Exam 9: Monopoly Markets

The only firms that do not have market power are

Most pharmaceutical firms selling prescription drugs continue to earn economic profits long after the patents on the prescription drugs expire because they have established a strong foothold in the market.

A virtuous cycle refers to the development of new products that follows when a monopoly earns economic profits.

Figure 9-8 Figure 9-8 reflects the cost and revenue structure for a monopoly that has been in business for a very long time. -Refer to Figure 9-8.Use the figure above to answer the following questions. a.Identify the curves labeled 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?

A price-discriminating firm charges the highest price to

When the government wants to give an exclusive right to one firm to produce a product,it

Research has shown that most economic profits from selling a prescription drug are eliminated 20 years after the drug is first offered for sale.The main reason for the elimination of profits is

Table 9-3 Julie plans to start a pet-sitting service.She surveyed her neighbourhood to determine the demand for this service.Assume that each person surveyed demands only one hour of pet sitting services per period.Table 9-3 above shows a portion of her survey results. -Refer to Table 9-3.Suppose Julie's marginal cost of providing this service is constant at $7 and she charges each customer according to his or her willingness to pay instead of a uniform price of $7.Which of the following statements is true?

A natural monopoly is characterised by large fixed costs relative to variable costs.

Figure 9-13 Figure 9-13 shows the market demand and cost curves facing a natural monopoly. -Refer to figure 9-13.In the absence of any government regulation,the profit-maximising owners of this firm will produce ________ units and charge a price of ________.

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

Which of the following products allows the seller to identify different groups of consumers (segment the market)and practice price discrimination?

Although some economists believe network externalities are important barriers to entry,other economists disagree because

A monopoly is a firm that is the only seller of a good or service that does not have a close substitute.

Governments grant patents to encourage

Figure 9-4 Figure 9-4 shows the demand and cost curves for a monopolist. -Refer to Figure 9-4.What is the amount of the monopoly's profit?

Which of the following statements is consistent with the views of Joseph Schumpeter?

The airline industry routinely engages in price discrimination across time.

One reason why McDonald's charges a single price for its products is that it is difficult and costly for the company to determine each individual consumer's willingness to pay.

A price maker is