Question 1

Exhibit 9-5   The firm in Exhibit 9-5

Accepted Answer

A) is operating in the short run 
B) is operating in the long run 
C) will exit the industry in the long run 
D) shut down in the short run 
E) could be operating in either the short run or the long run 
A) is operating in the short run 
B) is operating in the long run 
C) will exit the industry in the long run 
D) shut down in the short run 
E) could be operating in either the short run or the long run

Question 2

If marginal cost is positive, which of the following is true?

Accepted Answer

A) A monopolist always produces on the inelastic portion of the firm's demand curve. 
B) A monopolist always produces on the inelastic portion of the market demand curve. 
C) A monopolist always produces on the elastic portion of the market demand curve. 
D) A monopolist always produces on the unit elastic portion of the market demand curve. 
E) The presence of a monopolist increases the elasticity of demand. 
A) A monopolist always produces on the inelastic portion of the firm's demand curve. 
B) A monopolist always produces on the inelastic portion of the market demand curve. 
C) A monopolist always produces on the elastic portion of the market demand curve. 
D) A monopolist always produces on the unit elastic portion of the market demand curve. 
E) The presence of a monopolist increases the elasticity of demand.

Question 3

Exhibit 9-14   At the profit-maximizing (or loss-minimizing)level of production, the monopoly in Exhibit 9-14 will have total cost of

Accepted Answer

A) $264 
B) $306 
C) $216 
D) $187 
E) $176 
A) $264 
B) $306 
C) $216 
D) $187 
E) $176

Question 4

Patents stimulate investment

Accepted Answer

A) by giving inventors an incentive to incur up-front costs of developing new products 
B) by giving tax breaks to inventors 
C) by guaranteeing a profit from new products 
D) by lowering interest rates 
E) through government payments that cover costs of research and development 
A) by giving inventors an incentive to incur up-front costs of developing new products 
B) by giving tax breaks to inventors 
C) by guaranteeing a profit from new products 
D) by lowering interest rates 
E) through government payments that cover costs of research and development

Question 5

Exhibit 9-11   If the monopolist in Exhibit 9-11 does not price discriminate, the total amount consumers will spend on its profit-maximizing quantity of output is

Accepted Answer

A) $95, 200 
B) $84, 000 
C) $79, 000 
D) $53, 200 
E) $42, 000 
A) $95, 200 
B) $84, 000 
C) $79, 000 
D) $53, 200 
E) $42, 000

Question 6

For a monopolist, P < MR at all quantities.

Accepted Answer

A) True 
 B)False

Question 7

The welfare loss of monopoly is also called

Accepted Answer

A) converted consumer surplus 
B) deadweight loss 
C) economic profit under monopoly 
D) producer surplus 
E) contestable profit 
A) converted consumer surplus 
B) deadweight loss 
C) economic profit under monopoly 
D) producer surplus 
E) contestable profit

Question 8

Suppose that a monopolist must choose between two points on its demand curve; it can sell 100 units for $3 each, or it can sell 160 units for $2 each.Which of the following is true?

Accepted Answer

A) The monopolist is facing an elastic demand. 
B) The monopolist is facing unit elastic demand. 
C) The monopolist is facing inelastic demand. 
D) The monopolist is facing perfectly elastic demand. 
E) The elasticity of demand cannot be determined with the information given. 
A) The monopolist is facing an elastic demand. 
B) The monopolist is facing unit elastic demand. 
C) The monopolist is facing inelastic demand. 
D) The monopolist is facing perfectly elastic demand. 
E) The elasticity of demand cannot be determined with the information given.

Question 9

Exhibit 9-17   Which area in Exhibit 9-17 represents deadweight loss under monopoly with perfect price discrimination?

Accepted Answer

A) area a 
B) area b 
C) area c 
D) there is no deadweight loss 
E) area e 
A) area a 
B) area b 
C) area c 
D) there is no deadweight loss 
E) area e

Question 10

Exhibit 9-14   At the profit-maximizing (or loss-minimizing)level of production, the monopoly in Exhibit 9-14 will have a

Accepted Answer

A) profit per unit of output of $2 
B) loss per unit of output of $2 
C) loss per unit of output of $5 
D) profit per unit of output of $5 
E) loss per unit of output of $4 
A) profit per unit of output of $2 
B) loss per unit of output of $2 
C) loss per unit of output of $5 
D) profit per unit of output of $5 
E) loss per unit of output of $4

Question 11

In the long run, which of the following is not a problem for a monopolist earning economic profit?

Accepted Answer

A) other firms have an incentive to create substitutes for the monopolist's product 
B) technological change tends to break down barriers to entry 
C) patents expire, licenses must be renewed, and new sources of essential resources may be discovered 
D) government often decides to regulate monopolies 
E) all profit will gradually be converted to consumer surplus 
A) other firms have an incentive to create substitutes for the monopolist's product 
B) technological change tends to break down barriers to entry 
C) patents expire, licenses must be renewed, and new sources of essential resources may be discovered 
D) government often decides to regulate monopolies 
E) all profit will gradually be converted to consumer surplus

Question 12

Firms can earn economic profits even in the long run if

Accepted Answer

A) they charge the highest price possible 
B) there is a cost-reducing technological change 
C) there are significant barriers to entry 
D) marginal revenue equals marginal cost 
E) price is less than average variable cost at all rates of output 
A) they charge the highest price possible 
B) there is a cost-reducing technological change 
C) there are significant barriers to entry 
D) marginal revenue equals marginal cost 
E) price is less than average variable cost at all rates of output

Question 13

Exhibit 9-8   Consider Exhibit 9-8.What is the profit-maximizing quantity?

Accepted Answer

A) 1 unit 
B) 2 units 
C) 3 units 
D) 4 units 
E) 5 units 
A) 1 unit 
B) 2 units 
C) 3 units 
D) 4 units 
E) 5 units

Question 14

Which of the following is not true of a pure monopoly?

Accepted Answer

A) Demand is negatively sloped 
B) Marginal revenue is less than price therefore the firm should consider raising its price until marginal revenue equals demand 
C) Marginal revenue is less than average revenue therefore the firm should consider adjusting its quantity until marginal revenue equals average revenue 
D) It is a price taker 
E) Its position is protected by significant barriers to entry 
A) Demand is negatively sloped 
B) Marginal revenue is less than price therefore the firm should consider raising its price until marginal revenue equals demand 
C) Marginal revenue is less than average revenue therefore the firm should consider adjusting its quantity until marginal revenue equals average revenue 
D) It is a price taker 
E) Its position is protected by significant barriers to entry

Question 15

Which of the following is true of marginal revenue for a monopolist that charges a single price?

Accepted Answer

A) P = MR because there are no close substitutes for the monopolist's product. B) P > MR because the monopolist must decrease price on all units sold in order to sell an additional unit. C) P < MR because the monopolist must decrease price on all units sold in order to sell an additional unit. D) AR = MR because there are no close substitutes for the monopolist's product. E) P = MR only at the profit-maximizing quantity. A) P = MR because there are no close substitutes for the monopolist's product. B) P > MR because the monopolist must decrease price on all units sold in order to sell an additional unit. C) P < MR because the monopolist must decrease price on all units sold in order to sell an additional unit. D) AR = MR because there are no close substitutes for the monopolist's product. E) P = MR only at the profit-maximizing quantity.

Question 16

If a firm's demand curve slopes downward, the firm's

Accepted Answer

A) marginal revenue will rise as price is reduced 
B) marginal revenue will generally be less than price 
C) total revenue will decline continuously as price is reduced 
D) marginal revenue will always be greater than its demand 
E) average revenue will increase continuously as output increases 
A) marginal revenue will rise as price is reduced 
B) marginal revenue will generally be less than price 
C) total revenue will decline continuously as price is reduced 
D) marginal revenue will always be greater than its demand 
E) average revenue will increase continuously as output increases

Question 17

Assuming a constant cost industry, consumer surplus would be greater under monopoly than if the industry were perfectly competitive.

Accepted Answer

A) True 
 B)False

Question 18

A monopolist maximizes profit at the quantity where its total revenue curve equals total cost.

Accepted Answer

A) True 
 B)False

Question 19

In the short run, a monopolist will shut down when

Accepted Answer

A) average total cost is greater than price at all output levels 
B) average variable cost is greater than average fixed cost at all output levels 
C) price is greater than average variable cost at all output levels 
D) average fixed cost is greater than price at all output levels 
E) average variable cost is greater than price at all output levels 
A) average total cost is greater than price at all output levels 
B) average variable cost is greater than average fixed cost at all output levels 
C) price is greater than average variable cost at all output levels 
D) average fixed cost is greater than price at all output levels 
E) average variable cost is greater than price at all output levels

Question 20

Exhibit 9-16   Exhibit 9-16 depicts the cost and demand conditions facing a profit-maximizing monopolist that does not price discriminate.Which of the following statements is true?

Accepted Answer

A) An output of 50 is allocatively efficient, but the monopolist will produce 100 units. 
B) An output of 50 is allocatively efficient, but the monopolist will produce 75 units. 
C) An output of 75 is allocatively efficient, but the monopolist will produce 100 units. 
D) An output of 100 is allocatively efficient, but the monopolist will produce 50 units. 
E) An output of 100 is allocatively efficient, but the monopolist will produce 75 units. 
A) An output of 50 is allocatively efficient, but the monopolist will produce 100 units. 
B) An output of 50 is allocatively efficient, but the monopolist will produce 75 units. 
C) An output of 75 is allocatively efficient, but the monopolist will produce 100 units. 
D) An output of 100 is allocatively efficient, but the monopolist will produce 50 units. 
E) An output of 100 is allocatively efficient, but the monopolist will produce 75 units.

Exam 9: A--Monopoly

Exhibit 9-5 The firm in Exhibit 9-5

If marginal cost is positive, which of the following is true?

Exhibit 9-14 At the profit-maximizing (or loss-minimizing)level of production, the monopoly in Exhibit 9-14 will have total cost of

Patents stimulate investment

Exhibit 9-11 If the monopolist in Exhibit 9-11 does not price discriminate, the total amount consumers will spend on its profit-maximizing quantity of output is

For a monopolist, P < MR at all quantities.

The welfare loss of monopoly is also called

Suppose that a monopolist must choose between two points on its demand curve; it can sell 100 units for $3 each, or it can sell 160 units for $2 each.Which of the following is true?

Exhibit 9-17 Which area in Exhibit 9-17 represents deadweight loss under monopoly with perfect price discrimination?

Exhibit 9-14 At the profit-maximizing (or loss-minimizing)level of production, the monopoly in Exhibit 9-14 will have a

In the long run, which of the following is not a problem for a monopolist earning economic profit?

Firms can earn economic profits even in the long run if

Exhibit 9-8 Consider Exhibit 9-8.What is the profit-maximizing quantity?

Which of the following is not true of a pure monopoly?

Which of the following is true of marginal revenue for a monopolist that charges a single price?

If a firm's demand curve slopes downward, the firm's

Assuming a constant cost industry, consumer surplus would be greater under monopoly than if the industry were perfectly competitive.

A monopolist maximizes profit at the quantity where its total revenue curve equals total cost.

In the short run, a monopolist will shut down when

Exhibit 9-16 Exhibit 9-16 depicts the cost and demand conditions facing a profit-maximizing monopolist that does not price discriminate.Which of the following statements is true?

The Art and Science of Economic Analysis

Appendix--Understanding Graphs

Economic Tools and Economics Systems

Economic Decision Makers

Demand, Supply, and Markets

Elasticity of Demand and Supply

Appendix--Price Elasticity and Tax Incidence

Consumer Choice and Demand

Appendix--Indifference Curves and Utility Maximization

Production and Cost in the Firm

A--Perfect Competition

B--Perfect Competition

B--Monopoly

Monopolistic Competition and Oligopoly

Resource Markets

Labor Markets and Labor Unions

Capital, Interest, and Corporate Finance

Transaction Costs, Imperfect Information, and Behavioral Economics

Economic Regulation and Antitrust Policy

Public Goods and Public Choice

Externalities and the Environment

Income Distribution and Poverty

International Trade

International Finance

Economic Development

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