Question 1

Which of the following is not a condition of price discrimination?

Accepted Answer

Having zero fixed costs is not a condition of price discrimination. The other options are conditions that must be met for a seller to engage in price discrimination.

Question 2

The perfectly competitive firm produces the quantity of output at which __________, and the single-price monopolist produces the quantity of output at which __________. The perfectly price-discriminating monopolist is like the __________ in this regard.

Accepted Answer

In a perfectly competitive market, firms produce where price (P) equals marginal cost (MC) to maximize profit. A single-price monopolist sets output where marginal revenue equals marginal cost (MR=MC), but sells at a price (P) greater than MC. A perfectly price-discriminating monopolist effectively operates like a perfectly competitive firm in that it captures all consumer surplus by charging each consumer their maximum willingness to pay, effectively equating price and marginal cost for every unit sold.

Question 3

Which of the following is descriptive of rent-seeking?

Accepted Answer

Rent-seeking refers to using resources to obtain economic gain through non-productive means, such as lobbying for government interventions or subsidies. In this case, the domestic company is using a lobbyist to try to gain an advantage over Brazilian imports, rather than improving its own products or production processes.

Question 4

Exhibit 23-10 
Refer to Exhibit 23-10. The profit-maximizing single-price monopolist will produce which quantity of output?

Accepted Answer

The answer of Exhibit 23-10 
Refer to Exhibit 23-10. The...

Question 5

Exhibit 23-9  Refer to Exhibit 23-9. A single-price monopolist earns a total profit of __________ when it produces and sells 20 units of its good.

Accepted Answer

The answer of Exhibit 23-9  Refer to Exhibit 23-9....

Question 6

Which of the following statements is true?

Accepted Answer

Economic rent is defined as a payment in excess of opportunity cost, which means that it is a payment for a factor of production (such as land or labor) that is in limited supply and therefore earns a higher return than the amount that would be necessary to keep it in its current use or attract it to an alternative use. Rent seeking, on the other hand, refers to the use of resources or efforts to obtain economic rents or other advantages through the political or legal process, rather than through productive activity in the market. The motivation for rent seeking may be different from the motivation for profit seeking, as rent seekers may seek to maintain or enhance their existing position or monopolize a market, rather than create new value. The deadweight loss triangle is a graphic representation of the inefficiency or welfare loss that arises when a market operates with monopoly power or other distortions, and is not a cost of not having a monopoly. Rent seeking may contribute to deadweight loss by diverting resources away from productive activity or creating market inefficiencies, but it is not always irrational for rent seekers, as they may gain significant benefits from capturing economic rents or other advantages through political or legal means.

Question 7

Rent-seeking is said to be socially wasteful because

Accepted Answer

Rent-seeking involves using resources to obtain a larger share of existing wealth, rather than creating new wealth through productive activities. Thus, resources used for rent-seeking are not used for producing goods and services, which can lead to a loss of potential economic output and social welfare.

Question 8

When a monopolist can perfectly price discriminate, it follows that

Accepted Answer

When a monopolist can perfectly price discriminate, it charges each consumer their maximum willingness to pay, capturing all consumer surplus and producing the socially optimal quantity where price equals marginal cost, thus achieving resource-allocative efficiency.

Question 9

Exhibit 23-9  Refer to Exhibit 23-9. Total fixed costs are equal to.

Accepted Answer

The answer of Exhibit 23-9  Refer to Exhibit 23-9....

Question 10

A single-price monopolist with the same demand and cost conditions as a perfectly price-discriminating monopolist produces __________ output than the perfectly price-discriminating monopolist and __________ resource-allocative efficient.

Accepted Answer

A single-price monopolist produces less output than a perfectly price-discriminating monopolist because the former faces a downward-sloping demand curve, whereas the latter faces a perfectly elastic demand curve. However, both monopolists are not resource-allocative efficient as they restrict output below the level of output that would minimize the sum of consumer and producer surplus.

Question 11

Exhibit 23-10 
Refer to Exhibit 23-10. The profit-maximizing single-price monopolist earns profits equal to what area?

Accepted Answer

The answer of Exhibit 23-10 
Refer to Exhibit 23-10. The...

Question 12

"Rent-seeking" refers to

Accepted Answer

Rent-seeking is the act of using resources to try to gain an economic rent, which is an income earned by an individual or group from the control or ownership of assets. In this case, individuals spend resources to influence public policy and transfer income to themselves from others.

Question 13

Exhibit 23-9  Refer to Exhibit 23-9. Assuming that the firm is maximizing profits, the marginal cost of the last unit produced equals

Accepted Answer

The answer of Exhibit 23-9  Refer to Exhibit 23-9....

Question 14

For the perfectly price-discriminating monopolist, its __________ curve is the same as its __________ curve.

Accepted Answer

For a perfectly price-discriminating monopolist, the demand curve is the same as its marginal revenue curve because it can charge each consumer exactly their willingness to pay, thus capturing the entire area under the demand curve as revenue.

Question 15

Exhibit 23-9  Refer to Exhibit 23-9. A single-price monopolist that seeks to maximize profits will sell __________ units and charge a per-unit price of __________.

Accepted Answer

The answer of Exhibit 23-9  Refer to Exhibit 23-9....

Question 16

Buying low and selling high is often referred to as

Accepted Answer

Buying low and selling high is known as arbitrage. This involves exploiting price differences between two or more markets to make a profit. Arbitrageurs buy an asset in one market where the price is low and then sell it in another market where the price is high. This helps to balance out prices in different markets and can help to reduce inefficiencies in the economy.

Question 17

Exhibit 23-9 
Refer to Exhibit 23-9. Assuming that the firm is maximizing profits, the marginal revenue of the last unit produced equals

Accepted Answer

The answer of Exhibit 23-9 
Refer to Exhibit 23-9. Assuming...

Question 18

Which of the following statements is false ?

Accepted Answer

Charging women less for a car wash is not an act of second-degree price discrimination, but rather an act of third-degree price discrimination based on demographic characteristics. Second-degree price discrimination involves charging different prices for different quantities purchased, while third-degree price discrimination involves charging different prices to different groups of customers based on their demographic characteristics.

Question 19

Exhibit 23-9  Refer to Exhibit 23-9. A single-price monopolist earns a total profit of __________ when it produces the profit maximizing level of output.

Accepted Answer

To find the profit maximizing level of output for a single-price monopolist, we need to find where marginal revenue (MR) equals marginal cost (MC). From the graph, we can see that MR intersects MC at a quantity of 6. At this quantity, the monopolist can charge a price of $20 and produce at an average cost of $14, resulting in a profit of $(20-14) * 6 = $36. Since the monopolist has a fixed cost of $74, the total profit would be $110 (i.e. $36 + $74). Therefore, the answer is B.

Question 20

Exhibit 23-9  Refer to Exhibit 23-9. The reason we know the firm represented in the exhibit is a price searcher and not a price taker is because

Accepted Answer

The fact that the firm's marginal revenue is not constant for all given levels of output indicates that it has some degree of market power, which is a characteristic of a price searcher. In contrast, a price taker must accept the market price and has no market power to influence it. Options A, B, and D are not necessarily indicative of whether a firm is a price searcher or price taker.

Quiz 10: Monopoly

Which of the following is not a condition of price discrimination?

The perfectly competitive firm produces the quantity of output at which , and the single-price monopolist produces the quantity of output at which . The perfectly price-discriminating monopolist is like the __ in this regard.

Which of the following is descriptive of rent-seeking?

Exhibit 23-10 Refer to Exhibit 23-10. The profit-maximizing single-price monopolist will produce which quantity of output?

Exhibit 23-9 Refer to Exhibit 23-9. A single-price monopolist earns a total profit of __________ when it produces and sells 20 units of its good.

Which of the following statements is true?

Rent-seeking is said to be socially wasteful because

When a monopolist can perfectly price discriminate, it follows that

Exhibit 23-9 Refer to Exhibit 23-9. Total fixed costs are equal to.

A single-price monopolist with the same demand and cost conditions as a perfectly price-discriminating monopolist produces output than the perfectly price-discriminating monopolist and resource-allocative efficient.

Exhibit 23-10 Refer to Exhibit 23-10. The profit-maximizing single-price monopolist earns profits equal to what area?

"Rent-seeking" refers to

Exhibit 23-9 Refer to Exhibit 23-9. Assuming that the firm is maximizing profits, the marginal cost of the last unit produced equals

For the perfectly price-discriminating monopolist, its curve is the same as its curve.

Exhibit 23-9 Refer to Exhibit 23-9. A single-price monopolist that seeks to maximize profits will sell units and charge a per-unit price of .

Buying low and selling high is often referred to as

Exhibit 23-9 Refer to Exhibit 23-9. Assuming that the firm is maximizing profits, the marginal revenue of the last unit produced equals

Which of the following statements is false ?

Exhibit 23-9 Refer to Exhibit 23-9. A single-price monopolist earns a total profit of __________ when it produces the profit maximizing level of output.

Exhibit 23-9 Refer to Exhibit 23-9. The reason we know the firm represented in the exhibit is a price searcher and not a price taker is because