Question 1

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 2

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?

Accepted Answer

The answer of Microsoft hires marketing and sales specialists to...

Question 3

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

Accepted Answer

To maximize profit, a firm produces where marginal cost (MC) equals marginal revenue (MR). In typical diagrams, this occurs at Q2.

Question 4

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?

Accepted Answer

The answer of U.S. antitrust laws are designed to prohibit...

Question 5

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

Accepted Answer

The answer of What is a public franchise? Are all...

Question 6

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

Accepted Answer

The answer of If a monopolist's price is $50 per...

Question 7

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 does not deal with exclusive rights to produce a product. A public franchise is a government-issued contract that allows a company or individual to provide a specific service or sell a particular product in a certain area.

Question 8

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 9

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 positive feedback loop that occurs when one successful action or event leads to subsequent successes, such as improved technology or increased research and development, leading to even more profits. This can occur in any industry, not just monopolies earning economic profits.

Question 10

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

Accepted Answer

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

Question 11

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 of the sixth performance can be calculated by subtracting the ticket revenue of the previous five performances from the ticket revenue of all six performances.

Marginal Revenue = Total revenue from all six performances - Revenue from first five performances

Marginal Revenue = $288,000 - $250,000 
Marginal Revenue = $38,000

Therefore, the correct answer is B. The cost of staging the sixth performance is not given in the question, so we cannot determine whether it is higher or lower than the cost of staging the previous five performances. Additionally, the question does not provide information on the number of tickets sold or the profit from each performance, so we cannot determine whether the company will be making a loss on the sixth performance.

Question 12

Provide two examples of a government barrier to entry?

Accepted Answer

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

Question 13

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

Accepted Answer

The answer of How does a network externality serve as...

Question 14

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

Accepted Answer

The answer of Because a monopoly's demand curve is the...

Question 15

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

Accepted Answer

A monopolist's profit maximizing output is found where marginal revenue equals marginal cost. The corresponding price is determined by locating that output on the market demand curve. This choice yields the highest possible profit for the monopolist.

Question 16

The demand curve for the monopoly's product is

Accepted Answer

In a monopoly, the firm is the sole producer of the product, so the demand curve for the monopoly's product is the same as the market demand curve.

Question 17

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 18

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

Accepted Answer

The answer of What gives rise to a natural monopoly?...

Question 19

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 20

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

Accepted Answer

Since marginal revenue is equal to marginal cost, the monopolist is already producing the optimal quantity of output to maximize profits. Any increase or decrease in output would result in lower profits.

Quiz 15: Monopoly and Antitrust Policy

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

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?

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

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?

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

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

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

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

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

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

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?

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

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

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

The demand curve for the 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

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

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

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