Question 1

The demand curve faced by a firm with a patent on a marketable product

Accepted Answer

A) is horizontal 
B) is vertical 
C) slopes upward 
D) slopes downward 
E) is nonexistent 
A) is horizontal 
B) is vertical 
C) slopes upward 
D) slopes downward 
E) is nonexistent

Question 2

In the monopoly market structure, new firms

Accepted Answer

A) cannot profitably enter the industry, even in the long run 
B) may freely enter and leave the industry in both the short run and the long run 
C) may freely enter and leave the industry in the long run only 
D) may freely enter and leave the industry in the short run only 
E) have no incentive to enter the industry, even if economic profits are present 
A) cannot profitably enter the industry, even in the long run 
B) may freely enter and leave the industry in both the short run and the long run 
C) may freely enter and leave the industry in the long run only 
D) may freely enter and leave the industry in the short run only 
E) have no incentive to enter the industry, even if economic profits are present

Question 3

Empirical estimates indicate that the annual welfare cost of monopoly in the United States

Accepted Answer

A) ranges from less than 1 percent to 5 percent of national income 
B) ranges from 10 percent to 20 percent of national income 
C) is approximately 10 percent of national income 
D) is approximately $1 billion 
E) is approximately $1 trillion 
A) ranges from less than 1 percent to 5 percent of national income 
B) ranges from 10 percent to 20 percent of national income 
C) is approximately 10 percent of national income 
D) is approximately $1 billion 
E) is approximately $1 trillion

Question 4

One important source of challenge to De Beers' control of the diamond market is

Accepted Answer

A) the additional market supply from Russia, Australia, and Canada 
B) the emerging auction markets for diamonds in France and Spain 
C) the growing demand for diamonds in industrial uses 
D) that its South African mines are not producing as many diamonds as they did decades ago 
E) antitrust legislation in the United States 
A) the additional market supply from Russia, Australia, and Canada 
B) the emerging auction markets for diamonds in France and Spain 
C) the growing demand for diamonds in industrial uses 
D) that its South African mines are not producing as many diamonds as they did decades ago 
E) antitrust legislation in the United States

Question 5

Exhibit 9-12   The total cost for the nondiscriminating monopolist in Exhibit 9-12, that maximizes profit while charging all customers the same price, is

Accepted Answer

A) $0d ´ 0f 
B) $0e ´ 0f 
C) $0b ´ 0f 
D) $0a ´ 0f 
E) $0c ´ 0g 
A) $0d ´ 0f 
B) $0e ´ 0f 
C) $0b ´ 0f 
D) $0a ´ 0f 
E) $0c ´ 0g

Question 6

A monopolist price discriminates by

Accepted Answer

A) charging different buyers different prices for different products 
B) charging different buyers different prices for the same product 
C) selling at a price below average total cost 
D) selling at a price below marginal cost 
E) selling at a price above marginal revenue 
A) charging different buyers different prices for different products 
B) charging different buyers different prices for the same product 
C) selling at a price below average total cost 
D) selling at a price below marginal cost 
E) selling at a price above marginal revenue

Question 7

What is true at the profit-maximizing quantity for a perfectly competitive firm but not for a nondiscriminating monopoly?

Accepted Answer

A) Price equals marginal cost. 
B) Price is greater than marginal cost. 
C) Marginal revenue equals marginal cost. 
D) Marginal revenue is less than marginal cost. 
E) Marginal revenue is greater than average revenue. 
A) Price equals marginal cost. 
B) Price is greater than marginal cost. 
C) Marginal revenue equals marginal cost. 
D) Marginal revenue is less than marginal cost. 
E) Marginal revenue is greater than average revenue.

Question 8

Exhibit 9-17   Which area in Exhibit 9-17 represents deadweight loss under monopoly without price discrimination?

Accepted Answer

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

Question 9

Exhibit 9-10   Maximum profit for the profit-maximizing monopolist in Exhibit 9-10, which does not price discriminate, is

Accepted Answer

A) $14 
B) -$8 
C) $0 
D) $46.62 
E) $54 
A) $14 
B) -$8 
C) $0 
D) $46.62 
E) $54

Question 10

Under perfect price discrimination,

Accepted Answer

A) equilibrium quantity and consumer surplus are the same as under perfect competition 
B) equilibrium quantity is greater and consumer surplus is the same as under perfect competition 
C) equilibrium quantity and consumer surplus are less than under perfect competition 
D) equilibrium quantity is the same but consumer surplus is less than under perfect competition 
E) equilibrium quantity is less but consumer surplus is the same as under perfect competition 
A) equilibrium quantity and consumer surplus are the same as under perfect competition 
B) equilibrium quantity is greater and consumer surplus is the same as under perfect competition 
C) equilibrium quantity and consumer surplus are less than under perfect competition 
D) equilibrium quantity is the same but consumer surplus is less than under perfect competition 
E) equilibrium quantity is less but consumer surplus is the same as under perfect competition

Question 11

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

Accepted Answer

A) $308 
B) $187 
C) $216 
D) $306 
E) $272 
A) $308 
B) $187 
C) $216 
D) $306 
E) $272

Question 12

Gilligan runs the only dry-cleaning business on a desert isle.If the cost of cleaning fluid falls, he can increase profit by

Accepted Answer

A) raising price 
B) charging the highest price he can 
C) using less cleaning fluid 
D) lowering price 
E) charging a price equal to marginal cost 
A) raising price 
B) charging the highest price he can 
C) using less cleaning fluid 
D) lowering price 
E) charging a price equal to marginal cost

Question 13

Exhibit 9-18   The firm in Exhibit 9-18, who charges the same price to all customers, will earn how much profit?

Accepted Answer

A) $0 
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) $0 
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 14

Exhibit 9-17   Which area in Exhibit 9-17 represents monopoly profit without price discrimination?

Accepted Answer

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

Question 15

A profit-maximizing monopoly will always produce at the minimum point of its average total cost (ATC)curve.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is true of perfect price discrimination?

Accepted Answer

A) Profit is lower than it would be without discrimination. 
B) Revenue is higher than it would be without discrimination, but profit is lower. 
C) Average revenue and average cost are both higher than they would be without discrimination, so it is not certain whether profit will be higher. 
D) Consumer surplus is zero. 
E) Profit is zero. 
A) Profit is lower than it would be without discrimination. 
B) Revenue is higher than it would be without discrimination, but profit is lower. 
C) Average revenue and average cost are both higher than they would be without discrimination, so it is not certain whether profit will be higher. 
D) Consumer surplus is zero. 
E) Profit is zero.

Question 17

Exhibit 9-14   The profit-maximizing (or loss-minimizing)price the monopoly will charge in Exhibit 9-14 is

Accepted Answer

A) irrelevant since the firm should shut down 
B) $11 
C) $16 
D) $18 
E) $22 
A) irrelevant since the firm should shut down 
B) $11 
C) $16 
D) $18 
E) $22

Question 18

Exhibit 9-15   Why might the true deadweight loss from a nondiscriminating monopolist be less than the loss indicated in Exhibit 9-15?

Accepted Answer

A) The monopolist might have diseconomies of scale 
B) The monopolist might charge lower prices to discourage competition 
C) The monopolist might engage in rent seeking 
D) The monopolist might advertise more to maintain its position 
E) The monopolist may face diminishing marginal returns 
A) The monopolist might have diseconomies of scale 
B) The monopolist might charge lower prices to discourage competition 
C) The monopolist might engage in rent seeking 
D) The monopolist might advertise more to maintain its position 
E) The monopolist may face diminishing marginal returns

Question 19

Exhibit 9-11   In Exhibit 9-11, for a monopolist that does not price discriminate, consumer surplus at the profit-maximizing level of output is

Accepted Answer

A) the area under the demand curve bounded above a price of $136 
B) the area under the demand curve bounded by average total cost of $110 
C) the area under the marginal revenue curve bounded by a marginal revenue of $60 
D) $0 
E) equal to total consumer expenditure 
A) the area under the demand curve bounded above a price of $136 
B) the area under the demand curve bounded by average total cost of $110 
C) the area under the marginal revenue curve bounded by a marginal revenue of $60 
D) $0 
E) equal to total consumer expenditure

Question 20

Exhibit 9-9   Assuming the firm should not shut down, the profit-maximizing price and quantity for the monopolist in Exhibit 9-9, which does not price discriminate, are

Accepted Answer

A) P = $4 and Q = 7 
B) P = $3.50 and Q = 10 
C) P = $2 and Q = 7 
D) P = $1 and Q = 7 
E) P = $1 and Q = 10 
A) P = $4 and Q = 7 
B) P = $3.50 and Q = 10 
C) P = $2 and Q = 7 
D) P = $1 and Q = 7 
E) P = $1 and Q = 10

Exam 9: A--Monopoly

The demand curve faced by a firm with a patent on a marketable product

In the monopoly market structure, new firms

Empirical estimates indicate that the annual welfare cost of monopoly in the United States

One important source of challenge to De Beers' control of the diamond market is

Exhibit 9-12 The total cost for the nondiscriminating monopolist in Exhibit 9-12, that maximizes profit while charging all customers the same price, is

A monopolist price discriminates by

What is true at the profit-maximizing quantity for a perfectly competitive firm but not for a nondiscriminating monopoly?

Exhibit 9-17 Which area in Exhibit 9-17 represents deadweight loss under monopoly without price discrimination?

Exhibit 9-10 Maximum profit for the profit-maximizing monopolist in Exhibit 9-10, which does not price discriminate, is

Under perfect price discrimination,

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

Gilligan runs the only dry-cleaning business on a desert isle.If the cost of cleaning fluid falls, he can increase profit by

Exhibit 9-18 The firm in Exhibit 9-18, who charges the same price to all customers, will earn how much profit?

Exhibit 9-17 Which area in Exhibit 9-17 represents monopoly profit without price discrimination?

A profit-maximizing monopoly will always produce at the minimum point of its average total cost (ATC)curve.

Which of the following is true of perfect price discrimination?

Exhibit 9-14 The profit-maximizing (or loss-minimizing)price the monopoly will charge in Exhibit 9-14 is

Exhibit 9-15 Why might the true deadweight loss from a nondiscriminating monopolist be less than the loss indicated in Exhibit 9-15?

Exhibit 9-11 In Exhibit 9-11, for a monopolist that does not price discriminate, consumer surplus at the profit-maximizing level of output is

Exhibit 9-9 Assuming the firm should not shut down, the profit-maximizing price and quantity for the monopolist in Exhibit 9-9, which does not price discriminate, are

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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