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Exam 8: Monopoly Markets

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Question 91

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Figure 8.9 Figure 8.9 shows the demand and cost curves for a monopolist. -Refer to Figure 8.9.The difference between the monopoly's price and the perfectly competitive industry's price is:

A) The monopoly's price is higher by $9.50.
B) The monopoly's price is higher by $13.
C) The monopoly's price is higher by $3.50.
D) The monopoly's price is higher by $21.

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Question 92

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Although some economists believe network externalities are important barriers to entry,other economists disagree because

A) they believe that the dominant positions of firms that are supposedly due to network externalities are to a greater extent the result of the efficiency of firms in offering products that satisfy consumer preferences.
B) they believe that most examples of network externalities are really barriers to entry caused by the control of a key resource.
C) network externalities are really negative externalities.
D) they believe that the dominant positions of firms that are supposedly due to network externalities are to a greater extent the result of economies of scale.

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Question 93

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A patent or copyright is a barrier to entry based on

A natural monopoly is most likely to occur in which of the following industries?

a.What is the difference between a horizontal merger and a vertical merger? b.Give an example of each type of merger. c.Could a horizontal merger be welfare improving? __________________________________________________________________________________________________________________________________________________________________________________________

A natural monopoly is characterised by large fixed costs relative to variable costs.

Figure 8.9 Figure 8.9 shows the demand and cost curves for a monopolist. -Refer to Figure 8.9.At the profit-maximising quantity,the difference between the monopoly's price and the marginal cost of production is -.

A profit-maximising monopoly's price is

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

A monopoly is a firm that is the only seller of a good or service that does not have a close substitute.

To have a monopoly in an industry there must be

A monopolist's demand curve is the same as the marginal revenue curve for the product.

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?

Suppose that a perfectly competitive industry becomes a monopoly.What effect will this have on consumer surplus,producer surplus,and deadweight loss? __________________________________________________________________________________________________________________________________________________________________________________________

Explain why the monopolist has no supply curve? __________________________________________________________________________________________________________________________________________________________________________________________

Wendell can sell five motor homes per week at a price of $22 000.If he lowers the price of motor homes to $20 000 per week,he will sell six motor homes.The marginal revenue of the sixth motor home is -.

Compared to perfect competition,the consumer surplus in a monopoly

A monopoly firm's demand curve

There are several types of barriers to entry that can create a monopoly.The barrier to entry that is the result of government action is -.

Table 8.2 $\begin{array} { | c | c | c | } \hline \text { Quantity per } & \text { Price per } & \text { Total Cost } \\\text { Day (cases) } & \text { Case } \\\hline 1 &\$16& \$ 7.00 \\\hline 2 & 15 & 9.50 \\\hline 3 & 14 & 11.00 \\\hline 4 & 13 & 12.00 \\\hline 5 & 12 & 14.50 \\\hline 6 & 11 & 17.50 \\\hline 7 & 10 & 21.00 \\\hline 8 & 9 & 25.00 \\\hline 9 & 8 & 30.00 \\\hline 10 & 7 & 35.50 \\\hline\end{array}$ The government of a small developing country has granted exclusive rights to Linden Enterprises for the production of plastic syringes. Table 8.2 shows the cost and demand data for this government-protected monopolist. -Refer to Table 8.2.What is the profit-maximising quantity and price for the monopolist?