Question 1

What is a natural monopoly?

Accepted Answer

A natural monopoly is a market

Question 2

Price discrimination

Accepted Answer

A)  is common in perfectly competitive markets. 
B)  is more likely for services than for goods that can be stored and resold. 
C)  is illegal because it always violates antitrust laws. 
D)  works only if all groups of demanders have the same price elasticity of demand for the product. 
A)  is common in perfectly competitive markets. 
B)  is more likely for services than for goods that can be stored and resold. 
C)  is illegal because it always violates antitrust laws. 
D)  works only if all groups of demanders have the same price elasticity of demand for the product.

Question 3

-Consider the market for cable television in the figure above. This graph depicts a natural monopoly because the

Accepted Answer

A)  marginal cost curve is constant. 
B)  demand curve is downward sloping. 
C)  average cost curve is declining as it crosses the demand curve. 
D)  marginal revenue curve is downward sloping. 
A)  marginal cost curve is constant. 
B)  demand curve is downward sloping. 
C)  average cost curve is declining as it crosses the demand curve. 
D)  marginal revenue curve is downward sloping.

Question 4

A monopoly is a firm that produces a good or service for which no close substitute exists.

Accepted Answer

A) True 
 B)False

Question 5

-Which area in the above figure equals the consumer surplus under perfect price discrimination?

Accepted Answer

A)  A + B + C + D + E + F + G + H 
B)  A + B + C + D + E 
C)  A + B 
D)  There is no consumer surplus. 
A)  A + B + C + D + E + F + G + H 
B)  A + B + C + D + E 
C)  A + B 
D)  There is no consumer surplus.

Question 6

An efficient use of resources occurs when

Accepted Answer

A)  there is a deadweight loss. 
B)  the total social benefit of a good equals its total social cost. 
C)  there is perfect price discrimination by a monopoly. 
D)  there is no producer surplus. 
A)  there is a deadweight loss. 
B)  the total social benefit of a good equals its total social cost. 
C)  there is perfect price discrimination by a monopoly. 
D)  there is no producer surplus.

Question 7

-In the figure above, the deadweight loss when the market is a single-price monopoly rather than perfectly competitive is the area of

Accepted Answer

A)  triangle aeb. 
B)  triangle aic. 
C)  triangle eig. 
D)  triangle eif. 
A)  triangle aeb. 
B)  triangle aic. 
C)  triangle eig. 
D)  triangle eif.

Question 8

-Prime Pharmaceuticals has developed a new asthma medicine, for which 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 Prime Pharmaceuticals could perfectly price discriminate, then which of the following is true?

Accepted Answer

A)  It would produce and sell 16 million inhalers. 
B)  Inhalers would sell for $5 each. 
C)  Inhalers would sell for $2 each. 
D)  None of the above answers is correct. 
A)  It would produce and sell 16 million inhalers. 
B)  Inhalers would sell for $5 each. 
C)  Inhalers would sell for $2 each. 
D)  None of the above answers is correct.

Question 9

-In the figure above, the curve labeled "X" can be a

Accepted Answer

A)  monopoly's demand curve. 
B)  monopoly's marginal revenue curve. 
C)  perfectly competitive firm's demand curve. 
D)  perfectly competitive firm's marginal revenue curve. 
A)  monopoly's demand curve. 
B)  monopoly's marginal revenue curve. 
C)  perfectly competitive firm's demand curve. 
D)  perfectly competitive firm's marginal revenue curve.

Question 10

A patent creates a monopoly by restricting ________.

Accepted Answer

A)  demand for the product 
B)  the number of complements for the product 
C)  the amount of advertising that can be undertaken 
D)  entry into the market 
A)  demand for the product 
B)  the number of complements for the product 
C)  the amount of advertising that can be undertaken 
D)  entry into the market

Question 11

-In the market depicted in the above figure, if a single-price monopoly maximizes its profit ,which area shows the deadweight loss?

Accepted Answer

A)  area FHIL 
B)  area GHJM 
C)  area IJH 
D)  area LJK 
A)  area FHIL 
B)  area GHJM 
C)  area IJH 
D)  area LJK

Question 12

A single-price monopolist determines

Accepted Answer

A)  its output but not its price. 
B)  its price but not its output. 
C)  both its output and its price. 
D)  neither its output nor its price. 
A)  its output but not its price. 
B)  its price but not its output. 
C)  both its output and its price. 
D)  neither its output nor its price.

Question 13

If the market illustrated in the above figure was a perfectly competitive market with the MC curve being the sum of all individual firms' marginal costs, then the perfectly competitive price and quantity would be

Accepted Answer

A)  P3 and Q1. 
B)  P5 and Q1. 
C)  P1 and Q1. 
D)  P4 and Q3. 
A)  P3 and Q1. 
B)  P5 and Q1. 
C)  P1 and Q1. 
D)  P4 and Q3.

Question 14

Compared to a perfectly competitive industry, a single-price monopoly with the same costs will

Accepted Answer

A)  create less consumer surplus. 
B)  create less economic profit. 
C)  create a deadweight loss. 
D)  Both answers A and C are correct. 
A)  create less consumer surplus. 
B)  create less economic profit. 
C)  create a deadweight loss. 
D)  Both answers A and C are correct.

Question 15

-The figure above shows the demand and cost curves for a single-price monopoly. What price will the firm charge?

Accepted Answer

A)  $50 per unit 
B)  $30 per unit 
C)  $20 per unit 
D)  $10 per unit 
A)  $50 per unit 
B)  $30 per unit 
C)  $20 per unit 
D)  $10 per unit

Question 16

Under rate of return regulation, a natural monopoly ________.

Accepted Answer

A)  has an incentive to inflate its costs 
B)  has an incentive to deflate its costs and capture more of the market 
C)  makes an economic profit 
D)  sets price equal to marginal cost 
A)  has an incentive to inflate its costs 
B)  has an incentive to deflate its costs and capture more of the market 
C)  makes an economic profit 
D)  sets price equal to marginal cost

Question 17

Describe the general types of barriers.

Accepted Answer

Barriers to entry can be divided into le

Question 18

-In the figure above, consumer surplus at the price that maximizes the profit for an unregulated, single-price monopolist is the area of

Accepted Answer

A)  rectangle 0heb. 
B)  triangle abe. 
C)  triangle eig. 
D)  rectangle 0hgd. 
A)  rectangle 0heb. 
B)  triangle abe. 
C)  triangle eig. 
D)  rectangle 0hgd.

Question 19

Customers are most likely buying from a natural monopoly when they purchase

Accepted Answer

A)  aspirin from a generic drug company. 
B)  a laptop computer from Sony. 
C)  a glass of water from the local water company. 
D)  all of the above 
A)  aspirin from a generic drug company. 
B)  a laptop computer from Sony. 
C)  a glass of water from the local water company. 
D)  all of the above

Question 20

-In the above figure, if the natural monopoly is regulated with an average cost pricing rule and the firm does not inflate its costs, then consumer surplus will be

Accepted Answer

A)  $192 million. 
B)  $108 million. 
C)  $216 million. 
D)  $60 million. 
A)  $192 million. 
B)  $108 million. 
C)  $216 million. 
D)  $60 million.

Exam 13: Monopoly

What is a natural monopoly?

Price discrimination

-Consider the market for cable television in the figure above. This graph depicts a natural monopoly because the

A monopoly is a firm that produces a good or service for which no close substitute exists.

-Which area in the above figure equals the consumer surplus under perfect price discrimination?

An efficient use of resources occurs when

-In the figure above, the deadweight loss when the market is a single-price monopoly rather than perfectly competitive is the area of

-In the figure above, the curve labeled "X" can be a

A patent creates a monopoly by restricting ________.

-In the market depicted in the above figure, if a single-price monopoly maximizes its profit ,which area shows the deadweight loss?

A single-price monopolist determines

If the market illustrated in the above figure was a perfectly competitive market with the MC curve being the sum of all individual firms' marginal costs, then the perfectly competitive price and quantity would be

Compared to a perfectly competitive industry, a single-price monopoly with the same costs will

-The figure above shows the demand and cost curves for a single-price monopoly. What price will the firm charge?

Under rate of return regulation, a natural monopoly ________.

Describe the general types of barriers.

-In the figure above, consumer surplus at the price that maximizes the profit for an unregulated, single-price monopolist is the area of

Customers are most likely buying from a natural monopoly when they purchase

-In the above figure, if the natural monopoly is regulated with an average cost pricing rule and the firm does not inflate its costs, then consumer surplus will be

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