Advanced Economics - Practical - MONOPOLY
Advanced Economics (IBMEC208R1)
Hogeschool Rotterdam
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1 of the following is not a characteristic of monopoly?
No close product substitutes Barriers to entry
Price taker Advertising
2 Johnson Mousetrap Company is extremely efficient in building mousetraps. In fact, they have a secret process that allows them to sell it below the cost of any other mousetrap on the market. Soon all other competitors are driven out of business. What best explains its monopoly?
a patent economies of scale low pricing a license
3 characteristic of monopoly is that a monopoly is guaranteed a profit.
True False
4.
Quantity
Demanded
Price Marginal Cost Marginal Revenue
0 $
1 $24 $30 $
2 $23 $10 $
3 $22 $6 $
4 $21 $3 $
5 $20 $1 $
6 $19 $10 $
7 $18 $12 $
8 $17 $18 $
9 $16 $20 $
10 $15 $40 $
The table above represents information that helps a monopoly owner determine the appropriate price and quantity supplied for the market. If marginal costs increase by $14 at every level of output from the amounts reported in the table, and demand remained unchanged, what price and quantity would be most profitable for the monopoly?
$18, 7 units Shut Down $21, 4 units $15, 10 units
- If a monopoly has expenditures in the form of lobbying, legal fees, etc. to obtain or maintain a monopoly despite not leading to an increase in output, this is called
simultaneous consumption x-inefficiency
rent seeking socially optimal pricing
- You have been hired by an economic think-tank to analyze a pure monopoly that exists in your city. Your statistics show that the monopoly currently charges $23 per unit it sells and it sells 100 units per day. At this amount of production, the monopoly experiences average costs of $11, marginal costs of $6, and marginal revenue of $6. Your report on the economic effects of this monopoly should say that
the monopoly has neither productive nor allocative efficiency
the monopoly is economically efficient
the monopoly has allocative efficiency
the monopoly has productive efficiency
- All forms of price discrimination are illegal in the United States.
True False
- You have recently purchased the local movie theater. You need to determine the prices to charge during the times that your four primary groups of customers (senior citizens, college students, young families, and executives) watch movies. You are considering prices of $10, $8, $6, and $4. Senior citizens in the area have a price elasticity of demand for movie tickets of 3; college students have an elasticity of demand of 0; young families' elasticity of demand equals 3; and, executives have an elasticity of demand of 1. Based upon this information, which group should be charged the price of $10?
Senior citizens Young families Executives College students
- When government regulates a monopoly by setting price at the intersection of the average cost and demand curves, this is known as the
x-inefficiency socially optimal price
natural monopoly price fair-return price
Advanced Economics - Practical - MONOPOLY
Vak: Advanced Economics (IBMEC208R1)
Universiteit: Hogeschool Rotterdam
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