ECON 1050 Chapter 13: Economics-1 (1) (dragged) 1

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salmoneagle674

17 Sep 2016

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For a monopoly firm to determine the quantity it sells, it must choose the appropriate price. Many firms price discriminate, but not all of them are monopoly firms. A monopoly is a price setter, not a price taker like a firm in perfect competition. The reason is that the demand for the monopoly"s output is the market demand. To sell a larger output, a monopoly must set a lower price. Total revenue, tr, is the price, p, multiplied by the quantity sold, q. Marginal revenue, mr, is the change in total revenue that results from a one-unit increase in the q sold. For a single-price monopoly, marginal revenue is less than price at each level of output. Figure 13. 2 illustrates the relationship between the price and marginal revenue and derives the marginal revenue curve. It loses of total revenue of the 2 units it was was selling at each.

Related Questions

Select the correct answer:

A (legal; natural) monopoly exists when one firm can meet the entire market demand at a lower average total cost than two or more firms could.

A monopoly that is able to sell different units of a good or service for different prices is a (natural-price; price-discriminating) monopoly.

The act of obtaining special treatment by the government to create an economic profit is called (government surplus; rent seeking).

Regulated firms have an incentive to inflate their costs under (rate of return; price cap) regulation.

The U.S. Postal Service has a (natural; legal) monopoly on first class mail delivery.

A (single-price; price discriminating) monopoly maximizes profit by producing the quantity at which marginal revenue equals marginal cost and then charging the maximum price that consumers are willing to pay for that quantity.

The key idea behind price discrimination is to convert (consumer surplus; producer surplus) into economic profit.

1.
When a monopoly charges a higher price, fewer of its goods aresold.
A) True
B) False
2.
A firm can price discriminate if it operates in a competitivemarket.
A) True
B) False
3.
Declining average total cost with increased production is one ofthe defining characteristics of a natural monopoly.
A) True
B) False
4.
In a natural monopoly,if the government requires marginal costpricing, it must pay the monopolist a subsidy.
A) True
B) False
5.
A discriminating monopolist will produce a larger output than anon-discriminating monopolist.
A) True
B) False
6.
By selling hardcover books to die-hard fans and paperback books toless enthusiastic readers, the publisher is able to pricediscriminate and raise its profit.
A) True
B) False
7.
For a monopoly, marginal revenue is often greater than the pricethey charge for their good.
A) True
B) False
8.
A monopoly that engages in perfect price discrimination produces asmuch as a firm in perfect competition
A) True
B) False
9.
The monopolist is a price maker
A) True
B) False
10.
A monopolist will always pick a price in the elastic region of thedemand curve
A) True
B) False

burgundyhare679

Which of the following is a characteristic shared by a perfectly competitive firm and a monopoly?

A) Each sets a price for its product that will maximize its revenue.

B) Each must lower its price to sell more output.

C) Each maximizes profits by producing a quantity for which price equals marginal cost.

D) Each maximizes profits by producing a quantity for which marginal revenue equals marginal cost.

fuchsiahound634

ECON 1050 Chapter 13: Economics-1 (1) (dragged) 1

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