ECO 251 Ch.15 Document

ECO 251 Ch.15 Document - CHAPTER 15 MONOPOLY 237...

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Unformatted text preview: CHAPTER 15 MONOPOLY 237 Multiple-Choice Questions 1. Which of the following is not a barrier to entry in a monopolized market? a. The government gives a single firm the exclusive right to produce some good. b. The costs of production make a single producer more efficient than a large number of producers. c. A key resource is owned by a single firm. 61) A single firm is very large. 2. A firm whose average total cost continually declines at least to the quantity that could supply the entire market is known as a a. perfect competitor. C6; natural monopoly. c. government monopoly. d. regulated monopoly. 3. When a monopolist produces an additional tmit, the marginal revenue generated by that unit must be a. above the price because the output effect outweighs the price effect. b. above the price beam the price effect Outweighs the output effect. c. below the price because the output effect outweighs the price effect. [email protected] the price because the price effect outweighs the output effect. 4. Amonopolist maximizes profit by producing the quantity at which {a} marginal revenue equals marginal cost. k b. marginal revenue equals price. c. marginal cost equals price. (1. marginal cost equals demand. e. none of the above occurs. 5. Which of the following statements about price and marginal cost in competitive and monopolized markets is true? a. in competitive markets, price equals marginal cost,- in monopolize-d markets, price equals marginal cost. b. In competitive markets, price exceeds marginal cost; in monopolized mar- __* kets, price exceeds marginal cost. In competitive markets, price equals marginal cost; in monopolized markets, "" price exceeds marginal cost. d. In competitive markets, price exceeds marginal cost; in monopolized mar- kets, price equals marginal cost. 6. South—Western is a monopolist in the production of your textbook because a. South—Western owns a key resource in the production of textbooks. b. South-Western is a natural monopoly. the government has granted South-Western exclusive rights to produce this textbook. d. South-Western is a very large company. 238 PART 5 FIRM BEHAVIOR AND THE ORGANIZATION OF INDUSTRY Use Exhibit 4 to answer questions 7 through 10. 4 'EXHIBIT Quantity 7. The profit—maximizing monopolist will choose the price and quantity represent- ed by point Ia. A. . B. c. C. d. D. e. None of the above is correct. 8. The profit earned by the profit-maximizing monopolist is represented by the area R‘ABPZ. “f b.) PQACPI. 71'. P4AQ10. d. PBDQZO. e. None of the above is correct. 9. The deadweight loss associated with monopoly pricing is represented by the area a. PQABPZ. b. P4ACPI. ABD. . P213031. e. None of the above is correct. 10. The efficient price and quantity are represented by point a. A. b. B. c. C. D. e. None of the above is correct. CHAPTER 15 MONOPOLY 239 11. The inefficiency associated with monopoly is due to a. the monopoly’s profits. b. the mon0poly’s losses. c. overproduction of the good. (ET) underproduction of the good. 12. Compared to a perfectly competitive market, a monopoly market will usually generate a; higher prices and higher output. L12. “ higher prices and lower output. c. lower prices and lower output. d. lower prices and higher output. 13. The monopolist’s supply curve is the marginal-cost curve above average variable cost. is the marginal-cost curve above average total cost. is the upward-sloping portion of the average-total—cost curve. . is the upward-sloping portion of the average variable cost. " does not exist. rule-o 579: '1’ \_ . 14. Using government regulations to force a natural monopoly to charge a price equal to its marginal cost will a. improve efficiency. b. raise the price of the good. c. attract additional firms to enter the market. 'd. 7' cause the monopolist to exit the market. (a. 15. The purpose of antitrust laws is to as.“ regulate the prices charged by a monopoly. 715. '_'_‘_.increase competition in an industry by preventing mergers and breaking up large Firms. c. increase merger activity to help generate synergies that reduce costs and raise efficiency. d. create public ownership of natural monopolies. e. do all of the above. 16. Public ownership of natural monopolies 1.} tends to be inefficient. b. usually lowers the cost of production dramatically. c. creates synergies between the newly acquired firm and other government- owned companies. d. does none of the above. 17. Which of the following statements about price discrimination is not true? a. Price discrimination can raise economic Welfare. b. Price discrimination requires that the Seller be able to separate buyers accord- ” ing to their willingness to pay. -' 'ch5 Perfect price discrimination generates a deadweight loss. '1 it Price discrimination increases a monopolist’s profits. e. For a monopolist to engage in price discrimination, buyers must be unable to engage in arbitrage. 18. If regulators break up a natural monopoly into many smaller firms, the cost of production (a. will fall. 4.; will rise. 11. will remain the same. d. could either rise or fall depending on the elasticity of the monopolist’s supply curve. 240 PART 5 FIRM BEHAVIOR AND THE ORGANIZATION OF INDUSTRY 19. A monopoly is able to continue to generate economic profits in the long run because a: potential competitors sometimes don’t notice the profits. there is some barrier to entry to that market. “'6 the monopolist is financially powerful. cl. antitrust laws eliminate competitors for a specified number of years. e. of all. of the above. 20. If marginal revenue exceeds marginal cost, a monopolist should ,4"""\ ‘ KaJ Increase output. b. decrease output. c. keep output the same because profits are maximized when marginal revenue exceeds marginal cost. d. raise the price. ADVANCED CR1 ICAL THINKING You are watchin _ television news show. A consumer advocate is discussing the airline ' - dustry. He says, "There are so u - ny rates offered by airlines that it is technically possible for a 747 o be carrying a full load of passeng s where no two of them paid the same price for their tick - . This is clearly unfair and inefficient.” l - continues, “In addition, the profits of the airlines hav a doubled in the last few years since they bega - this practice, and these additional profits are clear a social burden. We need legislation that require airlines to charge all passengers on an airplan he same price for their travel.” 1. List some of i. e ways airlines divide their custo a 5 according to their willing- ness to pay. 2. is it necessarily mefficient r air ‘ es to charge different prices to different cus— tomers? Why? 3. Is the increa = m profits generated by n '3 type of price discrimination a social cost? Expla' . ...
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This note was uploaded on 10/22/2011 for the course ACCT 3551 taught by Professor Brown during the Spring '11 term at UNC.

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ECO 251 Ch.15 Document - CHAPTER 15 MONOPOLY 237...

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