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Assignment 8

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Question 1 (1 point)
A monopoly
  1. will never earn economic losses in the short run
  2. is continually prone to the threat of entry from new rivals
  3. must be inexpensive to create since so many of them exist
  4. consists of from 2 to 8 players, like the board game
  5. None of these
Question 2 (1 point)
When Glaxo-Wellcome introduced AZT, an AIDS drug, it was able to enjoy high profits because of
  1. barriers to entry provided by patents
  2. the quick response of rivals in introducing substitute drugs
  3. its low prices
  4. the widespread use of the drug among ordinary people
  5. economies of scale in advertising
Question 3 (1 point)
A local monopoly
  1. is a firm that supplies its product to customers only in one specific geographic area
  2. is a firm that is a supplier in a specific geographic area
  3. is a firm that is a supplier within only one country
  4. is a firm that is a seller to only one customer
  5. is a firm that is a sole supplier without substitutes in a specific geographic area
Question 4 (1 point)
Which of the following statements is true?
  1. There are more firms in a monopoly market compared to perfect competition
  2. For a monopolist, the demand curve is perfectly elastic
  3. A perfectly competitive firm's demand curve is the market-demand curve
  4. A monopolist's demand curve is the market demand curve
  5. For a monopolist, the law of demand generally does not apply since it is the only firm in a market
Question 5 (1 point)
Marginal Revenue
According to the table above, what is the marginal revenue of the third unit?
  1. $42
  2. $32
  3. $18
  4. $14
  5. $10
Question 6 (1 point)
Monopoly Curves
Refer to the figure above, which shows a monopolist's MR, AR, and TR curves. At point C,
  1. marginal revenue is equal to 1
  2. price elasticity of demand is equal to zero
  3. price elasticity of demand is perfectly inelastic
  4. price elasticity of demand is equal to 1
  5. price elasticity of supply is equal to 1
Question 7 (1 point)
For a straight-line, downward-sloping demand curve, marginal revenue lies below the demand curve because
  1. price is greater than marginal revenue
  2. If average revenue is falling, marginal revenue must be less than average revenue
  3. to sell more units of output, the firm must reduce the price of previously sold units, so there is a loss in revenue as well as a gain in revenue
  4. the marginal-revenue curve is twice as steep but has the same intercept as the demand curve
  5. All of these
Question 8 (1 point)
A monopolist maximizes profit
  1. where the average-cost curve intersects the demand curve
  2. where average revenue equals average cost
  3. where marginal revenue equals marginal cost
  4. where price equals marginal cost
  5. by charging the highest possible price on the demand curve
Question 9 (1 point)
If a firm is producing at a point where marginal revenue is greater than marginal cost, it should
  1. increase the level of production
  2. lower its prices
  3. raise its prices
  4. continue producing at the current level
  5. decrease the level of production
Question 10 (1 point)
Revenue of Monopoly
Refer to the table above. Total revenue to the monopoly at the profit-maximizing output level is
  1. $16
  2. $30
  3. $42
  4. $52
  5. $60
Question 11 (1 point)
Optimal Output Level
In the figure above, at the optimal output level, total revenue is
  1. $3,500
  2. $3,600
  3. $2,400
  4. $3,000
  5. $1,200
Question 12 (1 point)
Marginal Cost
In the figure above, if the firm's marginal costs decrease (the marginal-cost curve shifts down), the monopolist will
  1. incur an economic loss
  2. decrease price and quantity of output
  3. increase price and quantity of output
  4. decrease price and increase quantity of output
  5. earn a smaller economic profit
Question 13 (1 point)
Since a monopolist is a price maker and not a price taker,
  1. it has a supply curve identical to the perfectly competitive market
  2. it can never earn economic profits in the long run
  3. it has no supply curve, only a supply point on the demand curve where MR = MC
  4. it has a horizontal demand curve
  5. it has no demand curve
Question 14 (1 point)
To practice price discrimination, a firm
  1. must be able to distinguish between customers based on elasticities of demand
  2. cannot be a perfectly competitive firm
  3. must have customers with different elasticities of demand
  4. must be able to prevent resale
  5. All of these
Question 15 (1 point)
Movie theaters are able to offer discounts to senior citizens because
  1. movie theaters can separate senior citizens from other customers and it is relatively easy to prevent resale
  2. the elderly deserve lower prices because of their contributions to society
  3. senior citizens have the most inelastic demand
  4. senior citizens can't see the movie very well anyway because of poor eyesight
  5. All of these
Question 16 (1 point)
Demand for Football Tickets
Refer to the figure above, which shows the demand by two classes of buyers for tickets to a football game. The price to group 1 and the price to group 2 must be___________ if the firm is to maximize profit.
  1. group 1 is charged P 2 and group 2 is charged P 1 .
  2. the same because the MC is constant
  3. group 1 is charged P 1 and group 2 is charged P 2 .
  4. P 1 .
Question 17 (1 point)
Compared to a perfectly competitive market with similar cost conditions, a monopolist will have
  1. a higher output and a lower price
  2. a higher output and lower price
  3. a lower output and lower price
  4. the same output and a higher price
  5. a lower output and a higher price
Question 18 (1 point)
In long-run equilibrium, a monopolist is not economically efficient because
  1. it does not operate on the minimum point of its average-total-cost curve
  2. it does not produce the level of output where price equals marginal cost
  3. consumer surplus is maximized but not producer surplus
  4. producer surplus is maximized but not consumer surplus
  5. Both a. and b
Question 19 (1 point)
Deadweight Loss
In the figure above, what is the resulting deadweight loss if the perfectly competitive industry is monopolized?
  1. The area BCGF
  2. The area BEF
  3. The area BCE
  4. The area BCF
  5. The area P 1 P 2 CE
Question 20 (1 point)
Deadweight Loss
Refer to the figure above. If the perfectly competitive industry is monopolized, then the area __________ represents the consumer surplus that is transferred to the monopoly.
  1. ABF
  2. P 1 P 2 CE
  3. P 1 P 2 CB
  4. ACEP 1
  5. ACP 2
Question 1 (5.00 points)
List the three conditions necessary for price discrimination.
Question 2 (5.00 points)
About 85 percent of the soup sold in the U.S. is Campbell�s brand. Is Campbell Soup Company a monopoly firm? Why or why not?
Copyright 2008, by the Contributing Authors. Cite/attribute Resource . admin. (2009, January 27). Assignment 8. Retrieved January 07, 2011, from Free Online Course Materials — USU OpenCourseWare Web site: http://ocw.usu.edu/economics/introduction-to-microeconomics-1/assignment8.htm. This work is licensed under a Creative Commons License Creative Commons License