; decreases
c. decreases; decreases
d. increases; increases
Price discrimination is more common in service industries because:
a. low-price buyers will find it virtually impossible to resell the products of such industries to high-price buyers.
b. the costs of providing such industries' products to different groups of buyers vary dramatically.
c. the price elasticity of demand is the same for all groups of buyers in these industries.
d. all firms in these industries have significant monopoly power over price.
In the Microsoft antitrust case, a federal court ruled to break up the company on the basis of the:
a. firm's market behavior.
b. firm's large market share.
c. size of the corporation.
d. firm's effect on the stock market.
A pure monopoly firm will never charge a price in the inelastic range of its demand curve because lowering price to get into this region will:
a. increase total revenue, increase total cost, and decrease profit.
b. decrease total revenue, increase total cost, and decrease profit.
c. increase total revenue, decrease total cost, and decrease profit.
d. decrease total revenue, total cost, and profit.
n exclusive right granted by government for a number of years to an inventor of a product is a:
In response to a cost-reducing technological breakthrough in the production of its product, a profit-maximizing monopolist will normally:
a. increase price and decrease production.
b. not change its level of output or price.
c. decrease the price it charges for its product.
d. increase its output and practice price discrimination.
Suppose that a monopolist calculates that at present output and sales, marginal cost is $1.00 and marginal revenue is $2.00. He could maximize profits by:
a. decreasing price and increasing output.
b. increasing price and decreasing output.
c. decreasing price and leaving output unchanged.
d. decreasing output and leaving prices unchanged.
A firm will earn economic profits whenever:
a. marginal revenue exceeds marginal costs.
b. marginal revenue exceeds variable costs.
c. average revenue exceeds average total costs.
d. average revenue exceeds average variable costs.
A monopolist calculates its marginal revenues to be $15 and her marginal costs to be $16. One can infer that it
a. should increase output.
b. is profit maximizing.
c. should decrease output.
d. should raise its price.
The supply curve for a pure monopolist:
a. is the portion of the marginal cost curve that lies above the average variable cost curve.
b. is perfectly price-elastic at the market price.
c. is upsloping across all relevant ranges of output.
d. does not exist because there is no fixed relationship between price and quantity supplied.
If a monopolist finds that its marginal revenue exceeds its marginal costs at the current level of output, it should
a. do nothing as it has maximized profits.
b. contract production until marginal revenue equals marginal costs.
c. expand production until marginal revenue equals marginal costs.
d. expand production until price equals marginal costs.
If a monopolized industry should become purely competitive without any change in cost conditions:
a. both price and quantity produced will increase.
b. both price and quantity produced will decrease.
c. price will increase and quantity produced will decrease.
d. price will decrease and quantity produced will increase.
Some firms in the technology sector have achieved economies of scale because costs have been reduced by:
a. price discrimination.
b. socially optimal pricing.
c. fair return pricing.
d. simultaneous consumption.
Allocative inefficiency due to unregulated monopoly is characterized by the condition:
a. P = MC.
b. P = MR.
c. P > MC.
d. P > AVC.