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Exam 8: Monopoly, Oligopoly, and Monopolistic Competition

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Question 1

Multiple Choice

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For all firms,the additional revenue collected from the sale of one additional unit of output is:

A) price.
B) average revenue.
C) marginal profit.
D) marginal revenue.

E) B) and C)
F) None of the above

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D

Question 2

Multiple Choice

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A firm might have a monopoly in a market because:

A) its average total cost function is increasing over the entire relevant range of output.
B) the market is geographically isolated from other sellers.
C) the firm's technology is obsolete.
D) it faces a perfectly elastic demand curve.

E) A) and B)
F) A) and C)

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Question 3

Multiple Choice

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In exchange for a share in the revenues earned on campus,State U has granted CheapFizz the exclusive right to sell soft drinks in the student union and in vending machines on campus.Prior to the deal,three soft drink companies sold beverages on campus;now no other soft drink company is allowed to sell its products on campus or at university events. Refer to the information above.The beneficiaries of this deal are _______.

A firm that enjoys economies of scale is said to have:

If a natural monopoly increases the quantity of output it produces:

Suppose that there are just two firms in a small market. Acme Manufacturing's Total Costs equal $100 + $3 × Quantity. Generic Industries' Total Costs equal $500 + $3 × Quantity. Refer to the information given above.Compare cost functions at the two firms.Which statement is true?

Start up costs are:

Campus Bookstore is the only textbook supplier in the town,a profit-maximizing business.The table below represents the reservation prices for the eight students enrolled in the class for which this book is required. $\begin{array} { c c } \text { Customer } & \begin{array} { c } \text { Reservation Price } \\\text { (\$/book) }\end{array} \\\mathrm { Q } & 60 \\\mathrm { R } & 54 \\\mathrm {~S} & 48 \\\mathrm {~T} & 42 \\\mathrm { U } & 36 \\\mathrm {~V} & 30 \\\mathrm {~W} & 24 \\\mathrm { X } & 18\end{array}$ Assume that the marginal and average total cost for each book is $12. Refer to the information above.If the bookstore is selling the socially efficient number of books,how many will it sell?

Campus Bookstore is the only textbook supplier in the town,a profit-maximizing business.The table below represents the reservation prices for the eight students enrolled in the class for which this book is required. $\begin{array} { c c } \text { Customer } & \begin{array} { c } \text { Reservation Price } \\\text { (\$/book) }\end{array} \\\mathrm { Q } & 60 \\\mathrm { R } & 54 \\\mathrm {~S} & 48 \\\mathrm {~T} & 42 \\\mathrm { U } & 36 \\\mathrm {~V} & 30 \\\mathrm {~W} & 24 \\\mathrm { X } & 18\end{array}$ Assume that the marginal and average total cost for each book is $12. Refer to the information above.How much should the bookstore charge for this book if it must charge a single price to all customers?

The hurdle method of price discrimination is _____ efficient;it is ______ efficient than charging a single price to all buyers.

This graph illustrates the demand faced by a firm. Refer to the figure above.The firm will charge a price of $8 only if:

Campus Bookstore is the only textbook supplier in the town,a profit-maximizing business.The table below represents the reservation prices for the eight students enrolled in the class for which this book is required. $\begin{array} { c c } \text { Customer } & \begin{array} { c } \text { Reservation Price } \\\text { (\$/book) }\end{array} \\\mathrm { Q } & 60 \\\mathrm { R } & 54 \\\mathrm {~S} & 48 \\\mathrm {~T} & 42 \\\mathrm { U } & 36 \\\mathrm {~V} & 30 \\\mathrm {~W} & 24 \\\mathrm { X } & 18\end{array}$ Assume that the marginal and average total cost for each book is $12. Refer to the information above.If the bookstore can charge two different prices for this book,the list price for the book will be _____ and the discounted price for the book will be ____.

A firm that doubles its use of inputs to produce ______ output has constant returns to scale.

Consider an industry with two firms producing similar products. Mega Corp's total costs are TC = $5,000 + 100 × Quantity. Big Inc's total costs are TC = $4,000 + 200 × Quantity. Refer to the information given above.If each firm starts out producing 15 units you would expect that:

Campus Bookstore is the only textbook supplier in the town,a profit-maximizing business.The table below represents the reservation prices for the eight students enrolled in the class for which this book is required. $\begin{array} { c c } \text { Customer } & \begin{array} { c } \text { Reservation Price } \\\text { (\$/book) }\end{array} \\\mathrm { Q } & 60 \\\mathrm { R } & 54 \\\mathrm {~S} & 48 \\\mathrm {~T} & 42 \\\mathrm { U } & 36 \\\mathrm {~V} & 30 \\\mathrm {~W} & 24 \\\mathrm { X } & 18\end{array}$ Assume that the marginal and average total cost for each book is $12. If the bookstore can charge two different prices for this book,the economic profit for the bookstore is ______.

Suppose a single-price monopolist is considering becoming a price discriminating monopolist.If the firm does begin to price discriminate,it can expect to:

Which of the following firms is most likely to be a monopolist?

Consider an industry with two firms producing similar products. Mega Corp's total costs are TC = $5,000 + 100 × Quantity. Big Inc's total costs are TC = $4,000 + 200 × Quantity. Refer to the information given above.If each firm produces 10 units,Mega Corp will have total costs of _____ and Big Inc will have total costs of _____.

Once a firm has determined the quantity of output it wishes to sell,the price it can charge is determined by:

If the demand curve facing the monopolist is Price = 70 - 14 × Q,then the slope of its marginal revenue curve is: