Question 1

-Which area in the above figure shows the consumer surplus at the price and quantity that would be attained if the industry were perfectly competitive?

Accepted Answer

A)  A + B + C + D 
B)  A + B + C + D + E 
C)  F + G + H 
D)  A + B + C + D + E + F + G + H 
A)  A + B + C + D 
B)  A + B + C + D + E 
C)  F + G + H 
D)  A + B + C + D + E + F + G + H

Question 2

A single-price monopoly charges the same price

Accepted Answer

A)  even if the demand curve shifts. 
B)  even if its cost curves shift. 
C)  to all customers for each unit of output they buy. 
D)  at all times, and that price equals the firm's marginal revenue. 
A)  even if the demand curve shifts. 
B)  even if its cost curves shift. 
C)  to all customers for each unit of output they buy. 
D)  at all times, and that price equals the firm's marginal revenue.

Question 3

-If a marginal cost pricing rule is imposed on the natural monopoly shown in the figure above, then the deadweight loss will equal

Accepted Answer

A)  $0. 
B)  $4 million. 
C)  $8 million. 
D)  $12 million. 
A)  $0. 
B)  $4 million. 
C)  $8 million. 
D)  $12 million.

Question 4

Which of the following is an example of natural monopoly?

Accepted Answer

A)  cellular phone companies in a large city 
B)  local water utility companies 
C)  major league sports franchises in the largest cities 
D)  All of the above are natural monopolies. 
A)  cellular phone companies in a large city 
B)  local water utility companies 
C)  major league sports franchises in the largest cities 
D)  All of the above are natural monopolies.

Question 5

The WaveHouse on Mission Beach in San Diego features the Bruticus Maximus, a ten foot wave, which tests the skills of even the most talented surf and wake board riders on the planet. WaveHouse is the only place in San Diego where this service is offered. You can ride B. Max for $40 for the first hour, $33 for the second hour, and $26 for the third hour. Why would WaveHouse charge different prices for each subsequent hour of riding?

Accepted Answer

A)  To capture consumer surplus among groups of buyers 
B)  To capture consumer surplus among units of a good 
C)  To create customer loyalty 
D)  To encourage skill development 
A)  To capture consumer surplus among groups of buyers 
B)  To capture consumer surplus among units of a good 
C)  To create customer loyalty 
D)  To encourage skill development

Question 6

Which of the following can create a monopoly? I. high prices
II) public franchise
III) patent
IV) government license

Accepted Answer

A)  I and II 
B)  I and III 
C)  I, II and III 
D)  II, III and IV 
A)  I and II 
B)  I and III 
C)  I, II and III 
D)  II, III and IV

Question 7

-Prime Pharmaceuticals has developed a new asthma medicine, for it has a patent. An inhaler can be produced at a constant marginal cost of $2/inhaler. The demand curve, marginal revenue curve, and marginal cost curve for this new asthma inhaler are in the figure above. With its patent giving it a monopoly for its new inhaler, if it is a single-price monopoly, Prime Pharmaceuticals will produce ________ inhalers and set a price of ________ for each inhaler.

Accepted Answer

A)  16 million; $2 
B)  10 million; $5 
C)  8 million; $6 
D)  8 million; $2 
A)  16 million; $2 
B)  10 million; $5 
C)  8 million; $6 
D)  8 million; $2

Question 8

-Dee's TV Repair is the only TV repair shop in a small town. Dee is a single-price monopolist. Based on the demand and cost information in the table above, what quantity of TV repairs should Dee undertake?

Accepted Answer

A)  0 per week 
B)  10 per week 
C)  20 per week 
D)  30 per week 
A)  0 per week 
B)  10 per week 
C)  20 per week 
D)  30 per week

Question 9

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

Accepted Answer

A)  $0. 
B)  $8 million. 
C)  $16 million. 
D)  $32 million. 
A)  $0. 
B)  $8 million. 
C)  $16 million. 
D)  $32 million.

Question 10

The social interest theory of regulation predicts that the political process will seek to minimize

Accepted Answer

A)  producer surplus. 
B)  consumer surplus. 
C)  total surplus. 
D)  deadweight loss. 
A)  producer surplus. 
B)  consumer surplus. 
C)  total surplus. 
D)  deadweight loss.

Question 11

Rent seeking

Accepted Answer

A)  is an additional social cost of monopoly. 
B)  is only a problem in the commercial real estate market. 
C)  helps employ resources that would otherwise be unemployed. 
D)  is beneficial to society. 
A)  is an additional social cost of monopoly. 
B)  is only a problem in the commercial real estate market. 
C)  helps employ resources that would otherwise be unemployed. 
D)  is beneficial to society.

Question 12

A single-price monopolist will maximize profit by producing so that marginal revenue

Accepted Answer

A)  exceeds marginal cost. 
B)  is less than marginal cost. 
C)  equals marginal cost. 
D)  equals price. 
A)  exceeds marginal cost. 
B)  is less than marginal cost. 
C)  equals marginal cost. 
D)  equals price.

Question 13

Which of the following cannot be an effective entry barrier?

Accepted Answer

A)  a firm earning very high economic profits 
B)  a firm being granted a patent for its product 
C)  a firm owning all of a vital resource needed to produce a good 
D)  when huge economies of scale exist 
A)  a firm earning very high economic profits 
B)  a firm being granted a patent for its product 
C)  a firm owning all of a vital resource needed to produce a good 
D)  when huge economies of scale exist

Question 14

-The table above gives the demand for a monopolist's output. What is the marginal revenue of increasing production from 4 to 5 units?

Accepted Answer

A)  $70 
B)  $16 
C)  $14 
D)  $6 
A)  $70 
B)  $16 
C)  $14 
D)  $6

Question 15

Which of the following is true for BOTH monopoly and a perfectly competitive firm?

Accepted Answer

A)  The demand for the individual firm's product is perfectly elastic. 
B)  Economic profits can be sustained indefinitely over time. 
C)  The marginal revenue curve is horizontal at the market equilibrium price. 
D)  Profits are maximized by producing at the level of output where marginal revenue is equal to marginal cost. 
A)  The demand for the individual firm's product is perfectly elastic. 
B)  Economic profits can be sustained indefinitely over time. 
C)  The marginal revenue curve is horizontal at the market equilibrium price. 
D)  Profits are maximized by producing at the level of output where marginal revenue is equal to marginal cost.

Question 16

A perfect price discriminator

Accepted Answer

A)  charges the maximum price for each unit that consumers are willing to pay. 
B)  is able to convince consumers to pay more for each unit than they are willing to pay. 
C)  is unable to make an economic profit. 
D)  disregards the market demand curve. 
A)  charges the maximum price for each unit that consumers are willing to pay. 
B)  is able to convince consumers to pay more for each unit than they are willing to pay. 
C)  is unable to make an economic profit. 
D)  disregards the market demand curve.

Question 17

-The figure above provides information about Light-U-Up Utilities, which is a natural monopoly that provides electricity. What is the area of deadweight loss when Light-U-Up is regulated and follows an average cost pricing rule?

Accepted Answer

A)  acg 
B)  degf 
C)  deg 
D)  There is no deadweight loss. 
A)  acg 
B)  degf 
C)  deg 
D)  There is no deadweight loss.

Question 18

To maximize profit, the monopolist produces on the ________ portion of its demand where ________.

Accepted Answer

A)  elastic; P = MC 
B)  elastic; MR = MC 
C)  inelastic; P = MC 
D)  inelastic; MR = MC 
A)  elastic; P = MC 
B)  elastic; MR = MC 
C)  inelastic; P = MC 
D)  inelastic; MR = MC

Question 19

The iconic American drink-maker, Coca-Cola, announced plans in 2008 to buy the dominant Chinese fruit juice company for $2.5 billion. But China just rolled out a new law to guard against business monopolies. How would this rent-seeking behavior by Coca-Cola most likely affect efficiency in the drink market?

Accepted Answer

A)  Profit would increase. 
B)  Producer surplus would increase. 
C)  Consumer surplus would decrease. 
D)  Deadweight loss would increase. 
A)  Profit would increase. 
B)  Producer surplus would increase. 
C)  Consumer surplus would decrease. 
D)  Deadweight loss would increase.

Question 20

-Donna owns the only dog grooming salon on Lonely Island. The figure above shows the dog grooming market. Donna is a single-price monopoly that maximizes profit by charging ________ per grooming and producing ________ groomings per day.

Accepted Answer

A)  $30; 8 
B)  $20; $8 
C)  $20; $12 
D)  None of the above answers is correct. 
A)  $30; 8 
B)  $20; $8 
C)  $20; $12 
D)  None of the above answers is correct.

Exam 13: Monopoly

-Which area in the above figure shows the consumer surplus at the price and quantity that would be attained if the industry were perfectly competitive?

A single-price monopoly charges the same price

-If a marginal cost pricing rule is imposed on the natural monopoly shown in the figure above, then the deadweight loss will equal

Which of the following is an example of natural monopoly?

Which of the following can create a monopoly? I. high prices II) public franchise III) patent IV) government license

-Dee's TV Repair is the only TV repair shop in a small town. Dee is a single-price monopolist. Based on the demand and cost information in the table above, what quantity of TV repairs should Dee undertake?

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

The social interest theory of regulation predicts that the political process will seek to minimize

Rent seeking

A single-price monopolist will maximize profit by producing so that marginal revenue

Which of the following cannot be an effective entry barrier?

-The table above gives the demand for a monopolist's output. What is the marginal revenue of increasing production from 4 to 5 units?

Which of the following is true for BOTH monopoly and a perfectly competitive firm?

A perfect price discriminator

-The figure above provides information about Light-U-Up Utilities, which is a natural monopoly that provides electricity. What is the area of deadweight loss when Light-U-Up is regulated and follows an average cost pricing rule?

To maximize profit, the monopolist produces on the ________ portion of its demand where ________.

-Donna owns the only dog grooming salon on Lonely Island. The figure above shows the dog grooming market. Donna is a single-price monopoly that maximizes profit by charging ________ per grooming and producing ________ groomings per day.

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

To maximize profit, the monopolist produces on the portion of its demand where .

-Donna owns the only dog grooming salon on Lonely Island. The figure above shows the dog grooming market. Donna is a single-price monopoly that maximizes profit by charging per grooming and producing groomings per day.