Question 1

With regard to price discrimination,we can generally say that a monopolist practicing perfect price discrimination _ a single- price monopolist in the same market.

Accepted Answer

A monopolist practicing perfect price discrimination generates a more efficient outcome for society as a whole compared to a single-price monopolist in the same market because it eliminates deadweight loss and maximizes total welfare by charging each consumer their exact willingness to pay for a good or service. As a result, there is no consumer surplus in perfect price discrimination. However, societal welfare is maximized, resulting in a more efficient outcome.

Question 2

A monopolist faces a straight- line demand curve and is currently producing an output level of 2000 units receiving $10 000 in total revenue.At an output of 1000 units the marginal revenue for this firm would be

Accepted Answer

The answer of A monopolist faces a straight- line demand...

Question 3

Suppose that a single- price monopolist knows the following information: $\begin{array}{|l|l|l|l|l|l|l|l|}
\hline \text { Price } & \text { Quantity } & \text { TR } & \text { MR } & \text { Fixed Cost } & \text { TC } & \text { ATC } & \text { MC } \
\hline \$ 9.00 & 1500 & & \$ 4.00 & \$ 7000 & & \$ 7.00 & \$ 5.00 \
\hline
\end{array}$ The total profit being earned by this firm at the current level of output is

Accepted Answer

Total profit is calculated as Total Revenue (TR) minus Total Cost (TC). TR can be calculated as Price multiplied by Quantity, which is $9.00 * 1500 = $13,500. TC is given as ATC multiplied by Quantity, which is $7.00 * 1500 = $10,500. Therefore, profit is $13,500 - $10,500 = $3,000.

Question 4

The diagram below shows total revenue for a single- price monopolist.
  FIGURE 10- 3
-A monopolist will be earning positive economic profits

Accepted Answer

Positive economic profits occur when total revenue exceeds total cost. In a single-price monopoly, the profit-maximizing output is where marginal revenue equals marginal cost. At this output level, the monopolist will charge a price that exceeds average total cost. Therefore, the correct answer is option C.

Question 5

Suppose you go to a retailer's website and print a coupon that gives you a discount on your next purchase at their store.But your friend,who also plans to purchase there,can't be bothered.You are revealing to the store that

Accepted Answer

By using the coupon and taking advantage of the discount, you are showing that you are more sensitive to changes in price (i.e. have a higher elasticity of demand) than your friend who is not using the coupon.

Question 6

The figure below shows the demand schedule and demand curve for a product produced by a single- price monopolist.
 $\begin{array}{ll}
\text { Price (\$) } & \begin{array}{l}
\text { Quantity } \
\text { Demanded }
\end{array} \
\hline n & 5 \
7 & 6 \
6 & 7 \
5 & 8 \
4 & 9 \
3 & 10 \
2 & 11
\end{array}$
 FIGURE 10- 1
-Refer to Figure 10- 1.Suppose this single- price monopolist is initially selling 5 units at $8 each and then reduces the price of the product to $6.By making this change,the firm is giving up revenue of on the original number of units sold and gaining revenue of _ on the additional units sold.Its marginal revenue is therefore .(All figures are dollars.)

Accepted Answer

The firm gives up $10 in revenue on the original 5 units (5 units x $2 price decrease) and gains $12 on the additional units (2 additional units x $6 price). Therefore, the marginal revenue is $2.

Question 7

TABLE 10- 1  $$\begin{array} { | l | c | } 
\hline \text { Price } & \begin{array} { c } 
\text { Quantity } \
\text { Demanded }
\end{array} \
\hline \$ 8 & 5 \
\hline \$ 7 & 6 \
\hline \$ 6 & 7 \
\hline \$ 5 & 8 \
\hline \$ 4 & 9 \
\hline \$ 3 & 10 \
\hline \$ 2 & 11 \
\hline
\end{array}$$
-Refer to Table 10- 1,which displays the demand schedule for a single- price monopolist.At what level of demand is the price elasticity of demand equal to 1?

Accepted Answer

The answer of TABLE 10- 1  \[\begin{array} { |...

Question 8

TABLE 10- 1  $$\begin{array} { | l | c | } 
\hline \text { Price } & \begin{array} { c } 
\text { Quantity } \
\text { Demanded }
\end{array} \
\hline \$ 8 & 5 \
\hline \$ 7 & 6 \
\hline \$ 6 & 7 \
\hline \$ 5 & 8 \
\hline \$ 4 & 9 \
\hline \$ 3 & 10 \
\hline \$ 2 & 11 \
\hline
\end{array}$$
-Refer to Table 10- 1,which displays the demand schedule for a single- price monopolist.Which of the following statements about price elasticity of demand is true?

Accepted Answer

The answer of TABLE 10- 1  \[\begin{array} { |...

Question 9

FIGURE 10- 4 Suppose a monopolist faces the demand curve and cost curves shown below.
 
-A monopoly is distinguished from a firm operating under any other market structure in the following way: the monopoly

Accepted Answer

A monopoly is the sole producer in the market, so its demand curve is the same as the market demand curve.

Question 10

TABLE 10- 2 Your food- services company has been named as the sole provider of meals at a small university.The cost and demand schedules are: $$\begin{array} { | c | c | c | c | c | } 
\hline \text { Sold per Day } & \begin{array} { c } 
\text { Price per } \
\text { Meal }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Fixed Cost }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Variable Cost }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Revenue }
\end{array} \
\hline 0 & \$ 3.50 & \$ 150 & \$ 0 & \$ 0 \
\hline 100 & \$ 3.25 & \$ 150 & \$ 300 & \$ 325 \
\hline 200 & \$ 3.00 & \$ 150 & \$ 500 & \$ 600 \
\hline 300 & \$ 275 & \$ 150 & \$ 650 & \$ 825 \
\hline 400 & \$ 250 & \$ 150 & \$ 750 & \$ 1000 \
\hline 500 & \$ 225 & \$ 150 & \$ 830 & \$ 1125 \
\hline 600 & \$ 200 & \$ 150 & \$ 905 & \$ 1200 \
\hline 700 & \$ 1.75 & \$ 150 & \$ 995 & \$ 1225 \
\hline
\end{array}$$
-Which one of the following cases is NOT an example of price discrimination?

Accepted Answer

Price discrimination occurs when a seller charges different prices to different buyers for the same product or service. In this case, young males are charged higher premiums for car insurance than older males or women. This is an example of price discrimination because the seller is charging different prices to different buyers for the same product (car insurance).

Question 11

The diagram below shows total revenue for a single- price monopolist.
  FIGURE 10- 3
-Consider a monopolist that is able to distinguish between two distinct market segments,A and B,for its product.Marginal cost is constant at $18 for each unit produced.The firm is currently selling its output at a single price and allocating its output across segments such that marginal revenue in segment A is $25 and marginal revenue in segment B is $15.Is this firm maximizing its profit?

Accepted Answer

The firm can increase its profits by price discriminating across the two market segments. This is because the firm can charge a higher price to segment A, where marginal revenue is greater, and a lower price to segment B, where marginal revenue is lower. By doing so, the firm can capture more consumer surplus and increase its overall profit.

Question 12

Suppose that a single- price monopolist knows the following information: $\begin{array}{|l|l|l|l|l|l|l|l|}
\hline \text { Price } & \text { Quantity } & \text { TR } & \text { MR } & \text { Fixed Cost } & \text { TC } & \text { ATC } & \text { MC } \
\hline \$ 10.00 & 1500 & & \$ 7.00 & \$ 6000 & & \$ 5.00 & \$ 5.00 \
\hline
\end{array}$ The total profit being earned by this firm at the current level of output is which the maximum profit possible.

Accepted Answer

The answer of Suppose that a single- price monopolist knows...

Question 13

The marginal revenue curve facing a single- price monopolist

Accepted Answer

For a single-price monopolist, the marginal revenue curve lies below the average revenue (or demand) curve because the monopolist must lower the price on all units sold to sell additional units, causing marginal revenue to be less than the price.

Question 14

At the profit- maximizing level of output for a single- price monopolist,price

Accepted Answer

The answer of At the profit- maximizing level of output...

Question 15

A number of firms agreeing together to restrict output and thereby raise prices is known as

Accepted Answer

A cartel is a group of firms that agree to restrict output and raise prices in order to increase their profits. This is often done by setting quotas on production or allocating market shares among the members of the cartel. The most well-known example of a cartel is OPEC, which controls much of the world's oil production.

Question 16

The diagram below shows total revenue for a single- price monopolist.
  FIGURE 10- 3
-Refer to Figure 10- 3.The firm's marginal revenue at Q1 is

Accepted Answer

The marginal revenue is represented by the slope of the total revenue curve. At Q1, the slope is positive but decreasing, indicating that each additional unit sold brings in less revenue than the previous unit. Therefore, the answer is D, positive but falling.

Question 17

The figure below shows the demand schedule and demand curve for a product produced by a single- price monopolist.
 $\begin{array}{ll}
\text { Price (\$) } & \begin{array}{l}
\text { Quantity } \
\text { Demanded }
\end{array} \
\hline n & 5 \
7 & 6 \
6 & 7 \
5 & 8 \
4 & 9 \
3 & 10 \
2 & 11
\end{array}$
 FIGURE 10- 1
-If a single- price monopolist's price equals marginal cost,the firm

Accepted Answer

A single-price monopolist maximizes profit where marginal revenue (MR) equals marginal cost (MC). If price equals MC, the firm is not maximizing profit because MR is less than price. By reducing output and increasing price, the monopolist can increase profits.

Question 18

TABLE 10- 2 Your food- services company has been named as the sole provider of meals at a small university.The cost and demand schedules are: $$\begin{array} { | c | c | c | c | c | } 
\hline \text { Sold per Day } & \begin{array} { c } 
\text { Price per } \
\text { Meal }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Fixed Cost }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Variable Cost }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Revenue }
\end{array} \
\hline 0 & \$ 3.50 & \$ 150 & \$ 0 & \$ 0 \
\hline 100 & \$ 3.25 & \$ 150 & \$ 300 & \$ 325 \
\hline 200 & \$ 3.00 & \$ 150 & \$ 500 & \$ 600 \
\hline 300 & \$ 275 & \$ 150 & \$ 650 & \$ 825 \
\hline 400 & \$ 250 & \$ 150 & \$ 750 & \$ 1000 \
\hline 500 & \$ 225 & \$ 150 & \$ 830 & \$ 1125 \
\hline 600 & \$ 200 & \$ 150 & \$ 905 & \$ 1200 \
\hline 700 & \$ 1.75 & \$ 150 & \$ 995 & \$ 1225 \
\hline
\end{array}$$
-Refer to Table 10- 2,and suppose that the firm is a single- price monopolist.At the profit- maximizing level of output,the price elasticity of demand is

Accepted Answer

At the profit-maximizing level of output for a monopolist, the price elasticity of demand is greater than one (elastic). This is because a monopolist maximizes profit where marginal revenue equals marginal cost, and in the elastic range of the demand curve, a decrease in price leads to an increase in total revenue.

Question 19

A firm is best described as a natural monopoly if

Accepted Answer

A natural monopoly occurs when a single firm can supply the entire market at a lower cost than if multiple firms were operating in the market. This leads to the firm having a downward sloping average cost curve, which means that as production increases, the firm's average costs decrease. Therefore, the firm can supply the entire market while minimizing its average costs. Since there are no competing firms, the firm does not face any competition that would drive down its prices or force it to incur additional costs to compete.

Question 20

TABLE 10- 1  $$\begin{array} { | l | c | } 
\hline \text { Price } & \begin{array} { c } 
\text { Quantity } \
\text { Demanded }
\end{array} \
\hline \$ 8 & 5 \
\hline \$ 7 & 6 \
\hline \$ 6 & 7 \
\hline \$ 5 & 8 \
\hline \$ 4 & 9 \
\hline \$ 3 & 10 \
\hline \$ 2 & 11 \
\hline
\end{array}$$
-Consider the following statement: "Price discrimination is harmful to society and should not be tolerated under any circumstance." Why is this statement false?

Accepted Answer

Price discrimination can make some consumers better off by allowing them access to products or services at prices they can afford, which can increase overall welfare.

Quiz 10: Monopoly,cartels,and Price Discrimination