Question 1

Monopolists can earn positive economic profits in the long run because they are more productively efficient than perfectly competitive firms.

Accepted Answer

A) True 
 B)False

Question 2

A monopolist is

Accepted Answer

A) one of a large number of small firms that produce a homogeneous good 
B) one of a small number of large firms that produce a differentiated good 
C) a single seller of a product with many close substitutes 
D) one of a small number of large firms that produce a homogeneous good 
E) a single seller of a product with no close substitutes 
A) one of a large number of small firms that produce a homogeneous good 
B) one of a small number of large firms that produce a differentiated good 
C) a single seller of a product with many close substitutes 
D) one of a small number of large firms that produce a homogeneous good 
E) a single seller of a product with no close substitutes

Question 3

For which of the following products would price discrimination be most difficult?

Accepted Answer

A) photograph developing 
B) tooth extractions 
C) airline tickets 
D) beer 
E) college education 
A) photograph developing 
B) tooth extractions 
C) airline tickets 
D) beer 
E) college education

Question 4

From the following demand schedule for a monopolist, what is the marginal revenue associated with the sale of the fourth unit?

Accepted Answer

A) $10 
B) $30 
C) $60 
D) $240 
E) marginal revenue cannot be determined from the information given 
A) $10 
B) $30 
C) $60 
D) $240 
E) marginal revenue cannot be determined from the information given

Question 5

Eli Whitney III receives a patent for the rayon gin, a product for which there are no close substitutes.Eli will maximize his profit when

Accepted Answer

A) MR is maximized 
B) MR = MC 
C) MR > MC 
D) MR  MC 
A) MR is maximized 
B) MR = MC 
C) MR > MC 
D) MR  MC

Question 6

Suppose a monopolist cannot price discriminate.To maximize profit, it will

Accepted Answer

A) always produce in the inelastic range of its demand curve 
B) never produce in the elastic range of its demand curve 
C) never produce in the inelastic range of its demand curve 
D) never produce in the elastic range of its marginal cost curve 
E) produce in the elastic range of the marginal revenue curve 
A) always produce in the inelastic range of its demand curve 
B) never produce in the elastic range of its demand curve 
C) never produce in the inelastic range of its demand curve 
D) never produce in the elastic range of its marginal cost curve 
E) produce in the elastic range of the marginal revenue curve

Question 7

For a monopolist, there is no supply curve because

Accepted Answer

A) the supply curve is the same as the marginal cost curve 
B) the monopolist does not maximize profit 
C) the quantity supplied is independent of marginal cost 
D) the quantity supplied is independent of demand 
E) there is no unique relationship between price and quantity supplied 
A) the supply curve is the same as the marginal cost curve 
B) the monopolist does not maximize profit 
C) the quantity supplied is independent of marginal cost 
D) the quantity supplied is independent of demand 
E) there is no unique relationship between price and quantity supplied

Question 8

One likely result of monopoly power is

Accepted Answer

A) a wide variety of substitute products from which consumers can choose 
B) an elimination of barriers to industry entry 
C) a decline in government regulation 
D) a higher price than would exist in a competitive industry 
E) an improvement in allocative efficiency 
A) a wide variety of substitute products from which consumers can choose 
B) an elimination of barriers to industry entry 
C) a decline in government regulation 
D) a higher price than would exist in a competitive industry 
E) an improvement in allocative efficiency

Question 9

A natural monopoly is based on economies of scale.

Accepted Answer

A) True 
 B)False

Question 10

A monopolist maximizes total revenue at the quantity where marginal revenue equals zero.

Accepted Answer

A) True 
 B)False

Question 11

The main reason a monopolist can earn long-run economic profit, whereas a perfectly competitive firm cannot, is that

Accepted Answer

A) monopolists operate under economies of scale 
B) perfectly competitive firms have opportunity costs 
C) demand for the monopolist's output is inelastic 
D) demand for the monopolist's output is elastic 
E) there are no barriers to entry in perfect competition 
A) monopolists operate under economies of scale 
B) perfectly competitive firms have opportunity costs 
C) demand for the monopolist's output is inelastic 
D) demand for the monopolist's output is elastic 
E) there are no barriers to entry in perfect competition

Question 12

Exhibit 9-18   Consider the firm in Exhibit 9-18, who charges the same price to all customers.Which of the following most accurately describes the price elasticity of demand at the level of output produced by the firm?

Accepted Answer

A) demand is price inelastic 
B) demand is price elastic 
C) demand is unitary elastic 
D) price elasticity is equal to 1 
E) price elasticity greater than 1 
A) demand is price inelastic 
B) demand is price elastic 
C) demand is unitary elastic 
D) price elasticity is equal to 1 
E) price elasticity greater than 1

Question 13

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 140 units for $2 each.Which of the following is true?

Accepted Answer

A) The monopolist is facing 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 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 14

Exhibit 9-14   The firm in Exhibit 9-14 will have an economic

Accepted Answer

A) profit of $85 
B) loss of $48 
C) profit of $132 
D) loss of $96 
E) loss of $34 
A) profit of $85 
B) loss of $48 
C) profit of $132 
D) loss of $96 
E) loss of $34

Question 15

A monopolist earning short-run economic profit determines that at its present level of output, marginal revenue is $23 and marginal cost is $30.Which of the following should the firm do to increase profit?

Accepted Answer

A) Raise price and lower output. 
B) Lower price and lower output. 
C) Raise price and raise output. 
D) Lower price and raise output. 
E) Lower output but leave price unchanged. 
A) Raise price and lower output. 
B) Lower price and lower output. 
C) Raise price and raise output. 
D) Lower price and raise output. 
E) Lower output but leave price unchanged.

Question 16

One of the ways that a perfectly competitive firm and a nondiscriminating monopolist are different is that

Accepted Answer

A) the marginal cost curve is U-shaped for a perfectly competitive firm but not for a monopolist 
B) P = AR for a perfectly competitive firm but not for a monopolist 
C) P = MR for a perfectly competitive firm but not for a monopolist 
D) the average revenue curve and demand curve are the same for a perfectly competitive firm but not for a monopolist 
E) only the monopolist seeks to maximize profits 
A) the marginal cost curve is U-shaped for a perfectly competitive firm but not for a monopolist 
B) P = AR for a perfectly competitive firm but not for a monopolist 
C) P = MR for a perfectly competitive firm but not for a monopolist 
D) the average revenue curve and demand curve are the same for a perfectly competitive firm but not for a monopolist 
E) only the monopolist seeks to maximize profits

Question 17

Which of the following would not be considered price discrimination?

Accepted Answer

A) setting separate rates for residential and commercial uses of electricity 
B) giving a senior citizen discount at restaurants 
C) renting recently released videos at a higher price than the old classic videos 
D) giving children a discount at the movies 
E) giving students a discount on ski lift tickets 
A) setting separate rates for residential and commercial uses of electricity 
B) giving a senior citizen discount at restaurants 
C) renting recently released videos at a higher price than the old classic videos 
D) giving children a discount at the movies 
E) giving students a discount on ski lift tickets

Question 18

Monopolists always earn positive short-run economic profit.

Accepted Answer

A) True 
 B)False

Question 19

Natural monopolies form when

Accepted Answer

A) small firms merge to form larger firms 
B) one firm has control over the entire supply of a basic input required to produce the product 
C) one firm's monopoly position is created and enforced by the government 
D) one firm receives patent protection for certain basic production processes 
E) long-run average cost declines as a firm expands output 
A) small firms merge to form larger firms 
B) one firm has control over the entire supply of a basic input required to produce the product 
C) one firm's monopoly position is created and enforced by the government 
D) one firm receives patent protection for certain basic production processes 
E) long-run average cost declines as a firm expands output

Question 20

Exhibit 9-12   The nondiscriminating monopolist, which maximizes profit in Exhibit 9-12, is

Accepted Answer

A) earning a profit of $db times 0f 
B) earning a loss of $db times 0f 
C) earning a normal profit 
D) earning a loss of $0d times 0f 
E) earning a loss of $ed times 0f 
A) earning a profit of $db times 0f 
B) earning a loss of $db times 0f 
C) earning a normal profit 
D) earning a loss of $0d times 0f 
E) earning a loss of $ed times 0f

Exam 9: A--Monopoly

Monopolists can earn positive economic profits in the long run because they are more productively efficient than perfectly competitive firms.

A monopolist is

For which of the following products would price discrimination be most difficult?

From the following demand schedule for a monopolist, what is the marginal revenue associated with the sale of the fourth unit?

Eli Whitney III receives a patent for the rayon gin, a product for which there are no close substitutes.Eli will maximize his profit when

Suppose a monopolist cannot price discriminate.To maximize profit, it will

For a monopolist, there is no supply curve because

One likely result of monopoly power is

A natural monopoly is based on economies of scale.

A monopolist maximizes total revenue at the quantity where marginal revenue equals zero.

The main reason a monopolist can earn long-run economic profit, whereas a perfectly competitive firm cannot, is that

Exhibit 9-18 Consider the firm in Exhibit 9-18, who charges the same price to all customers.Which of the following most accurately describes the price elasticity of demand at the level of output produced by the firm?

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 140 units for $2 each.Which of the following is true?

Exhibit 9-14 The firm in Exhibit 9-14 will have an economic

A monopolist earning short-run economic profit determines that at its present level of output, marginal revenue is $23 and marginal cost is $30.Which of the following should the firm do to increase profit?

One of the ways that a perfectly competitive firm and a nondiscriminating monopolist are different is that

Which of the following would not be considered price discrimination?

Monopolists always earn positive short-run economic profit.

Natural monopolies form when

Exhibit 9-12 The nondiscriminating monopolist, which maximizes profit in Exhibit 9-12, is

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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