Microeconomics Homework 5

question

The simplest way for a monopoly to arise is for a single firm to A. make pricing decisions jointly with other firms B. decrease production to increase demand for its product C. own a key resource D. decrease its price below its competitors’ prices
answer

C. Own a key resource
question

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 will lead to a higher average cost D. a larger number of firms may lead to a lower average cost
answer

C. a larger number of firms will lead to a higher average cost
question

Which of the following is NOT a reason for the existence of a monopoly? A. sole ownership of a key resource B. patents C. Diseconomies of scale D. copy rights
answer

C. diseconomies of scale
question

a firm that is the sole seller of a product without close substitutes is A. monopolist B. perfectly competitive C. an oligopolist D. monopolically competitive
answer

A. monopolist
question

a natural monopolist’s ability to price its product is A. enhanced by regulatory control of the government B. not affected by market demand C. constrained by the market demand curve D. constrained by market supply
answer

C. constrained by the market demand curve
question

When a monopolist increases the number of units it sells, there are two effects on revenue. They are the A. output effect and the price effect B. demand effect and supply effect C. competitive effect and the monopoly effect D. competition effect and the cost effect
answer

A. output effect and the price effect
question

As a monopolist increases the quantity of output sells, the price consumers are willing to pay for the food A. is unaffected B. there is not enough information given to answer the question C. increases D. decreases
answer

D. decreases
question

for a monopolist, when does marginal revenue exceed average revenue? A. for all levels of output greater than zero B. when output is less than the profit-maximizing level of output C. never D. when output is greater than the profit-maximizing level of output
answer

C. never
question

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 $-.20 B. $-4.20 C. $35.80 D. $4.20
answer

B. $-4.20
question

a reduction is a monopolist’s fixed costs would A. not effect the profit-maximizing price or quantity B. increase the profit-maximizing price and decrease the profit-maximizing quantity produced C. decrease the profit-maximizing price and increase the profit-maximizing quantity produced D. possibly increase, decrease or not effect profit-maximizing price and quantity, depending on the elasticity of demand
answer

A. not effect the profit maximizing price or quantity
question

A monopoly market A. always maximizes total economic well-being B. general fails to maximize total economic well-being C. always minimizes consumer surplus D. general fails to maximized producer surplus
answer

B. generally fails to maximize total economic well-being
question

A monopolist produces A. less than the socially efficient quantity of output, but at a higher price than in a competitive market B. more than the socially efficient quantity of output, but at a higher price than in a competitive market C. possibly more or possibly less than the socially efficient quantity of output, but definitely at a higher price than in a competitive market D. the socially efficient quantity of output, but at a higher price than in a competitive market
answer

A. less than the socially efficient quantity of output, but at a higher price than in a competitive market
question

when regulators use a marginal-cost pricing strategy to regulate a natural monopoly, the regulated monopoly A. may rely on a government subsidy to remain in business B. will experience a lost C. will experience a price below average total cost D. all of the above
answer

D. all of the above
question

reduced competition through merging of companies will raise social welfare A. always B. if the cost from the synergies exceeds the benefit of increased market power C. never D. if the benefit from the synergies exceeds the social cost of increased market power
answer

D. if the benefit from the synergies exceeds the social cost of increased market power
question

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
answer

D. price discrimination
question

An airline knows that there are two types of travelers: business travelers and vacationer. 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 of 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 seats the price of a ticket at $600? A. $40,000 B. $-5,000 C. $70,000 D. $15,000
answer

A. $40,000

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