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Exam 15: Monopoly

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Question 121

True/False

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By selling hardcover books to die-hard fans and paperback books to less enthusiastic readers, the publisher is able to price discriminate and raise its profits.

A) True
B) False

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Question 122

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Figure 15-8 ​ ​ -Refer to Figure 15-8. What is the socially efficient price and quantity for this natural monopolist?

A) Q and A
B) R and A
C) R and B
D) S and C

E) All of the above
F) A) and C)

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Question 123

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Government intervention always reduces monopoly deadweight loss.

The profit that a monopolist earns represents a loss to society that is measured through deadweight loss.

Scenario 15-2 Vincent operates a scenic tour business in Boston. He has one bus that can fit 50 people per tour and each tour lasts 2 hours. His total cost of operating one tour is fixed at $450. Vincent's cost is not reduced if he runs a tour with a partially full bus. While his cost is the same for all tours, Vincent charges each passenger his/her willingness to pay: adults $18 per trip, children $10 per trip, and senior citizens $12 per trip. At those rates, on a typical day Vincent's demand is: ​ ​ $\begin{array} { | c | c | c | } \hline \text { Passenger Type } & \begin{array} { c } \text { Willingness to Pay } \\\text { (Dollars per unit) }\end{array} & \begin{array} { c } \text { Quantity Demanded } \\\text { (Units) }\end{array} \\\hline \text { Adult } & 18 & 70 \\\hline \text { Children } & 10 & 25 \\\hline \text { Senior Citizens } & 12 & 55 \\\hline\end{array}$ Assume that Vincent's customers are always available for the tour; therefore, he can fill his bus for each tour as long as there is sufficient total demand for the day. ​ -Refer to Scenario 15-2. What is Vincent's profit on a typical day?

Suppose a monopolist is able to charge each customer a price equal to that customer's willingness-to-pay for the product. Then the monopolist is engaging in

In a monopoly market, the socially efficient quantity of output is typically higher than the profit-maximizing quantity of output for the monopolist.

Goods that do not have close substitutes have downward-sloping demand curves.

A monopolist's profits with price discrimination will be

Price discrimination is a rational strategy for a profit-maximizing monopolist when

Comparing firms in perfectly competitive markets to monopoly firms, which can earn economic profits in the long run?