Question 1

"A single-price monopolist will always charge a price that is on the elastic range of its demand." Explain why the previous statement is correct or incorrect.

Accepted Answer

The statement is correct. Only when the

Question 2

A natural monopoly is defined as

Accepted Answer

A)  a market in which competition and entry are restricted by the granting of a government license. 
B)  an industry in which economies of scale allow one firm to supply the entire market at the lowest possible cost. 
C)  a market in which competition and entry are restricted by the granting of a patent. 
D)  any market where one firm constitutes the entire industry. 
A)  a market in which competition and entry are restricted by the granting of a government license. 
B)  an industry in which economies of scale allow one firm to supply the entire market at the lowest possible cost. 
C)  a market in which competition and entry are restricted by the granting of a patent. 
D)  any market where one firm constitutes the entire industry.

Question 3

-Interlace, Inc. produces and a unique soda. The company cannot price discriminate. The figure above shows Interlace's demand curve, marginal revenue curve, and marginal cost curve. Interlace, Inc. is definitely

Accepted Answer

A)  a perfectly competitive firm. 
B)  not a perfectly competitive firm. 
C)  a natural monopoly. 
D)  None of the above answers is correct. 
A)  a perfectly competitive firm. 
B)  not a perfectly competitive firm. 
C)  a natural monopoly. 
D)  None of the above answers is correct.

Question 4

-Mountain Water is a natural monopoly. The government decides to regulate Mountain Water by imposing a marginal cost pricing rule. The figure above shows the demand for Mountain Water. Marginal cost is $0.20 per bottle. The price of a bottle of Mountain Water is ________, and ________ thousand bottles are sold per month.

Accepted Answer

A)  $0.20; 400 
B)  $0.50; 250 
C)  $0.20; 500 
D)  $1.00; 500 
A)  $0.20; 400 
B)  $0.50; 250 
C)  $0.20; 500 
D)  $1.00; 500

Question 5

-If a marginal cost pricing rule is imposed on the firm in the figure above, the consumer surplus will be

Accepted Answer

A)  zero. 
B)  $800. 
C)  $400. 
D)  $200. 
A)  zero. 
B)  $800. 
C)  $400. 
D)  $200.

Question 6

-Consumer surplus is

Accepted Answer

A)  positive in the case of a monopolist practicing perfect price discrimination. 
B)  equal to the price minus the marginal cost. 
C)  less in the case of a single-price monopoly than in the case of a perfectly competitive industry. 
D)  zero for a single-price monopolist. 
A)  positive in the case of a monopolist practicing perfect price discrimination. 
B)  equal to the price minus the marginal cost. 
C)  less in the case of a single-price monopoly than in the case of a perfectly competitive industry. 
D)  zero for a single-price monopolist.

Question 7

A monopoly creates a deadweight loss because the monopoly produces less than the efficient quantity.

Accepted Answer

A) True 
 B)False

Question 8

If a monopoly is operating along the portion of its demand curve where marginal revenue is positive, its

Accepted Answer

A)  total revenue increases when price decreases. 
B)  total revenue decreases when price decreases. 
C)  total revenue remains the same when price decreases. 
D)  total revenue is zero. 
A)  total revenue increases when price decreases. 
B)  total revenue decreases when price decreases. 
C)  total revenue remains the same when price decreases. 
D)  total revenue is zero.

Question 9

-If the monopoly illustrated in the figure above could engage in perfect price discrimination, then each buyer would pay

Accepted Answer

A)  $2.00. 
B)  $3.00. 
C)  $3.50. 
D)  a different price. 
A)  $2.00. 
B)  $3.00. 
C)  $3.50. 
D)  a different price.

Question 10

How can managers of natural monopolies exaggerate their costs?

Accepted Answer

By increasing on-the-job luxury items su

Question 11

-The figure above shows a monopoly firm's demand curve. At point u in the figure, the demand facing the monopoly is

Accepted Answer

A)  elastic. 
B)  unit elastic. 
C)  inelastic. 
D)  less than the supply. 
A)  elastic. 
B)  unit elastic. 
C)  inelastic. 
D)  less than the supply.

Question 12

Which of the following markets will have the largest deadweight loss?

Accepted Answer

A)  A market that consists of perfectly competitive firms. 
B)  A market that consists of a single-price monopoly. 
C)  A market that consists of a perfect price discriminating monopoly. 
D)  None of the above. There is no deadweight loss as long as firms produce at the level of output where marginal revenue equals marginal cost. 
A)  A market that consists of perfectly competitive firms. 
B)  A market that consists of a single-price monopoly. 
C)  A market that consists of a perfect price discriminating monopoly. 
D)  None of the above. There is no deadweight loss as long as firms produce at the level of output where marginal revenue equals marginal cost.

Question 13

A monopolist can make an economic profit in the long run because of

Accepted Answer

A)  the relatively elastic demand for its product. 
B)  the relatively inelastic demand for its product. 
C)  the firm's price setting behavior. 
D)  barriers to entry. 
A)  the relatively elastic demand for its product. 
B)  the relatively inelastic demand for its product. 
C)  the firm's price setting behavior. 
D)  barriers to entry.

Question 14

A single-price monopolist produces a ________ quantity than a perfectly competitive market with the same costs and charges a ________ price than the perfectly competitive market.

Accepted Answer

A)  greater; higher 
B)  greater; lower 
C)  lesser; lower 
D)  lesser; higher 
A)  greater; higher 
B)  greater; lower 
C)  lesser; lower 
D)  lesser; higher

Question 15

Patents encourage inventions because without a patent,

Accepted Answer

A)  other firms could enter the inventor's market by producing the same product. 
B)  nobody would demand the inventor's product. 
C)  the inventor would receive no tax breaks. 
D)  all markets would be public franchises. 
A)  other firms could enter the inventor's market by producing the same product. 
B)  nobody would demand the inventor's product. 
C)  the inventor would receive no tax breaks. 
D)  all markets would be public franchises.

Question 16

The existence of economies of scale can create ________.

Accepted Answer

A)  a natural monopoly 
B)  a government monopoly 
C)  a legal monopoly 
D)  a market in which many firms make identical products 
A)  a natural monopoly 
B)  a government monopoly 
C)  a legal monopoly 
D)  a market in which many firms make identical products

Question 17

Regulation of a natural monopoly will maximize the sum of consumer surplus and producer surplus if the firm is regulated with

Accepted Answer

A)  an average cost pricing rule. 
B)  a marginal cost pricing rule. 
C)  rate of return regulation. 
D)  All of the above answers are correct. 
A)  an average cost pricing rule. 
B)  a marginal cost pricing rule. 
C)  rate of return regulation. 
D)  All of the above answers are correct.

Question 18

A natural monopoly

Accepted Answer

A)  is not protected by any barrier to entry. 
B)  exists because of legal barriers to entry. 
C)  is an industry in which economies of scale exist at the level of output where the market demand curve intersects the long-run average cost curve. 
D)  is an industry where two or more smaller firms can supply the market at a lower cost than one big firm could. 
A)  is not protected by any barrier to entry. 
B)  exists because of legal barriers to entry. 
C)  is an industry in which economies of scale exist at the level of output where the market demand curve intersects the long-run average cost curve. 
D)  is an industry where two or more smaller firms can supply the market at a lower cost than one big firm could.

Question 19

What is the drawback of forcing a natural monopolist to use a marginal cost pricing rule?

Accepted Answer

A)  No deadweight loss is eliminated. 
B)  The firm will incur an economic loss. 
C)  The gain in consumer surplus will be less than the loss in producer surplus, thus creating additional deadweight loss. 
D)  None of the above answers is correct. 
A)  No deadweight loss is eliminated. 
B)  The firm will incur an economic loss. 
C)  The gain in consumer surplus will be less than the loss in producer surplus, thus creating additional deadweight loss. 
D)  None of the above answers is correct.

Question 20

Why do perfectly competitive firms maximize their profits by producing so that the price is equal to marginal cost, but monopolists maximize their profits by setting a price that is greater than marginal cost?

Accepted Answer

Both types of firms maximize profits by

Exam 13: Monopoly

"A single-price monopolist will always charge a price that is on the elastic range of its demand." Explain why the previous statement is correct or incorrect.

A natural monopoly is defined as

-Interlace, Inc. produces and a unique soda. The company cannot price discriminate. The figure above shows Interlace's demand curve, marginal revenue curve, and marginal cost curve. Interlace, Inc. is definitely

-If a marginal cost pricing rule is imposed on the firm in the figure above, the consumer surplus will be

-Consumer surplus is

A monopoly creates a deadweight loss because the monopoly produces less than the efficient quantity.

If a monopoly is operating along the portion of its demand curve where marginal revenue is positive, its

-If the monopoly illustrated in the figure above could engage in perfect price discrimination, then each buyer would pay

How can managers of natural monopolies exaggerate their costs?

-The figure above shows a monopoly firm's demand curve. At point u in the figure, the demand facing the monopoly is

Which of the following markets will have the largest deadweight loss?

A monopolist can make an economic profit in the long run because of

A single-price monopolist produces a ________ quantity than a perfectly competitive market with the same costs and charges a ________ price than the perfectly competitive market.

Patents encourage inventions because without a patent,

The existence of economies of scale can create ________.

Regulation of a natural monopoly will maximize the sum of consumer surplus and producer surplus if the firm is regulated with

A natural monopoly

What is the drawback of forcing a natural monopolist to use a marginal cost pricing rule?

Why do perfectly competitive firms maximize their profits by producing so that the price is equal to marginal cost, but monopolists maximize their profits by setting a price that is greater than marginal cost?

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

Organizing Production

Output and Costs

Perfect Competition

Monopolistic Competition

Oligopoly

Public Choices and Public Goods

Externalities and the Environment

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Extension A: Review

Extension B: Review

Extension C: Review

Extension D: Review

Extension E: Review

Extension F: Review

Filters

A single-price monopolist produces a quantity than a perfectly competitive market with the same costs and charges a price than the perfectly competitive market.