Chapter 7 Monopoly and Price Discrimination

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11) Which of the following firms rely on patents the most as the barrier to keep other firms from entering the industry?

A) pharmaceutical firms

B) textbook publishers

C) law firms

D) wine makers

12) A monopoly may arise due to

A) a patent.

B) network externalities.

C) large economies of scale.

D) all of the above

13) ________ is a monopoly that exists in an industry where the large economies of scale acts as its barrier to entry.

A) A natural monopoly

B) A monopolistic competitor

C) A regulated monopoly

D) A price discriminator

14) A network externality occurs when

A) a firm has a patent.

B) the value of a product to a consumer increase with the number of other consumers who use it.

C) a firm has large economies of scale.

D) the value of a product to a consumer requires another product.

15) Facebook is a social networking Web site that is used by a growing number of individuals. Because of its popularity, it is now more difficult for new networking Web sites to enter and compete with Facebook. Facebook enjoys ________ as a barrier for others to enter the market.

A) a network externality

B) price discrimination

C) a negative externality

D) economies of scale

16) The demand curve that a monopolist faces is

A) the market demand curve.

B) the same as the demand curve that faces a perfectly competitive firm.

C) not affected by changes in the prices of other goods.

D) generally flatter than the demand curve that faces a perfectly competitive firm.

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Table 7.1

17) Refer to Table 7.1, which shows the relationship between the price that Gladys charges for a product and the quantity of that product that Gladys sells. The total revenue that Gladys receives from selling four units of output is

A) $4.

B) $6.

C) $10.

D) $24.

18) Refer to Table 7.1, which shows the relationship between the price that Gladys charges for a product and the quantity of that product that Gladys sells. The marginal revenue that Gladys receives from selling the fourth unit of output is

A) $3.

B) $6.

C) $10.

D) $24.

19) Refer to Table 7.1, which shows the relationship between the price that Gladys charges for a product and the quantity of that product that Gladys sells. The marginal revenue that Gladys receives from selling the fifth unit of output is

A) $5, because that is the price per unit of output that Gladys receives.

B) $5, because that is the quantity that Gladys sells.

C) $25, because Gladys sells five unit of output at a price of $5.

D) $1, because Gladys earns $1 more in revenues by increasing her output to five units from four units.

20) Refer to Table 7.1, which shows the relationship between the price that Gladys charges for a product and the quantity of that product that Gladys sells. Gladys’ marginal revenue becomes negative starting with the production of which unit?

A) 2

B) 4

C) 6

D) None of the above; marginal revenue is always positive or zero.

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