Question 1

The demand curve for a monopoly's product is

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Question 2

Figure 15-2
  
Figure 15-2 above shows the demand and cost curves facing a monopolist.
-Refer to Figure 15-2.If the firm's average total cost curve is ATC₁, the firm will

Accepted Answer

The answer of Figure 15-2
  
Figure 15-2 above shows...

Question 3

Microsoft hires marketing and sales specialists to decide what prices it should set for its products, whereas a wealthy corn farmer in Iowa, who sells his output in the world commodity market, does not.Why is this so?

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Question 4

What is a public franchise? Are all public franchises natural monopolies?

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Question 5

If a monopolist's marginal revenue is $25 a unit and its marginal cost is $25, then

Accepted Answer

When a monopolist's marginal revenue is equal to its marginal cost, it has already achieved maximum profit because any further increase in output will result in a decrease in profit. Therefore, the firm should continue producing the output it is already producing.

Question 6

Because a monopoly's demand curve is the same as the market demand curve for its product

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Question 7

U.S.antitrust laws are designed to prohibit monopolization and encourage competition.Why, then, does the government erect barriers to entry and create monopoly power by granting firms patents?

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Question 8

Figure 15-2
  
Figure 15-2 above shows the demand and cost curves facing a monopolist.
-Refer to Figure 15-2.If the firm's average total cost curve is ATC₂, the firm will

Accepted Answer

The answer of Figure 15-2
  
Figure 15-2 above shows...

Question 9

A public franchise gives the exclusive right to produce a product for 20 years from the date the product is invented.

Accepted Answer

A public franchise is a government grant of exclusive rights to produce, sell or distribute a product or service. However, there is no set time limit for how long a public franchise can last. It can vary depending on the agreement between the government and the franchise holder. Therefore, the statement that a public franchise gives the exclusive right to produce a product for 20 years from the date the product is invented is false.

Question 10

What gives rise to a natural monopoly? How do consumers benefit from a natural monopoly?

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Question 11

How does a network externality serve as a barrier to entry? Is this barrier surmountable? Explain.

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Question 12

A virtuous cycle refers to the development of new products that follows when a monopoly earns economic profits.

Accepted Answer

A virtuous cycle refers to a self-reinforcing economic cycle where a positive outcome leads to further positive outcomes. It is not specific to the development of new products that follows when a monopoly earns profits.

Question 13

Network externalities refer to the situation where the usefulness of a product increases with the number of consumers who use it.

Accepted Answer

This is the definition of network externalities.

Question 14

Figure 15-2
  
Figure 15-2 above shows the demand and cost curves facing a monopolist.
-Refer to Figure 15-2.To maximize profit, the firm will produce at output level

Accepted Answer

To maximize profit, the firm should produce where MR=MC. In this case, that occurs at an output of Q₂. At this output level, the firm can charge a price of P₂ and earn a profit equal to the shaded rectangle (P₂-ATC) x Q₂. At any other output level, the profit will be less than this maximum profit.

Question 15

A monopolist's profit-maximizing price and output correspond to the point on a graph

Accepted Answer

A monopolist maximizes profit where marginal revenue (MR) equals marginal cost (MC). At this output level, the monopolist charges the highest price the market will bear, which corresponds to a point on the market demand curve. Therefore, the correct answer is C.

Question 16

Figure 15-2
  
Figure 15-2 above shows the demand and cost curves facing a monopolist.
-Refer to Figure 15-2.The firm's profit-maximizing price is

Accepted Answer

The answer of Figure 15-2
  
Figure 15-2 above shows...

Question 17

Identify four reasons for high entry barriers.Briefly explain each reason.

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The answer of Identify four reasons for high entry barriers.Briefly...

Question 18

If a monopolist's price is $50 per unit and its marginal cost is $25, then

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Question 19

If a theatre company expects $250,000 in ticket revenue from five performances and $288,000 in ticket revenue if it adds a sixth performance, the

Accepted Answer

The marginal revenue is the increase in revenue from adding one additional performance. Therefore, the marginal revenue of the sixth performance is the difference between the total revenue of the six performances ($288,000) and the total revenue of the five performances ($250,000), which is $38,000. Option A is incorrect because it states the marginal revenue of the sixth performance is $288,000, which is the total revenue of the sixth performance, not the marginal revenue. Option C is irrelevant because the question does not provide any information about the costs of staging the performances. Option D is incorrect because the question does not provide any information about the average revenue received from the previous five performances or the ticket sales of the sixth performance, so we cannot determine whether the company will be making a loss.

Question 20

Provide two examples of a government barrier to entry.

Accepted Answer

The answer of Provide two examples of a government barrier...

Quiz 15: Monopoly and Antitrust Policy

The demand curve for a monopoly's product is

Figure 15-2 Figure 15-2 above shows the demand and cost curves facing a monopolist. -Refer to Figure 15-2.If the firm's average total cost curve is ATC₁, the firm will

Microsoft hires marketing and sales specialists to decide what prices it should set for its products, whereas a wealthy corn farmer in Iowa, who sells his output in the world commodity market, does not.Why is this so?

What is a public franchise? Are all public franchises natural monopolies?

If a monopolist's marginal revenue is $25 a unit and its marginal cost is $25, then

Because a monopoly's demand curve is the same as the market demand curve for its product

U.S.antitrust laws are designed to prohibit monopolization and encourage competition.Why, then, does the government erect barriers to entry and create monopoly power by granting firms patents?

Figure 15-2 Figure 15-2 above shows the demand and cost curves facing a monopolist. -Refer to Figure 15-2.If the firm's average total cost curve is ATC₂, the firm will

A public franchise gives the exclusive right to produce a product for 20 years from the date the product is invented.

What gives rise to a natural monopoly? How do consumers benefit from a natural monopoly?

How does a network externality serve as a barrier to entry? Is this barrier surmountable? Explain.

A virtuous cycle refers to the development of new products that follows when a monopoly earns economic profits.

Network externalities refer to the situation where the usefulness of a product increases with the number of consumers who use it.

Figure 15-2 Figure 15-2 above shows the demand and cost curves facing a monopolist. -Refer to Figure 15-2.To maximize profit, the firm will produce at output level

A monopolist's profit-maximizing price and output correspond to the point on a graph

Figure 15-2 Figure 15-2 above shows the demand and cost curves facing a monopolist. -Refer to Figure 15-2.The firm's profit-maximizing price is

Identify four reasons for high entry barriers.Briefly explain each reason.

If a monopolist's price is $50 per unit and its marginal cost is $25, then

If a theatre company expects $250,000 in ticket revenue from five performances and $288,000 in ticket revenue if it adds a sixth performance, the

Provide two examples of a government barrier to entry.