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Double Marginalization Problem
» Practice Questions
1. Consider the “Rhine River Problem.” The monopolies on the river set prices ________________ from the point of view of the monopolists as a group.
2. The _____________________ shows a monopolist the additional revenue it could obtain if it produced and sold one more unit.
marginal revenue curve
income-compensated demand curve
3. The _____________________ shows a monopolist the additional cost it would incur if it produced one more unit.
total cost curve
average cost curve
marginal cost curve
4. A monopolist finds its profit maximizing output by finding where ___________________________.
price equals marginal cost
marginal revenue equals demand
marginal revenue equals marginal cost
5. In a standard monopoly model, a monopoly produces less than the competitive market. The difference between the monopoly output and the competitive output (the trades which do not take place as a result of monopoly distortion) is known as:
dead weight loss
monopoly profit cost
6. When a monopolistic retailer buys its inputs from a competitive industry, the dead weight loss is ___________ compared to when a monopolistic retailer buys from another monopoly (like a wholesaler).
7. Double monopoly markup makes:
monopolists worse off
consumers worse off
both a. and b.
8. Vertical integration of two monopolies:
can improve social welfare
always makes consumers worse off
has unclear implications for both consumers and producers