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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. *

too high

too low

efficiently

2. The _____________________ shows a monopolist the additional revenue it could obtain if it produced and sold one more unit. *

demand curve

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

monopolistic loss

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). *

less

the same

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

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Double Marginalization Problem - Practice Questions