10) The table below gives a monopoly’s demand schedule. Complete the table by calculating the
total revenue and the marginal revenue.
11) The table below gives a monopoly’s demand schedule. Complete the table by calculating the
total revenue and the marginal revenue.
12) The demand schedule for a single-price monopoly is given in the table below. Calculate the
marginal revenue.
13) The above figure represents the demand and marginal revenue curves for Sue’s Seafood, a
seller of fresh fish.
a. Over what range of output is demand elastic?
b. Over what range of output is demand inelastic?
c. What price maximizes total revenue?
d. What is the price elasticity of demand at the revenue maximizing price?
14) A single-price monopoly has the demand and marginal cost schedules given in the above
table. What is the profit-maximizing level of output and price?
15) In the figure below, draw and label the demand and cost curves of a monopoly. Identify the
quantity a single-price monopoly will produce by labeling it Qm and identify the price by
labeling it Pm.
16) Ron’s Hamburger Joint is the only restaurant in town. The above figure represents Ron’s cost,
the market demand, and marginal revenue curves. Ron operates as a single-price monopoly.
a. How many hamburgers does Ron produce?
b. What price does Ron charge for a hamburger?
c. What is Ron’s total revenue?
d. What is his total cost?
e. What is Ron’s economic profit?
15.10 Essay: Monopoly and Competition Compared
1) “A single-price monopoly charges a higher price and produces more output than a perfectly
competitive industry.” Is the previous statement correct or incorrect? Explain your answer.
2) Compare the outcome in a market with a single-price monopoly to that in a perfectly
competitive market.
3) Explain how a single-price monopoly determines its output and price. Compare this process to
how a perfectly competitive firm determines its output and price.
4) Which creates a larger deadweight loss, perfect competition or a single-price monopoly?
5) How do the price, output, consumer surplus, economic profit, and total surplus for a single-
price monopoly compare to that of a competitive industry?
6) “Compared to a competitive market, a single-price monopoly decreases the consumer surplus
and increases the economic profit.” Is the previous statement correct or incorrect? Explain your
answer.
7) Suppose the government breaks up a single-price monopoly and turns it into a perfectly
competitive industry. What will happen to price and the quantity produced? What will happen to
the monopoly’s economic profit and the deadweight loss associated with the monopoly?
8) What is rent seeking? How does rent seeking affect the deadweight loss from monopoly?
9) “Because of rent seeking, a monopoly may end up earning a normal profit.” Is the previous
statement correct or incorrect? Why?
10) The above figure represents a perfectly competitive industry that is taken over by a single
firm and operated as a monopoly.
a. What was the competitive price and quantity?
b. What is the monopoly price and quantity?
c. What area represents consumer surplus under perfect competition?
d. What area represents consumer surplus under monopoly?
e. What area represents the deadweight loss of monopoly?
15.11 Essay: Price Discrimination
1) Define price discrimination. What factors must be present in order for a firm to price
discriminate? Why do firms price discriminate?
2) Give an example of price discrimination.
3) “Price discrimination allows a monopoly to increase its economic profit by capturing part of
the consumer surplus and turning it into economic profit.” Is the previous statement correct or
incorrect? If the statement is correct, why is it important in understanding firms’ behaviors? If it
is incorrect, why is it incorrect?
4) Why do some firms price discriminate? Relate your answer to the common practice of public
colleges charging lower tuition to in-state students and higher tuition to out-of-state students.
5) Compare and contrast the effect of perfect competition to the effect of perfect price
discrimination on:
a. efficiency.
b. consumer surplus.
c. economic profit in the long run.
6) Which produces more output: a perfectly price discriminating monopoly or a single-price
monopoly?
7) A monopolist has the market demand and marginal cost schedules given in the above table. If
the monopoly can perfectly price discriminate, what is the profit-maximizing level of output and
price?