Week 7 - Monopoly

monopoly has two key features, which are

• barriers to entry and no close substitutes.

• franchises and barriers to entry.

• barriers to entry and close substitutes.

• close substitutes and no barriers to entry.

An example of a monopoly is

• a big city restaurant.

• the stock market.

• the only veterinarian in an isolated farm community.

• PPUM

Which of the following is a characteristic of a single-price monopoly?

• The firm is a price taker.

• Demand is perfectly elastic.

• There are many close substitutes for the firm's product.

• The market price exceeds marginal revenue.

A single-price monopoly is characterized by a marginal revenue curve that is

• upward sloping.

• downward sloping.

• horizontal.

• vertical.

In the monopoly, the firm's marginal revenue curve is ________, while in a perfectly competitive market, each firm's marginal revenue curve is ________.

• downward sloping; horizontal

• horizontal; downward sloping

• upward sloping; horizontal

• downward sloping; upward sloping

Christy's Haircuts, the sole supplier of haircuts in a small town, faces the demand schedule shown in the table above. What is Christy's marginal revenue from the 25th haircut?

• zero

• $5

• $7

• $5.50

For the unregulated, single-price monopoly shown in the figure above, when its profit is maximized, output will be

• 4 units per year and the price will be $6.

• 4 units per year and the price will be $4.

• 6 units per year and the price will be $4.

• None of the above answers is correct.

Sue's Surfboards is the sole renter of surfboards on Big Wave Island. Sues demand and marginal revenue curves are illustrated in the figure above. Sue's Surfboards currently rents 15 surfboards an hour. Sue's total revenue from the 15 surfboards is

• $300

• $220

• $150

• $100

In the above figure, what price will a single-price monopoly set?

• P1

• P2

• P3

• P4

• P5

Gene's Car Wash is a natural monopoly. To wash 100 cars a week, if Gene is unregulated, he would charge a price of $10. Gene's long-run average cost for washing 100 cars is $8, his average variable cost is $6, and his marginal cost is constant at $4. If Gene was regulated using a marginal cost pricing rule, the price he would be allowed to charge to wash 100 cars is

• $10

• $8

• $6

• $4