Question 1

A single-price monopolist

Accepted Answer

A) maximizes economic profit by producing the quantity at which marginal revenue equals marginal cost. 
B) maximizes economic profit by producing the quantity at which marginal revenue equals average total cost. 
C) can increase the price and the quantity sold simultaneously. 
D) is not restricted by the law of demand. 
E) can sell as much as it wants at a given price because it is the only seller. 
A) maximizes economic profit by producing the quantity at which marginal revenue equals marginal cost. 
B) maximizes economic profit by producing the quantity at which marginal revenue equals average total cost. 
C) can increase the price and the quantity sold simultaneously. 
D) is not restricted by the law of demand. 
E) can sell as much as it wants at a given price because it is the only seller.

Question 2

A price cap is a price ________.A price cap might be a more effective way of regulating monopoly than rate of return regulation because under rate of return regulation,________.

Accepted Answer

A) ceiling;a firm incurs an economic loss 
B) floor;price is set equal to marginal cost 
C) ceiling;the firm's managers have an incentive to inflate costs 
D) floor;the firm's managers have an incentive to purchase more than the efficient quantity of capital 
E) floor;the firm's managers have an incentive to inflate costs 
A) ceiling;a firm incurs an economic loss 
B) floor;price is set equal to marginal cost 
C) ceiling;the firm's managers have an incentive to inflate costs 
D) floor;the firm's managers have an incentive to purchase more than the efficient quantity of capital 
E) floor;the firm's managers have an incentive to inflate costs

Question 3

Use the information below to answer the following questions.
Fact 12.5.1
Cascade Springs Inc.is a natural monopoly that bottles water from a spring high in the Rocky Mountains.The total fixed cost it incurs is $80,000,and its marginal cost is 10 cents a bottle.The demand curve for Cascade Springs bottled water is shown in the following figure:   Figure 12.5.1
-Refer to Figure 12.5.1.Suppose the government regulates the firm with average cost pricing.The price of a bottle of water is

Accepted Answer

A) $0. 
B) $0.50. 
C) $0.30. 
D) $0.10. 
E) $0.20. 
A) $0. 
B) $0.50. 
C) $0.30. 
D) $0.10. 
E) $0.20.

Question 4

Use the figure below to answer the following questions.   Figure 12.5.2
-Consider the natural monopoly depicted in Figure 12.5.2.If a regulatory agency sets a price just sufficient for the firm to make zero economic profit,and if the firm inflates its costs as much as possible,the regulated price will be

Accepted Answer

A) P0. 
B) P1. 
C) P2. 
D) P3. 
E) either P0 or P3. 
A) P0. 
B) P1. 
C) P2. 
D) P3. 
E) either P0 or P3.

Question 5

A monopolist under rate of return regulation has an incentive to

Accepted Answer

A) inflate costs. 
B) produce more than the efficient quantity of output. 
C) charge a price equal to marginal cost. 
D) maximize consumer surplus. 
E) maximize shareholder profits 
A) inflate costs. 
B) produce more than the efficient quantity of output. 
C) charge a price equal to marginal cost. 
D) maximize consumer surplus. 
E) maximize shareholder profits

Question 6

A single-price monopoly is a firm that ________ each unit of its output ________.A ________ monopoly sells different units of a good or service for different prices.

Accepted Answer

A) produces;at a constant cost;discriminatory 
B) must sell;for the same price to all its customers;price-discriminating 
C) produces;at a constant cost;price-discriminating 
D) must sell;for the same price to all its customers;discriminatory 
E) must sell;at the same price as a perfectly competitive firm;price-discriminating 
A) produces;at a constant cost;discriminatory 
B) must sell;for the same price to all its customers;price-discriminating 
C) produces;at a constant cost;price-discriminating 
D) must sell;for the same price to all its customers;discriminatory 
E) must sell;at the same price as a perfectly competitive firm;price-discriminating

Question 7

When Dominant Pizza is willing to sell a pizza to a student who lives on-campus at a lower price than it sells the identical pizza to a student who lives a block away from the campus,Dominant Pizza is

Accepted Answer

A) implementing unfair pricing practices. 
B) incurring a loss on on-campus sales. 
C) eliminating all competition. 
D) unlikely to have any competition. 
E) practising price discrimination. 
A) implementing unfair pricing practices. 
B) incurring a loss on on-campus sales. 
C) eliminating all competition. 
D) unlikely to have any competition. 
E) practising price discrimination.

Question 8

Use the information below to answer the following questions.
Fact 12.1.1
The following statements give some information about seven markets.
1.Coca-Cola cuts its price below that of Pepsi-Cola in an attempt to increase its market share.
2.A single firm,protected by a barrier to entry,produces a personal service that has no close substitutes.
3.A barrier to entry exists,but the good has some close substitutes.
4.A firm offers discounts to students and seniors.
5.A firm can sell any quantity it chooses at the going price.
6.The government issues Nike an exclusive licence to produce golf balls.
7.A firm experiences economies of scale even when it produces the quantity that meets the entire market demand.
-Refer to Fact 12.1.1.The firm described in statement ________ is a natural monopoly.The firm described in statement ________ is a legal monopoly.

Accepted Answer

A) 7;6 
B) 2;7 
C) 6;7 
D) 2;6 
E) 7;4 
A) 7;6 
B) 2;7 
C) 6;7 
D) 2;6 
E) 7;4

Question 9

For a single-price monopoly,marginal revenue is less than price because

Accepted Answer

A) the revenue gained from the last unit sold is offset by further gains in price on units not sold at all. 
B) total revenue always decreases as output increases. 
C) the revenue gained from the last unit sold is offset by a revenue loss on the units that previously had been sold at a higher price. 
D) the price does not need to be lowered on all previous units sold. 
E) demand is perfectly elastic. 
A) the revenue gained from the last unit sold is offset by further gains in price on units not sold at all. 
B) total revenue always decreases as output increases. 
C) the revenue gained from the last unit sold is offset by a revenue loss on the units that previously had been sold at a higher price. 
D) the price does not need to be lowered on all previous units sold. 
E) demand is perfectly elastic.

Question 10

A monopolist under marginal cost pricing has an incentive to

Accepted Answer

A) inflate costs. 
B) produce more than the efficient quantity of output. 
C) produce less than the efficient quantity of output. 
D) maximize consumer surplus. 
E) produce the efficient quantity of output. 
A) inflate costs. 
B) produce more than the efficient quantity of output. 
C) produce less than the efficient quantity of output. 
D) maximize consumer surplus. 
E) produce the efficient quantity of output.

Question 11

Use the information below to answer the following questions.
Fact 12.1.1
The following statements give some information about seven markets.
1.Coca-Cola cuts its price below that of Pepsi-Cola in an attempt to increase its market share.
2.A single firm,protected by a barrier to entry,produces a personal service that has no close substitutes.
3.A barrier to entry exists,but the good has some close substitutes.
4.A firm offers discounts to students and seniors.
5.A firm can sell any quantity it chooses at the going price.
6.The government issues Nike an exclusive licence to produce golf balls.
7.A firm experiences economies of scale even when it produces the quantity that meets the entire market demand.
-Refer to Fact 12.1.1.The firm described in ________ can price discriminate if it can ________.

Accepted Answer

A) statements 2,3,6,and 7;eliminate the barriers to entry 
B) statements 2,3,6,and 7;distinguish between different classes of consumers 
C) statements 2 and 3;eliminate the current barriers to entry 
D) statement 1;increase advertising 
E) statement 1;decrease its costs 
A) statements 2,3,6,and 7;eliminate the barriers to entry 
B) statements 2,3,6,and 7;distinguish between different classes of consumers 
C) statements 2 and 3;eliminate the current barriers to entry 
D) statement 1;increase advertising 
E) statement 1;decrease its costs

Question 12

Consumer surplus

Accepted Answer

A) exists when a monopolist practices perfect price discrimination. 
B) equals price minus marginal cost. 
C) is less in the case of a single-price monopoly than in the case of a perfectly competitive industry. 
D) equals zero for a single-price monopolist. 
E) is greater in a single-price monopoly than in a perfectly competitive industry. 
A) exists when a monopolist practices perfect price discrimination. 
B) equals price minus marginal cost. 
C) is less in the case of a single-price monopoly than in the case of a perfectly competitive industry. 
D) equals zero for a single-price monopolist. 
E) is greater in a single-price monopoly than in a perfectly competitive industry.

Question 13

Use the figure below to answer the following questions.   Figure 12.3.4
-Consider the natural monopoly depicted in Figure 12.3.4.What area in the graph represents the deadweight loss arising from an unregulated monopoly?

Accepted Answer

A) ABD 
B) DGF 
C) DEF 
D) ACF 
E) CBDE 
A) ABD 
B) DGF 
C) DEF 
D) ACF 
E) CBDE

Question 14

Use the figure below to answer the following question.   Figure 12.4.1
-Which area in Figure 12.4.1 indicates the deadweight loss from a perfect price-discriminating monopoly?

Accepted Answer

A) EACF 
B) ACD 
C) ABD 
D) BCD 
E) A perfect price-discriminating monopoly does not have a deadweight loss. 
A) EACF 
B) ACD 
C) ABD 
D) BCD 
E) A perfect price-discriminating monopoly does not have a deadweight loss.

A single-price monopolist

A price cap is a price .A price cap might be a more effective way of regulating monopoly than rate of return regulation because under rate of return regulation,.

A monopolist under rate of return regulation has an incentive to

A single-price monopoly is a firm that each unit of its output .A monopoly sells different units of a good or service for different prices.

When Dominant Pizza is willing to sell a pizza to a student who lives on-campus at a lower price than it sells the identical pizza to a student who lives a block away from the campus,Dominant Pizza is

For a single-price monopoly,marginal revenue is less than price because

A monopolist under marginal cost pricing has an incentive to

Consumer surplus

Use the figure below to answer the following questions. Figure 12.3.4 -Consider the natural monopoly depicted in Figure 12.3.4.What area in the graph represents the deadweight loss arising from an unregulated monopoly?

Use the figure below to answer the following question. Figure 12.4.1 -Which area in Figure 12.4.1 indicates the deadweight loss from a perfect price-discriminating monopoly?

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, preferences, and Choices

Output and Costs

Perfect Competition

Monopolistic Competition

Oligopoly

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

Filters

Exam 12: Monopoly

A single-price monopolist

A price cap is a price ________.A price cap might be a more effective way of regulating monopoly than rate of return regulation because under rate of return regulation,________.

A monopolist under rate of return regulation has an incentive to

A single-price monopoly is a firm that ________ each unit of its output ________.A ________ monopoly sells different units of a good or service for different prices.

When Dominant Pizza is willing to sell a pizza to a student who lives on-campus at a lower price than it sells the identical pizza to a student who lives a block away from the campus,Dominant Pizza is

For a single-price monopoly,marginal revenue is less than price because

A monopolist under marginal cost pricing has an incentive to

Consumer surplus

Use the figure below to answer the following questions. Figure 12.3.4 -Consider the natural monopoly depicted in Figure 12.3.4.What area in the graph represents the deadweight loss arising from an unregulated monopoly?

Use the figure below to answer the following question. Figure 12.4.1 -Which area in Figure 12.4.1 indicates the deadweight loss from a perfect price-discriminating monopoly?

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, preferences, and Choices

Output and Costs

Perfect Competition

Monopolistic Competition

Oligopoly

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

Filters

A price cap is a price .A price cap might be a more effective way of regulating monopoly than rate of return regulation because under rate of return regulation,.

A single-price monopoly is a firm that each unit of its output .A monopoly sells different units of a good or service for different prices.