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ECON 2106 Chapter 14
SI date: Thursday 10/28
Next exam: 11/16
Characteristics of MONOPOLIES:
1. What does it mean to be a monopolist?
2. Is there a barrier to entry?
3. How much control do they have over resources?
4. What kind of superiority do they have?
5. Do they make economic profits in the long run? Why? (p358)
What do they mean that a monopoly is a “net loss for the economy”? (p370)
They have ________________ returns to scale which means:
What/where is the monopolist’s profit-maximizing quantity of output?
What are some things that you notice are different between the perfect competition graph and the
monopoly graph?
We don’t have time for these topics, but be sure to know details about price discrimination, quantity and price
effects, natural monopoly, two things can the government do to prevent monopolies ect. This is not a guarantee
of what’s on the test. Remember, I don’t make it!
Figure: Monopoly Model
1. (Figure: Monopoly Model) The profit-maximizing price is the one indicated by:
A) Z.
B) P.
C) E.
D) F.
Figure: A Profit-Maximizing Monopoly Firm
2. (Figure: A Profit-Maximizing Monopoly Firm) This profit-maximizing monopoly firm's
profit per unit is:
A) $5.
B) $13.
C) $14.
D) $20.
3. (Figure: A Profit-Maximizing Monopoly Firm) This profit-maximizing monopoly firm's
cost per unit at its profit-maximizing quantity is:
A) $8.
B) $15.
C) $16.
D) $18.
4. A firm that experiences economies of scale:
A) at lower levels of output and then encounters diseconomies of scale at higher levels
of output is a natural monopoly.
B) over the entire range of outputs demanded is called a natural monopoly.
C) at any particular level of output is called a natural monopoly.
D) has a continually rising long-run average cost curve.
5. Suppose a monopoly can separate its customers into two groups. If the monopoly
practices price discrimination, it will charge the lower price to the group with:
A) the higher price elasticity of demand.
B) the lower price elasticity of demand.
C) the fewer close substitutes.
D) The answer cannot be determined with the information given.
6. Network externalities exist when the value to the consumer of a good rises as:
A) the number of people who use the good increases.
B) the number of people who use the good decreases.
C) the number of people who use the good remains constant.
D) technology improves.
Homework!! Work on this problem for our next SI session on Tuesday 11/02!
7. Mr. Porter sells 10 bottles of champagne per week at a price of $50 per bottle. He can
sell 11 bottles per week if he lowers the price to $45 per bottle. The quantity and the
price effects on total revenue would be, respectively,: (REFER TO PAGE 363-366)
A) an increase of $450 and a decrease of $500.
B) an increase of $495 and a decrease of $550.
C) an increase of $45 and a decrease of $5.
D) an increase of $45 and a decrease of $50.
Tuesday 11/02 is a review of just chapters 12-14!
Be sure to have read and taken notes on those!
Key
1. B
2. B
3. C
4. B
5. A
6. A