- Scholastic is the exclusive publisher of the Harry Potter series in the United States because it owns the copyright to the books.
- The government gives a single firm the exclusive right to produce Harry Potter books.
- It is less expensive for one publisher to print Harry Potter books than for many producers to do so.
- Scholastic owns a key resource used to produce Harry Potter books.
- The Aluminum Company of America (Alcoa), the sole producer of aluminum in the United States until the 1940s, controlled almost all sources of bauxite in the United States.
a.) The government gives Alcoa the exclusive right to produce aluminum.
b. )It is less expensive for one producer to manufacture aluminum than for many producers to do so.
c. )Alcoa has control over a key resource.
Use the following information to answer questions 3-4.
The graph below shows the market demand for computers in a small country. To develop a domestic computer industry, the government prohibits imports of computers and gives a single local firm the sole right to produce and sell computers (that is, it is a legal monopoly). The demand curve shows the local demand for computers. The cost curves show the marginal cost (MC) and average total cost (ATC) of the single producer. The graph also shows the marginal revenue (MR) curve faced by this firm.
- How many computers will the monopolist sell to maximize profit?
- At what price will the monopolist sell each computer?
Use the following information to answer questions 5-7.
High Wire Cinema is the only movie theater in a small town. The following graph shows the market demand, marginal revenue, and cost curves of this single-price monopoly.
- If the monopolist produces at the profit maximizing rate of output, what will be the total revenue?
- If the monopolist produces at the profit maximizing rate of output, what will be the total cost?
- If this monopolist wishes to maximize profits, then what price should she charge?
Use the following information to answer questions 8-10.
Toes owns the only record store in town and has the following demand, MR, and MC curves.
- If the record industry were perfectly competitive, the total welfare in town would be represented by ______.
a.) Area A + Area B + Area C + Area D + Area E
b.) Area A + Area B + Area D + Area E
c.) Area C + Area E
d.) Area A + Area B + Area C
- If B. Toes acts as a single-price monopolist, it will sell ____ records at a price of ___ per record.
- If B. Toes is able to use perfect price discrimination, consumer surplus equals ____, and producer surplus equals ______.
Choose one answer.
a. Area A; Area B + Area C + Area D + Area E
b. Area A + Area B + Area C + Area D + Area E; zero
c. Area C + Area E; Area A + Area B
d. Zero; Area A + Area B + Area C + Area D + Area E