Part 07 Pure Monopoly

8/19/2019 Part 07 Pure Monopoly

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Pure Monopoly

True or false :


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1) The monopolist's demand curve is more elastic than the industry demand curve.

2) A purely competitive firm is a price maker, but a monopolist is a price taker.

3) If a monopolist discovers that it is operatin at a level of output !here " # A$%, it

!ill continue to operate in the short run.

&) A monopolist !ill not chare the hihest price it can et.

) In a monopoly, price is reater than marinal cost.

() The supply curve for the pure monopolist is upslopin.

) *+uilibrium for the monopolist occurs !here " - -% averae total cost.

/) In a monopoly, price is less than minimum averae total cost.

Essay questions :

• 0hat are the maor characteristics of pure monopoly

• 0hat are the maor barriers to entry that eplain the eistence of monopoly

• In !hat !ays, if any, do the demand schedules for a purely competitive firm

and a pure monopolist differ 0hat sinificance does this have for the price4

output behavior of each

• 5o you aree or disaree !ith the statement that6 7A monopolist al!ays

chares the hihest possible price.8 *plain.

• 9o! does monopoly compare !ith pure competition in terms of price, output,

and efficiency


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Multiple choice:

:1) 0hich is most characteristic of a pure monopolyA) There is a dominant firm in a multifirm industry.

;) The firm produces a ood or a service for !hich there are no close

substitutes.

%) The firm has considerable control over the +uantity of the output

produced, but not over price.

5) *it from the industry is blocked but entry into the industry is

relatively easy.

:2) 0hich phrase !ould be most characteristic of pure monopoly

A) close substitutes

;) efficient advertiser%) price taker

5) sinle seller

:3) 0hich is a barrier to entry

A) patents

;) revenue maimi


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:) At !hich combination of price and marinal revenue :", -) is the price

elasticity of demand reater than 1

A) " @ 1 , - @ /

;) " @ 12 , - @

%) " @ / , - @ 42

5) " @ & , - @ 4&

:/) -arinal revenue is positive !henever6

A) demand is price4elastic.

;) demand is price4inelastic.

%) demand is unitary4elastic.

5) a firm operates at a point on the lo!er half of a linear demand curve.

:B) Cuppose a monopolist produces output !here total revenue is maimi


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:1&) In the fiure belo!, the profit4maimi


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:1/) "ure monopolists6

A) maimi


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Problem sets :

( 1 ) The demand schedule for the product produced by a monopolist is iven inthe table belo!. %omplete the table by computin total revenue and marinal

revenue.

Quantity Total Marginal

demanded Price revenue revenue

1 kd 32 kd KKKKKK

2 3 KKKKKK kd KKKKKK

3 2 KKKKKK KKKKKK

& 2 KKKKKK KKKKKK

22 KKKKKK KKKKKK

( 2 KKKKKK KKKKKK 1 KKKKKK KKKKKK

/ 1 KKKKKK KKKKKK

B 12 KKKKKK KKKKKK

1 1 KKKKKK KKKKKK

11 KKKKKK KKKKKK

12 KKKKKK KKKKKK

13 2 KKKKKK KKKKKK

1& KKKKKK KKKKKK

:a) 0hat do the data in the table indicate about the relationship bet!een total

revenue and marinal revenue *plain.

:b) 0hat do the data in the table indicate about the elasticity of demand

( ) The follo!in data represent costs and revenues for a monopolist 6

uantity

demanded

"rice T%

1 1 &

2 B /

3 / 12

& 1(

( 2

( 2&

& 2/

a) 5etermine the e+uilibrium output and price .

b) 0hat is the level of profits : losses ) received by the monopolist .


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( ! ) In the follo!in table are demand and cost data for a pure

monopolist. %omplete the table by fillin in the columns for total

revenue, marinal revenue, and marinal cost. Ans!er these three+uestions6 :a) 0hat output !ill the monopolist produce :b) 0hat

price !ill the monopolist chare :c) 0hat total profit !ill the

monopolist receive at the profit4maimi

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Part 07 Pure Monopoly