Question 1

Total deadweight loss in society is reduced through rent seeking by monopolists.

Accepted Answer

A) True 
 B)False

Question 2

For a monopolist that does not price discriminate, economic profit is maximized in the short run at a price of $140.Marginal revenue at that output level is

Accepted Answer

A) equal to $140 
B) greater than $140 
C) less than $140 
D) less than marginal cost 
E) greater than average revenue 
A) equal to $140 
B) greater than $140 
C) less than $140 
D) less than marginal cost 
E) greater than average revenue

Question 3

For a monopolist, as output expands, price and marginal revenue become more divergent (i.e., are farther apart).

Accepted Answer

A) True 
 B)False

Question 4

For which of the following products would price discrimination be easiest?

Accepted Answer

A) orange juice 
B) diamonds 
C) compact disks 
D) haircuts 
E) gasoline 
A) orange juice 
B) diamonds 
C) compact disks 
D) haircuts 
E) gasoline

Question 5

Exhibit 9-6   What is the profit-maximizing price for the monopolist in Exhibit 9-6?

Accepted Answer

A) $14 
B) $11 
C) $10 
D) $9 
E) $8 
A) $14 
B) $11 
C) $10 
D) $9 
E) $8

Question 6

A profit-maximizing monopolist

Accepted Answer

A) never produces on the inelastic portion of the demand curve because it can increase profit by increasing output 
B) never produces on the inelastic portion of the demand curve because marginal revenue exceeds marginal cost 
C) always produces on the inelastic portion of the demand curve 
D) never produces on the elastic portion of the demand curve because there are no substitutes for the good it produces 
E) never produces on the inelastic portion of the demand curve because marginal revenue is negative there 
A) never produces on the inelastic portion of the demand curve because it can increase profit by increasing output 
B) never produces on the inelastic portion of the demand curve because marginal revenue exceeds marginal cost 
C) always produces on the inelastic portion of the demand curve 
D) never produces on the elastic portion of the demand curve because there are no substitutes for the good it produces 
E) never produces on the inelastic portion of the demand curve because marginal revenue is negative there

Question 7

Which of the following would probably not be considered a natural monopoly?

Accepted Answer

A) a municipal water company 
B) the local telephone industry 
C) the cable television industry 
D) natural gas and electric companies 
E) the automobile industry 
A) a municipal water company 
B) the local telephone industry 
C) the cable television industry 
D) natural gas and electric companies 
E) the automobile industry

Question 8

A monopolist's demand curve

Accepted Answer

A) is horizontal at the market price 
B) lies above its marginal revenue curve 
C) is the same as its marginal cost curve 
D) indicates that the firm must raise price to sell additional units 
E) lies above the marginal cost curve at all levels of output 
A) is horizontal at the market price 
B) lies above its marginal revenue curve 
C) is the same as its marginal cost curve 
D) indicates that the firm must raise price to sell additional units 
E) lies above the marginal cost curve at all levels of output

Question 9

Exhibit 9-11   Total revenue for the profit-maximizing monopoly in Exhibit 9-11 that does not price discriminate will be

Accepted Answer

A) $95, 200 
B) $84, 000 
C) $79, 000 
D) $52, 000 
E) $42, 000 
A) $95, 200 
B) $84, 000 
C) $79, 000 
D) $52, 000 
E) $42, 000

Question 10

Which of the following is not considered a barrier to entry?

Accepted Answer

A) patents 
B) government licenses 
C) economies of scale 
D) diseconomies of scale 
E) control over essential resources 
A) patents 
B) government licenses 
C) economies of scale 
D) diseconomies of scale 
E) control over essential resources

Question 11

Which of the following could not bar entry into an industry?

Accepted Answer

A) economies of scale 
B) diseconomies of scale 
C) patents 
D) licenses 
E) one firm's control of essential resources 
A) economies of scale 
B) diseconomies of scale 
C) patents 
D) licenses 
E) one firm's control of essential resources

Question 12

A price searcher is any firm that has no control over price and must accept the market price as given.

Accepted Answer

A) True 
 B)False

Question 13

A firm facing a downward-sloping demand curve sells 50 units of output at $10 each.The firm's marginal revenue is

Accepted Answer

A) $500 
B) more than $10 but less than $500 
C) $10 
D) less than $10 
E) zero 
A) $500 
B) more than $10 but less than $500 
C) $10 
D) less than $10 
E) zero

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

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

Accepted Answer

A) 0 
B) 7 
C) 10 
D) more than 10 
E) less than 7 
A) 0 
B) 7 
C) 10 
D) more than 10 
E) less than 7

Question 16

A monopolist's demand curve is

Accepted Answer

A) its marginal cost curve 
B) its marginal revenue curve 
C) identical to the market demand curve 
D) the same as the demand curve of a firm in perfect competition 
E) nonexistent 
A) its marginal cost curve 
B) its marginal revenue curve 
C) identical to the market demand curve 
D) the same as the demand curve of a firm in perfect competition 
E) nonexistent

Question 17

Exhibit 9-7   Consider Exhibit 9-7.What is the profit-maximizing output for a monopolist that does not price discriminate?

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 18

Willie Stand obtains a patent on his new invention, the bipod.After twenty years,

Accepted Answer

A) he can renew his patent 
B) new entrants will begin bipod production if price exceeds average variable cost 
C) new entrants will drive up the price of the bipod 
D) Willie will eventually earn no more than a normal profit 
E) Willie will continue to earn a positive economic profit, because entry will not affect the price of bipods 
A) he can renew his patent 
B) new entrants will begin bipod production if price exceeds average variable cost 
C) new entrants will drive up the price of the bipod 
D) Willie will eventually earn no more than a normal profit 
E) Willie will continue to earn a positive economic profit, because entry will not affect the price of bipods

Question 19

Which of the following is a major criticism of a monopoly as a cause of allocative inefficiency?

Accepted Answer

A) A monopolist fails to expand output to the level where the consumers' evaluation of an additional unit is just equal to its opportunity cost 
B) A monopolist has no incentive to produce efficiently, because even if it pays no attention to the costs of production, it will be guaranteed an economic profit 
C) A monopolist will always make profits therefore providing an incentive to keep prices at the level that maximizes consumer surplus 
D) A monopolist has an advantage because it can purchase the resources in a competitive market 
E) Consumer surplus would no longer be equal to producer surplus 
A) A monopolist fails to expand output to the level where the consumers' evaluation of an additional unit is just equal to its opportunity cost 
B) A monopolist has no incentive to produce efficiently, because even if it pays no attention to the costs of production, it will be guaranteed an economic profit 
C) A monopolist will always make profits therefore providing an incentive to keep prices at the level that maximizes consumer surplus 
D) A monopolist has an advantage because it can purchase the resources in a competitive market 
E) Consumer surplus would no longer be equal to producer surplus

Question 20

A monopolist's marginal revenue curve is flatter than its demand curve.

Accepted Answer

A) True 
 B)False

Exam 9: A--Monopoly

Total deadweight loss in society is reduced through rent seeking by monopolists.

For a monopolist that does not price discriminate, economic profit is maximized in the short run at a price of $140.Marginal revenue at that output level is

For a monopolist, as output expands, price and marginal revenue become more divergent (i.e., are farther apart).

For which of the following products would price discrimination be easiest?

Exhibit 9-6 What is the profit-maximizing price for the monopolist in Exhibit 9-6?

A profit-maximizing monopolist

Which of the following would probably not be considered a natural monopoly?

A monopolist's demand curve

Exhibit 9-11 Total revenue for the profit-maximizing monopoly in Exhibit 9-11 that does not price discriminate will be

Which of the following is not considered a barrier to entry?

Which of the following could not bar entry into an industry?

A price searcher is any firm that has no control over price and must accept the market price as given.

A firm facing a downward-sloping demand curve sells 50 units of output at $10 each.The firm's marginal revenue is

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

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

A monopolist's demand curve is

Exhibit 9-7 Consider Exhibit 9-7.What is the profit-maximizing output for a monopolist that does not price discriminate?

Willie Stand obtains a patent on his new invention, the bipod.After twenty years,

Which of the following is a major criticism of a monopoly as a cause of allocative inefficiency?

A monopolist's marginal revenue curve is flatter than its demand curve.

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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