Question 1

-In the above figure, a single-price monopolist charges a price of ________ and the equilibrium competitive price is ________.

Accepted Answer

A)  $10; $20 
B)  $20; $30 
C)  $30; $20 
D)  $30; $10 
A)  $10; $20 
B)  $20; $30 
C)  $30; $20 
D)  $30; $10

Question 2

Which of the following is ALWAYS true for a profit-maximizing single-price monopolist?

Accepted Answer

A)  P > MC 
B)  P > MR 
C)  MR = MC 
D)  All of the above are always true. 
A)  P > MC 
B)  P > MR 
C)  MR = MC 
D)  All of the above are always true.

Question 3

Suppose a firm is a natural monopoly. Then, until the long-run average cost curve crosses the demand curve, as the quantity increases the long-run average costs

Accepted Answer

A)  increase. 
B)  decrease. 
C)  decrease and then increase. 
D)  increase and then decrease. 
A)  increase. 
B)  decrease. 
C)  decrease and then increase. 
D)  increase and then decrease.

Question 4

Rate of return regulation, as currently applied to many natural monopolies such as public utilities,

Accepted Answer

A)  generally involves the use of price caps. 
B)  gives the firms an incentive to inflate their costs. 
C)  gives the firms an incentive to cut their costs as much as possible. 
D)  generally keeps their prices higher than if they were unregulated monopolists. 
A)  generally involves the use of price caps. 
B)  gives the firms an incentive to inflate their costs. 
C)  gives the firms an incentive to cut their costs as much as possible. 
D)  generally keeps their prices higher than if they were unregulated monopolists.

Question 5

A natural monopoly that charges the profit-maximizing price will produce ________ amount of output than a ________.

Accepted Answer

A)  a larger; natural monopoly regulated with an average cost pricing rule 
B)  a more efficient; perfectly competitive industry 
C)  the same; natural monopoly regulated with a marginal cost pricing rule 
D)  a smaller; natural monopoly regulated with a marginal cost pricing rule 
A)  a larger; natural monopoly regulated with an average cost pricing rule 
B)  a more efficient; perfectly competitive industry 
C)  the same; natural monopoly regulated with a marginal cost pricing rule 
D)  a smaller; natural monopoly regulated with a marginal cost pricing rule

Question 6

A monopolist maximizes its profit by producing the amount of output where

Accepted Answer

A)  total revenue equals total cost. 
B)  marginal revenue equals marginal cost. 
C)  marginal revenue equals zero. 
D)  price equals marginal cost. 
A)  total revenue equals total cost. 
B)  marginal revenue equals marginal cost. 
C)  marginal revenue equals zero. 
D)  price equals marginal cost.

Question 7

Comment on the following: "A monopolist is a firm that can raise its price without experiencing a decrease in its total revenue."

Accepted Answer

This statement describes a fir

Question 8

Under a marginal cost pricing rule, a regulated natural monopoly

Accepted Answer

A)  makes a positive economic profit and there is a deadweight loss. 
B)  makes zero economic profit and there is no deadweight loss. 
C)  incurs an economic loss and there is a deadweight loss. 
D)  incurs an economic loss and there is no deadweight loss. 
A)  makes a positive economic profit and there is a deadweight loss. 
B)  makes zero economic profit and there is no deadweight loss. 
C)  incurs an economic loss and there is a deadweight loss. 
D)  incurs an economic loss and there is no deadweight loss.

Question 9

Give an example of price discrimination.

Accepted Answer

Though there are many examples of price

Question 10

The social interest theory of regulation assumes that

Accepted Answer

A)  regulations maximize consumer surplus. 
B)  regulations set price equal to average total revenue. 
C)  public officials seek to minimize deadweight loss. 
D)  public officials seek gain through regulation for only their own constituents. 
A)  regulations maximize consumer surplus. 
B)  regulations set price equal to average total revenue. 
C)  public officials seek to minimize deadweight loss. 
D)  public officials seek gain through regulation for only their own constituents.

Question 11

-In the above figure, if the natural monopoly is regulated using an average cost pricing rule, but the firm can pad its costs and make the regulator believe its costs are ATC (inflated), then the price the firm charges will increase from

Accepted Answer

A)  $18 to $24. 
B)  $12 to $24. 
C)  $12 to $18. 
D)  $18 to $36. 
A)  $18 to $24. 
B)  $12 to $24. 
C)  $12 to $18. 
D)  $18 to $36.

Question 12

-Roxie's Movie Theatre has a monopoly and discovers that at $12 a movie, no one is buying movie tickets during weekdays. Roxie's conducts a survey and the table above reveals the results of the survey. Roxie decides to price discriminate between weekend and weekday moviegoers. The marginal cost of a showing a movie is $6. Roxie's charges ________ on weekdays and ________ on weekends.

Accepted Answer

A)  $9; $12 
B)  $6; $15 
C)  $6; $18 
D)  $3; $12 
A)  $9; $12 
B)  $6; $15 
C)  $6; $18 
D)  $3; $12

Question 13

-In comparison with a perfect competition, a single-price monopolist with the same costs creates a ________ consumer surplus and makes a ________ economic profit.

Accepted Answer

A)  smaller; larger 
B)  smaller; smaller 
C)  larger; larger 
D)  larger; smaller 
A)  smaller; larger 
B)  smaller; smaller 
C)  larger; larger 
D)  larger; smaller

Question 14

A public franchise is

Accepted Answer

A)  an exclusive right granted to a firm to supply a good or service. 
B)  a government issued license required to practice a profession. 
C)  an exclusive right granted to an inventor of a product. 
D)  a unique source of raw materials. 
A)  an exclusive right granted to a firm to supply a good or service. 
B)  a government issued license required to practice a profession. 
C)  an exclusive right granted to an inventor of a product. 
D)  a unique source of raw materials.

Question 15

Why can a monopoly make an economic profit in the long run?

Accepted Answer

A)  because there are close substitutes for the firm's product 
B)  because the firm is protected by barriers to entry 
C)  because the firm produces where MR = MC 
D)  All of the above are reasons why a monopoly can earn an economic profit in the long run. 
A)  because there are close substitutes for the firm's product 
B)  because the firm is protected by barriers to entry 
C)  because the firm produces where MR = MC 
D)  All of the above are reasons why a monopoly can earn an economic profit in the long run.

Question 16

-The figure above shows a monopoly firm's demand curve. The monopoly's total revenue is zero at point

Accepted Answer

A)  x. 
B)  r. 
C)  t. 
D)  u. 
A)  x. 
B)  r. 
C)  t. 
D)  u.

Question 17

One difference between perfectly competitive markets and single-price monopoly markets is that

Accepted Answer

A)  marginal revenue equals marginal cost for perfectly competitive firms, but not for monopolists. 
B)  marginal revenue equals price for perfectly competitive firms, but not for single-price monopolists. 
C)  marginal cost equals average variable cost for perfectly competitive firms but not for monopolists. 
D)  All the above answers are correct. 
A)  marginal revenue equals marginal cost for perfectly competitive firms, but not for monopolists. 
B)  marginal revenue equals price for perfectly competitive firms, but not for single-price monopolists. 
C)  marginal cost equals average variable cost for perfectly competitive firms but not for monopolists. 
D)  All the above answers are correct.

Question 18

Which of the following types of economic regulation is most likely to encourage a natural monopoly to NOT inflate its costs?

Accepted Answer

A)  average cost pricing rule 
B)  rate of return regulation 
C)  price cap regulation 
D)  None of the above encourages cost cutting. 
A)  average cost pricing rule 
B)  rate of return regulation 
C)  price cap regulation 
D)  None of the above encourages cost cutting.

Question 19

Joe, a hair dresser, offers students a discount price on haircuts. This form of pricing is an example of

Accepted Answer

A)  a marginal cost pricing rule. 
B)  an average cost pricing rule. 
C)  price discrimination. 
D)  perfect price discrimination. 
A)  a marginal cost pricing rule. 
B)  an average cost pricing rule. 
C)  price discrimination. 
D)  perfect price discrimination.

Question 20

Which of the following is a characteristic of a single-price monopoly?

Accepted Answer

A)  The firm is a price taker. 
B)  Demand is perfectly elastic. 
C)  There are many close substitutes for the firm's product. 
D)  Price exceeds marginal revenue. 
A)  The firm is a price taker. 
B)  Demand is perfectly elastic. 
C)  There are many close substitutes for the firm's product. 
D)  Price exceeds marginal revenue.

Exam 13: Monopoly

-In the above figure, a single-price monopolist charges a price of ________ and the equilibrium competitive price is ________.

Which of the following is ALWAYS true for a profit-maximizing single-price monopolist?

Suppose a firm is a natural monopoly. Then, until the long-run average cost curve crosses the demand curve, as the quantity increases the long-run average costs

Rate of return regulation, as currently applied to many natural monopolies such as public utilities,

A natural monopoly that charges the profit-maximizing price will produce ________ amount of output than a ________.

A monopolist maximizes its profit by producing the amount of output where

Comment on the following: "A monopolist is a firm that can raise its price without experiencing a decrease in its total revenue."

Under a marginal cost pricing rule, a regulated natural monopoly

Give an example of price discrimination.

The social interest theory of regulation assumes that

-In the above figure, if the natural monopoly is regulated using an average cost pricing rule, but the firm can pad its costs and make the regulator believe its costs are ATC (inflated), then the price the firm charges will increase from

-In comparison with a perfect competition, a single-price monopolist with the same costs creates a ________ consumer surplus and makes a ________ economic profit.

A public franchise is

Why can a monopoly make an economic profit in the long run?

-The figure above shows a monopoly firm's demand curve. The monopoly's total revenue is zero at point

One difference between perfectly competitive markets and single-price monopoly markets is that

Which of the following types of economic regulation is most likely to encourage a natural monopoly to NOT inflate its costs?

Joe, a hair dresser, offers students a discount price on haircuts. This form of pricing is an example of

Which of the following is a characteristic of a single-price 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

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

-In the above figure, a single-price monopolist charges a price of and the equilibrium competitive price is .

A natural monopoly that charges the profit-maximizing price will produce amount of output than a .

-In comparison with a perfect competition, a single-price monopolist with the same costs creates a consumer surplus and makes a economic profit.