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Exam 8: Monopoly Markets

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Question 41

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Figure 8.8 Figure 8.8 reflects the cost and revenue structure for a monopoly that has been in business for a very long time. -Refer to Figure 8.8.Use the figure above to answer the following questions. a.Identify the curves labelled A and B.Identify the curve which contains both point Y and point Z.Identify the curve which contains both point V and point W. b.What is the profit-maximising quantity and what price will the monopolist charge? c.What area represents total revenue at the profit-maximising output level? d.What area represents total cost at the profit-maximising output level? e.What area represents profit? f.What is the profit per unit (average profit)at the profit-maximising output level? g.If this industry was organised as a perfectly competitive industry,what would be the profit-maximising price and quantity? h.What area represents the deadweight loss as a result of a monopoly? __________________________________________________________________________________________________________________________________________________________________________________________

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a.A = Demand curve; B = Marginal revenue...

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Question 42

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Figure 8.2 Figure 8.2 above shows the demand and cost curves facing a monopolist. -Refer to Figure 8.2.What is the firm's profit-maximising price?

A) P₁
B) P₂
C) P₃
D) P₄

E) A) and D)
F) A) and C)

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Question 43

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What is a monopoly? Can a firm be a monopoly if close substitutes for its product exists? __________________________________________________________________________________________________________________________________________________________________________________________

A product's price approaches its marginal cost as market concentration increases.

Explain whether a monopoly that maximises profit will also be maximising revenue and production. __________________________________________________________________________________________________________________________________________________________________________________________

Some economists argue that Microsoft became a monopoly in the market for computer software by developing MS-DOS,an operating system used for the first IBM personal computers.The more people who used MS-DOS-based programs,the greater the usefulness of using a computer with an MS-DOS operating system.The explanation for Microsoft's monopoly is

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

Unlike a perfect competitor,a monopolist faces the market demand curve.

Figure 8.6 Figure 8.6 shows the cost and demand curves for a monopolist. -Refer to Figure 8.6.What is the monopolist's total cost?

If a monopolist's price is $50 at 63 units of output,and marginal revenue equals marginal cost,and average total cost equals $43,then what is the firm's total profit?

Equilibrium in a perfectly competitive market results in the greatest amount of economic surplus,or total benefit to society,from the production of a good.Why,then,did Joseph Schumpeter argue that an economy may benefit more from firms that have market power than from firms that are perfectly competitive? __________________________________________________________________________________________________________________________________________________________________________________________

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

A monopolist currently sells 18 units of a good.If marginal revenue on the last unit sold is $117,then the price of the good must be less than $117.

Figure 8.3 Figure 8.3 above shows the demand and cost curves facing a monopolist. -Refer to Figure 8.3.Suppose the monopolist represented in the diagram above produces positive output.The price charged at the profit-maximising/loss-minimising output level is -.

Figure 8.9 Figure 8.9 shows the demand and cost curves for a monopolist. -Refer to Figure 8.9.The economically efficient output level is

If the market for a product begins as perfectly competitive and then becomes a monopoly,there will be a reduction in economic efficiency and a deadweight loss.

Figure 8.2 Figure 8.2 above shows the demand and cost curves facing a monopolist. -Refer to Figure 8.2.To maximise profit,the firm will produce -.

What is a network externality?

One reason patent protection is vitally important to pharmaceutical firms is:

If a restaurant was a natural monopoly,its