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Exam 10: Monopoly and Antitrust Policy

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Question 101

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To maximize profit a monopolist will produce where

A) marginal revenue is equal to marginal cost.
B) demand for its product is unit-elastic.
C) revenue per unit is maximized.
D) average total cost is equal to average revenue.

E) All of the above
F) B) and D)

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Question 102

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What is a network externality?

A) It refers to having a network of suppliers and buyers for a good or service.
B) It refers to lobbying to form a public enterprise.
C) It refers to a situation in which a product's usefulness increases with the number of people using it.
D) It refers to a product that requires connection to a network for it to be useful.

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

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Question 103

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Economic efficiency requires that a natural monopoly's price be

Governments grant patents to

The 10-year protection period from generic competition for drug manufacturers is a form of

When the government makes a firm the exclusive legal provider of a good or service,it grants the firm

Few firms in the United States are monopolies because

If a monopolist's marginal revenue is $15 per unit and its marginal cost is $25,then to maximize profit the firm should decrease output.

"Being the only seller in the market,the monopolist can choose any price and quantity it desires." Evaluate this statement: is it true or false? Explain your answer.

The United States Post Office

In the short-run,even if a monopoly's total revenue does not cover its variable costs,it should continue to produce because ultimately in the long run,the monopoly will start earning profits.

Producers in perfect competition receive a smaller producer surplus than a monopoly producer.

If you own the only bookstore in a small town,do you have a monopoly?

Figure 10-4 Figure 10-4 shows the demand and cost curves for a monopolist. -Refer to Figure 10-4.What is the amount of the monopoly's total revenue?

Figure 10-2 Figure 10-2 above shows the demand and cost curves facing a monopolist. -Refer to Figure 10-2.If the firm's average total cost curve is ATC₂,the firm will

Market power in the United States causes a huge loss of economic efficiency.

Figure 10-12 Figure 10-12 shows the cost and demand curves for a monopolist. -Refer to Figure 10-12.If the firm maximizes its profits,the deadweight loss to society due to this monopoly is equal to the area

Figure 10-14 -Refer to Figure 10-14.From the monopoly graph above,identify the following: a.The profit maximizing price b.The profit maximizing quantity c.The area representing deadweight loss d.The area representing the transfer of consumer surplus to the monopoly

The Aluminum Company of America (Alcoa) had a monopoly until the 1940s because

Table 10-4 $\begin{array} { | c | c | c | } \hline \begin{array} { c } \text { Price per } \\\text { Dose }\end{array} & \begin{array} { c } \text { Quantity } \\\text { Demanded } \\\text { (dose) }\end{array} & \begin{array} { c } \text { Total Cost of } \\\text { Production } \\\text { (dollars) }\end{array} \\\hline \$ 80 & 0 & \$ 80 \\\hline 72 & 1 & 82 \\\hline 64 & 2 & 88 \\\hline 56 & 3 & 100 \\\hline 48 & 4 & 124 \\\hline 40 & 5 & 164 \\\hline 32 & 6 & 208 \\\hline 24 & 7 & 268 \\\hline 16 & 8 & 340 \\\hline\end{array}$ Shakti Inc.has been granted a patent for its Arnica toothache balm. Table 10-4 shows the demand and the total cost schedule for the firm. -Refer to Table 10-4.What is the economically efficient output level?