Monopoly

The figure above shows the demand and marginal revenue curves facing Sue's Surfboards, the sole renter of surfboards on Big Wave Island. If Sue is renting 25 surfboards an hour so that the marginal revenue is negative, then Sue's Surfboards

• can increase its profit by increasing the number of rentals.

• must face an inelastic demand for surfboard rentals.

• must face a unit elastic demand for surfboard rentals.

• must face an elastic demand for surfboard rentals.

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

Consider the market for cable television in the figure above. This graph depicts a natural monopoly because the

• marginal cost curve is constant.

• demand curve is downward sloping.

• average cost curve is declining as it crosses the demand curve.

• marginal revenue curve is downward sloping.

T/F Monopolies are the price setters

• False

• True

The purpose of Anti-Trust laws is to? Check all that Apply

• Regulate the prices of a market

• Encourage big companies to merge more often

• To promote competition in a market by breaking up mergers

• Give companies the right to operate without government interference

• All of the above

If I own a food truck in New York City and there is a limited amount of licenses available and I own all of them and flood the market with my spicy breakfast burritos, Do I have a Monopoly over the Food Truck Industry?

• True

• False

A _______________is a firm that is the sole seller in its market

What is a natural monopoly?

• A market where a single firm can supply the entire market at a lower cost than two or more firms

• A market where government regulations prevent competition

• A market dominated by a single buyer

• A market where firms collude to set prices

Which of the following is a characteristic of a monopoly?

• Price taker

• Many competitors

• Unique product

• Free entry and exit

What is the main goal of antitrust laws?

• To promote competition

• To protect monopolies

• To increase prices

• To reduce consumer choice