Question 1

Relative to a perfectly competitive market, as long as the monopolist does not benefit from substantial economies of scale,

Accepted Answer

A) price and quantity are higher under monopoly 
B) price and quantity are lower under monopoly 
C) quantity is higher and price is lower under monopoly 
D) quantity is lower and price is higher under monopoly 
E) there are no differences in price and quantity 
A) price and quantity are higher under monopoly 
B) price and quantity are lower under monopoly 
C) quantity is higher and price is lower under monopoly 
D) quantity is lower and price is higher under monopoly 
E) there are no differences in price and quantity

Question 2

Exhibit 9-10   What price would maximize the profit of the nondiscriminating monopolist in Exhibit 9-10?

Accepted Answer

A) 0 
B) $2 
C) $4.60 
D) $6.66 
E) $8.66 
A) 0 
B) $2 
C) $4.60 
D) $6.66 
E) $8.66

Question 3

Exhibit 9-14   The production level that will maximize the profit (or minimize loss)for the monopoly in Exhibit 9-14 is

Accepted Answer

A) 0 
B) 22 
C) 17 
D) 12 
E) more than 22 
A) 0 
B) 22 
C) 17 
D) 12 
E) more than 22

Question 4

Suppose that at an output of 1, 000 units, a monopolist has marginal cost of $40, marginal revenue of $30, average variable cost of $30, and average total cost of $50.In order to maximize profit or minimize loss in the short run, the firm should

Accepted Answer

A) shut down 
B) continue to produce 1, 000 units 
C) produce fewer than 1, 000 units but still operate 
D) produce more than 1, 000 units 
E) increase its plant size to gain economies of scale 
A) shut down 
B) continue to produce 1, 000 units 
C) produce fewer than 1, 000 units but still operate 
D) produce more than 1, 000 units 
E) increase its plant size to gain economies of scale

Question 5

Which of the following would not be considered price discrimination?

Accepted Answer

A) Long distance telephone rates are cheaper late at night. 
B) Airline fares are cheaper if you reserve several weeks in advance. 
C) The price of lettuce is 59 cents a head and two for a dollar. 
D) The price of a brand-name prescription drug is higher than the price of a generic brand. 
E) Senior citizens pay less for a movie. 
A) Long distance telephone rates are cheaper late at night. 
B) Airline fares are cheaper if you reserve several weeks in advance. 
C) The price of lettuce is 59 cents a head and two for a dollar. 
D) The price of a brand-name prescription drug is higher than the price of a generic brand. 
E) Senior citizens pay less for a movie.

Question 6

Exhibit 9-17   In Exhibit 9-17, which area represents monopoly profit with perfect price discrimination?

Accepted Answer

A) area a 
B) area b 
C) area a + b + e 
D) area b + e 
E) area b + e + c + f 
A) area a 
B) area b 
C) area a + b + e 
D) area b + e 
E) area b + e + c + f

Question 7

Exhibit 9-18   The firm in Exhibit 9-18, the monopolist who charges the same price to all customers, will charge what price?

Accepted Answer

A) $5 
B) $10 
C) $15 
D) $20 
E) $25 
A) $5 
B) $10 
C) $15 
D) $20 
E) $25

Question 8

Exhibit 9-17   In Exhibit 9-17, which area represents the amount of consumer surplus received by consumers under perfect price discrimination?

Accepted Answer

A) area a 
B) area b 
C) area a + b + c 
D) area b + e 
E) there is no consumer surplus 
A) area a 
B) area b 
C) area a + b + c 
D) area b + e 
E) there is no consumer surplus

Question 9

Exhibit 9-19   The firm in Exhibit 9-19, who charges the same price to all customers, will earn how much profit?

Accepted Answer

A) none, in fact, they will lose money 
B) somewhere between $0 and $30 
C) somewhere between $30 and $45 
D) somewhere between $45 and $60 
E) cannot tell from the information available 
A) none, in fact, they will lose money 
B) somewhere between $0 and $30 
C) somewhere between $30 and $45 
D) somewhere between $45 and $60 
E) cannot tell from the information available

Question 10

Which of the following conditions would distinguish a competitive firm from a monopolist?

Accepted Answer

A) The existence of a demand curve for the firm. 
B) The slope of the demand curve facing the firm. 
C) The rule of profit maximization, i.e., produce where MR = MC. 
D) The relationship between marginal revenue and total revenue. 
E) The existence of diseconomies of scale. 
A) The existence of a demand curve for the firm. 
B) The slope of the demand curve facing the firm. 
C) The rule of profit maximization, i.e., produce where MR = MC. 
D) The relationship between marginal revenue and total revenue. 
E) The existence of diseconomies of scale.

Question 11

Exhibit 9-11   If the monopolist in Exhibit 9-11 engages in perfect price discrimination, profit-maximizing output would be

Accepted Answer

A) 700 units 
B) 810 units 
C) 884 units 
D) 976 units 
E) 1, 000 units 
A) 700 units 
B) 810 units 
C) 884 units 
D) 976 units 
E) 1, 000 units

Question 12

Anything that prevents new firms from competing on an equal basis with existing firms in an industry is called a barrier to entry.

Accepted Answer

A) True 
 B)False

Question 13

With perfect price discrimination, the firm faces a constant marginal revenue.

Accepted Answer

A) True 
 B)False

Question 14

Rent-seeking activities are socially wasteful because they use scarce resources but do not add to society's output.

Accepted Answer

A) True 
 B)False

Question 15

A profit-maximizing monopolist that produces in the short run will

Accepted Answer

A) produce the level of output where marginal revenue exceeds marginal cost by the largest amount 
B) increase output as long as the marginal revenue exceeds the marginal cost of producing that unit 
C) produce the level of output where average total cost is at a minimum 
D) increase price as long as the average revenue exceeds the average total cost 
E) produce the level of output where average revenue exceeds average total cost by the largest amount 
A) produce the level of output where marginal revenue exceeds marginal cost by the largest amount 
B) increase output as long as the marginal revenue exceeds the marginal cost of producing that unit 
C) produce the level of output where average total cost is at a minimum 
D) increase price as long as the average revenue exceeds the average total cost 
E) produce the level of output where average revenue exceeds average total cost by the largest amount

Question 16

Which of following is true of monopoly and not of perfect competition?

Accepted Answer

A) Profit is maximized where marginal cost equals marginal revenue 
B) The industry demand curve is also the firm's demand curve 
C) Normal profits are made only if average total cost equals average revenue 
D) Profit is maximized in the elastic portion of the demand curve 
E) the firm has no control over the market price 
A) Profit is maximized where marginal cost equals marginal revenue 
B) The industry demand curve is also the firm's demand curve 
C) Normal profits are made only if average total cost equals average revenue 
D) Profit is maximized in the elastic portion of the demand curve 
E) the firm has no control over the market price

Question 17

Suppose that a price-discriminating monopolist divides its market into two segments.If the firm sells its product for a price of $42 in the market segment where demand is relatively less elastic, the price in the market segment whose customers' demand is more elastic will be

Accepted Answer

A) $42 
B) greater than $42 
C) less than $42 
D) less than marginal revenue in that market segment 
E) equal to marginal revenue in that market segment 
A) $42 
B) greater than $42 
C) less than $42 
D) less than marginal revenue in that market segment 
E) equal to marginal revenue in that market segment

Question 18

Exhibit 9-11   In Exhibit 9-11, which level of output maximizes profit for this nondiscriminating monopolist?

Accepted Answer

A) 700 units 
B) 810 units 
C) 884 units 
D) 976 units 
E) 1, 000 units 
A) 700 units 
B) 810 units 
C) 884 units 
D) 976 units 
E) 1, 000 units

Question 19

The demand curve facing a monopolist

Accepted Answer

A) is kinked at the market price 
B) is perfectly elastic 
C) lies above its marginal revenue curve 
D) lies below its marginal revenue curve 
E) is the same as its marginal revenue curve 
A) is kinked at the market price 
B) is perfectly elastic 
C) lies above its marginal revenue curve 
D) lies below its marginal revenue curve 
E) is the same as its marginal revenue curve

Question 20

For a monopolist, if marginal revenue is $40, total revenue is

Accepted Answer

A) increasing 
B) decreasing 
C) zero 
D) positive 
E) negative 
A) increasing 
B) decreasing 
C) zero 
D) positive 
E) negative

Exam 9: A--Monopoly

Relative to a perfectly competitive market, as long as the monopolist does not benefit from substantial economies of scale,

Exhibit 9-10 What price would maximize the profit of the nondiscriminating monopolist in Exhibit 9-10?

Exhibit 9-14 The production level that will maximize the profit (or minimize loss)for the monopoly in Exhibit 9-14 is

Suppose that at an output of 1, 000 units, a monopolist has marginal cost of $40, marginal revenue of $30, average variable cost of $30, and average total cost of $50.In order to maximize profit or minimize loss in the short run, the firm should

Which of the following would not be considered price discrimination?

Exhibit 9-17 In Exhibit 9-17, which area represents monopoly profit with perfect price discrimination?

Exhibit 9-18 The firm in Exhibit 9-18, the monopolist who charges the same price to all customers, will charge what price?

Exhibit 9-17 In Exhibit 9-17, which area represents the amount of consumer surplus received by consumers under perfect price discrimination?

Exhibit 9-19 The firm in Exhibit 9-19, who charges the same price to all customers, will earn how much profit?

Which of the following conditions would distinguish a competitive firm from a monopolist?

Exhibit 9-11 If the monopolist in Exhibit 9-11 engages in perfect price discrimination, profit-maximizing output would be

Anything that prevents new firms from competing on an equal basis with existing firms in an industry is called a barrier to entry.

With perfect price discrimination, the firm faces a constant marginal revenue.

Rent-seeking activities are socially wasteful because they use scarce resources but do not add to society's output.

A profit-maximizing monopolist that produces in the short run will

Which of following is true of monopoly and not of perfect competition?

Suppose that a price-discriminating monopolist divides its market into two segments.If the firm sells its product for a price of $42 in the market segment where demand is relatively less elastic, the price in the market segment whose customers' demand is more elastic will be

Exhibit 9-11 In Exhibit 9-11, which level of output maximizes profit for this nondiscriminating monopolist?

The demand curve facing a monopolist

For a monopolist, if marginal revenue is $40, total revenue 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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