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Exam 15: Monopoly

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Question 311

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A movie theater can increase its profits through price discrimination by charging a higher price to adults and a lower price to children if it

A) can prevent children from buying the lower-priced tickets and selling them to adults.
B) has some degree of monopoly pricing power.
C) can easily distinguish between the two groups of customers.
D) All of the above are correct.

E) None of the above
F) C) and D)

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Question 312

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Table 15-8 The following table provides information on the price, quantity, and average total cost for a monopoly. -Refer to Table 15-8. What is the maximum profit that the monopolist can earn?

A) $10
B) $20
C) $30
D) $40

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

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Question 313

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Table 15-4 A monopolist faces the following demand curve: -Refer to Table 15-4. If the monopolist produces 5 units, what is its average revenue?

Which of the following is an example of a barrier to entry?

Suppose a profit-maximizing monopolist faces a constant marginal cost of $10, produces an output level of 100 units, and charges a price of $50. The socially efficient level of output is 200 units. Assume that the demand curve and marginal revenue curve are the typical downward-sloping straight lines. The monopoly deadweight loss equals $4,000.

Firms with substantial monopoly power are quite common because many goods are unique.

Table 15-18 A monopolist faces the following demand curve: Suppose marginal cost is constant at $8 per unit. -Refer to Table 15-18. Suppose the firm depicted in the table is selling a prescription drug for which it had a patent, but the patent has expired. As new firms enter the market and sell the generic version of this drug competitively, what quantity will be sold?

Comparing firms in perfectly competitive markets to monopoly firms, which can earn economic profits in the long run?

Scenario 15-7 Black Box Cable TV is able to purchase an exclusive right to sell a premium movie channel (PMC) in its market area. Let's assume that Black Box Cable pays $150,000 a year for the exclusive marketing rights to PMC. Since Black Box has already installed cable to all of the homes in its market area, the marginal cost of delivering PMC to subscribers is zero. The manager of Black Box needs to know what price to charge for the PMC service to maximize her profit. Before setting price, she hires an economist to estimate demand for the PMC service. The economist discovers that there are two types of subscribers who value premium movie channels. First are the 4,000 die-hard TV viewers who will pay as much as $150 a year for the new PMC premium channel. Second, the PMC channel will appeal to 20,000 occasional TV viewers who will pay as much as $20 a year for a subscription to PMC. -Refer to Scenario 15-7. If Black Box Cable TV is able to price discriminate, what would be the maximum amount of profit it could generate?

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 total profit at the profit-maximizing quantity?

The supply curve for the monopolist

At the profit-maximizing quantity of output for a monopolist, average revenue, marginal revenue, and price are all equal.

Scenario 15-10 Vincent operates a scenic tour business in Boston. He has one bus which can fit 50 people per tour and each tour lasts 2 hours. His total cost of operating one tour is fixed at $450. Vincent's cost is not reduced if he runs a tour with a partially full bus. While his cost is the same for all tours, Vincent charges each passenger his/her willingness to pay: adults $18 per trip, children $10 per trip, and senior citizens $12 per trip. At those rates, on a typical day Vincent's demand is: Assume that Vincent's customers are always available for the tour; therefore, he can fill his bus for each tour as long as there is sufficient total demand for the day. -Refer to Scenario 15-10. What is Vincent's profit on a typical day?

Table 15-1 -Refer to Table 15-1. When 4 units of output are produced and sold, what is average revenue?

For a monopolist, when the price effect is greater than the output effect, marginal revenue is

Figure 15-18 -Refer to Figure 15-18. If the monopoly firm is not allowed to price discriminate, then the deadweight loss amounts to

The legislation passed by Congress in 1914 to strengthen the government's powers and authorize private lawsuits was the

Figure 15-2 -Refer to Figure 15-2. If the firm profit-maximizes, what amount of output will it produce?

The fundamental cause of monopolies is barriers to entry.

Which of the following is not an example of a barrier to entry?