Exam 10: Market Power: Monopoly and Monopsony

There were initially two satellite radio providers in the U.S. market, Sirius and XM Radio. The firms merged to form one firm, and the federal government did not challenge the merger. Although the merger created a single seller in this market, the existence of a monopoly may not have much impact on U.S. consumers. Which of the following statements are plausible reasons for the limited impact of the merger?

The firms in a market have decided not to compete with one another and have agreed to limit output and raise price.

The more elastic the demand facing a firm,

Suppose that a firm can produce its output at either of two plants. If profits are maximized, which of the following statements is true?

Under which of the following scenarios is it most likely that monopoly power will be exhibited by firms?

Scenario 10.4: The demand for tickets to the Katy Perry concert (Q) is given as follows: Q = 120,000 - 2,000P The marginal revenue is given as: MR = 60 - .001Q The stadium at which the concert is planned holds 60,000 people. The marginal cost of each additional concert goer is essentially zero up to 60,000 fans, but becomes infinite beyond that point. -Refer to Scenario 10.4. Suppose that the municipal stadium authority imposes a tax of $10 per ticket on the concert promoters. Given the information above, the profit maximizing ticket price would

In a bilateral monopoly, equilibrium price will

Scenario 10.3: The demand curve and marginal revenue curve for red herrings are given as follows: Q = 250 - 5P MR = 50 - 0.4Q -Refer to Scenario 10.3. Compared to a competitive red herring industry, the monopolistic red herring industry

Scenario 10.9: Maui Macadamia Inc. has a monopoly in the macadamia nut industry. The demand curve, marginal revenue and marginal cost curve for macadamia nuts are given as follows: P = 360 - 4Q MR = 360 - 8Q MC = 4Q -Refer to Scenario 10.9. At the profit maximizing level of output, what is the deadweight loss?

Scenario 10.9: Maui Macadamia Inc. has a monopoly in the macadamia nut industry. The demand curve, marginal revenue and marginal cost curve for macadamia nuts are given as follows: P = 360 - 4Q MR = 360 - 8Q MC = 4Q -Refer to Scenario 10.9. What is the maximum amount that Maui Macadamia would be willing to spend in order to maintain its monopoly through rent seeking?

Figure 10.1 The revenue and cost curves in the diagram above are those of a natural monopoly. -Refer to Figure 10.1. If the monopolist is not regulated, the price will be set at ________.

For a monopsony buyer, the marginal expenditure per unit of an input

In some cases, firms that are accused of antitrust violations by federal authorities will plead guilty to the criminal charges in order to avoid facing the same charges in a private or civil trial. Why?

Which of the following is true at the output level where P=MC?

Jeremy has a monopoly on jetski rentals on Peterson Lake. The demand function for jet ski rentals on Peterson Lake is: Q_D = 160 - 2P $\iff$ P = 80 - 0.5 Q_D . Use this information to fill in the table below. If Jeremy's marginal costs are constant at $50, what price should he charge?

Scenario 10.1: Barbara is a producer in a monopoly industry. Her demand curve, total revenue curve, marginal revenue curve and total cost curve are given as follows: Q = 160 - 4P TR = 40Q - 0.25Q² MR = 40 - 0.5Q TC = 4Q MC = 4 -Refer to Scenario 10.1. How much profit will she make?

The Lerner index measures

If the regulatory agency sets a price where AR = AC for a natural monopoly, output will be

The Metro Electric Company produces and distributes electricity to residential customers in the metropolitan area. This monopoly firm is regulated, as are other investor owned electric companies. The company faces the following demand and marginal revenue functions: P = 0.04 - 0.01Q MR = 0.04 - 0.02Q Its marginal cost function is: MC = 0.005 + 0.0075Q, where Q is in millions of kilowatt hours and P is in dollars per kilowatt hour. Find the deadweight loss that would result if this company were allowed to operate as a profit maximizing firm, assuming that P = MC under regulation.

Scenario 10.7: The marginal revenue of green ink pads is given as follows: MR = 2500 - 5Q The marginal cost of green ink pads is 5Q. -Refer to Scenario 10.7. Suppose that the firm chooses to produce 200 ink pads. At this level of output the demand for ink pads is