Econ 2301 HW 5 – Flashcards

The simplest way for a monopoly to arise is for a single firm to _________________________________________________________________________________ a. decrease its price below its competitors' prices. b. decrease production to increase demand for its product. c. make pricing decisions jointly with other firms. d. own a key resource.

When an industry is a natural monopoly __________________________________________________________________________________ a. it is characterized by constant returns to scale. b. it is characterized by diseconomies of scale. c. a larger number of firms may lead to a lower average cost. d. a larger number of firms will lead to a higher average cost.

Which of the following is not a reason for the existence of a monopoly? _____________________________________________________________________________________ a. Sole ownership of a key resource b. Patents c. Copyrights d. Diseconomies of scale

A firm that is the sole seller of a product without close substitutes is ________________________________________________________________________________ a. perfectly competitive. b. monopolistically competitive. c. an oligopolist d. monopolist

A natural monopolist's ability to price its product is ________________________________________________________________________________ a. constrained by the market demand curve. b.constrained by market supply. c. not affected by market demand. d. enhanced by regulatory control of the government.

When a monopolist increases the number of units it sells, there are two effects on revenue. They are the ___________________________________________________________________________________ a. demand effect and the supply effect. b. competition effect and the cost effect. c. competitive effect and the monopoly effect. d. output effect and the price effect.

As a monopolist increases the quantity of output it sells, the price consumers are willing to pay for the good __________________________________________________________________________________ a. is unaffected. b. decreases. c. increases. d. There is not enough information given in answer the question.

For a monopolist, when does marginal revenue exceed average revenue? _________________________________________________________________________________ a. Never b. When output is less than the profit-maximizing level of output c. When output is greater than the profit-maximizing level of output d. For all levels of output greater than zero.

A monopolist can sell 200 units of output for $36.00 per unit. Alternatively, it can sell 201 units of output for $35.80 per unit. The marginal revenue of the 201st unit of output is ___________________________________________________________________________________ a. $-4.20. b. $-0.20. c. $4.20. d. $35.80.

A reduction in a monopolist's fixed costs would ______________________________________________________________________________ a. decrease the profit-maximizing price and increase the profit-maximizing quantity produced. b. increase the profit-maximizing price and decrease the profit-maximizing quantity produced. c. not effect the profit-maximizing price or quantity. d. possibly increase, decrease or not effect profit-maximizing price and quantity, depending on the elasticity of demand.

A monopoly market _______________________________________________________________________________ a. always maximizes total economic well-being. b. always minimizes consumer surplus. c. generally fails to maximize total economic well-being. d. generally fails to maximize producer surplus.

For a monopoly market, total surplus can be defined as the value of the good to __________________________________________________________________________________ a. producers minus the cost incurred by consumers. b. producers plus the cost incurred by consumers. c. consumers minus the costs of producing the good. d. consumers plus the cost of producing the good.

A monopolist produces _______________________________________________________________________________ a. more than the socially efficient quantity of output, but at a higher price than in a competitive market. b. less than the socially efficient quantity of output, but at a higher price than in a competitive market. c .the socially efficient quantity of output, but at a higher price than in a competitive market. d. possibly more or possibly less than the social

When regulators use a marginal-cost pricing strategy to regulate a natural monopoly, the regulated monopoly ____________________________________________________________________ a. will experience a loss. b. will experience a price below average total cost. c. may rely on a government subsidy to remain in business. d. All of the above are correct.

Reduced competition through merging of companies will raise social welfare __________________________________________________________________________________ a. if the cost from the synergies exceeds the benefit of increased market power. b. if the benefit from the synergies exceeds the social cost of increased market power. c. always. d. never.

When a monopolist is able to sell its product at different prices, it is engaging in _____________________________________________________________________________________ a. distribution pricing. b. quality-adjusted pricing. c. price differentiation. d. price discrimination.

An airline knows that there are two types of travelers: business travelers and vacationers. For a particular flight, there are 100 business travelers who will pay $600 for a ticket while there are 50 vacationers who will pay $300 for a ticket. There are 150 seats available on the plane. Suppose the cost to the airline of providing the flight is $20,000, which includes the cost of the pilots, flight attendants, fuel, etc. How much profit will the airline earn if it sets the price of a ticket at $600? _________________________________________________________________________________ -$5,000 $15,000 $40,000 $70,000