Question 1

If the regulator wanted to maximize the total surplus in a natural monopoly market, the regulator has the firm set its price equal to its

Accepted Answer

A)  average fixed cost. 
B)  average total cost. 
C)  average variable cost. 
D)  marginal cost. 
A)  average fixed cost. 
B)  average total cost. 
C)  average variable cost. 
D)  marginal cost.

Question 2

Buying a monopoly from the existing owner does not ensure an economic profit because

Accepted Answer

A)  the market for monopolies is a monopoly. 
B)  competition among buyers drives up the cost of buying the firm. 
C)  profits equal zero in the long run anyway. 
D)  of the deadweight loss triangle. 
A)  the market for monopolies is a monopoly. 
B)  competition among buyers drives up the cost of buying the firm. 
C)  profits equal zero in the long run anyway. 
D)  of the deadweight loss triangle.

Question 3

A natural monopoly that is regulated to set its price according to the marginal cost pricing rule will

Accepted Answer

A)  incur an economic loss. 
B)  maximize its profit. 
C)  produce a quantity of output such that price is above average total cost. 
D)  produce a quantity of output such that marginal cost is above average total cost. 
A)  incur an economic loss. 
B)  maximize its profit. 
C)  produce a quantity of output such that price is above average total cost. 
D)  produce a quantity of output such that marginal cost is above average total cost.

Question 4

-The table above gives the demand schedule for water bottled by Wanda's Healthy Waters. Wanda's marginal cost is a constant $4 a bottle and has no fixed cost. Wanda's makes an economic profit of ________ a day.

Accepted Answer

A)  $0 
B)  $24 
C)  $36 
D)  $60 
A)  $0 
B)  $24 
C)  $36 
D)  $60

Question 5

In order to maximize its profit, a single-price monopoly always produces output in the inelastic range of the demand for its product.

Accepted Answer

A) True 
 B)False

Question 6

A monopoly

Accepted Answer

A)  faces a perfectly elastic demand curve. 
B)  does not need to take account of demand because it's the only seller. 
C)  raises the price it can charge for its product by increasing the quantity sold. 
D)  raises the price it can charge for its product by decreasing the quantity sold. 
A)  faces a perfectly elastic demand curve. 
B)  does not need to take account of demand because it's the only seller. 
C)  raises the price it can charge for its product by increasing the quantity sold. 
D)  raises the price it can charge for its product by decreasing the quantity sold.

Question 7

-In a small town, Marilyn's Christmas Tree Lot has a monopoly on sales of Christmas trees. In order to increase her sales from 100 trees to 101 trees, she must drop the price of all of her trees from $20 to $19. What is the marginal revenue?

Accepted Answer

A)  $2000 
B)  $20 
C)  $19 
D)  negative $81 
A)  $2000 
B)  $20 
C)  $19 
D)  negative $81

Question 8

-The unregulated, single-price monopoly shown in the figure above will produce where its demand

Accepted Answer

A)  equals its MC curve. 
B)  equals its ATC curve. 
C)  is inelastic. 
D)  is elastic. 
A)  equals its MC curve. 
B)  equals its ATC curve. 
C)  is inelastic. 
D)  is elastic.

Question 9

The monopolist always maximizes its profits by producing the amount of output that sets the marginal revenue equal to zero.

Accepted Answer

A) True 
 B)False

Question 10

-If an average cost pricing rule is imposed on the natural monopoly in the figure above, then the firm will

Accepted Answer

A)  incur an economic loss. 
B)  make zero economic profit, that is, its owners make a normal profit. 
C)  make an economic profit of $4 million. 
D)  make an economic profit of $9 million. 
A)  incur an economic loss. 
B)  make zero economic profit, that is, its owners make a normal profit. 
C)  make an economic profit of $4 million. 
D)  make an economic profit of $9 million.

Question 11

-Roxie's Movie Theatre is the only one in town. The table above gives the demand schedule for movies. If Roxie's is a single-price monopoly and the marginal cost of a movie is $6, Roxie's will charge ________ a movie and will sell ________ movie tickets a week.

Accepted Answer

A)  $15; 100 
B)  $12; 200 
C)  $6; 400 
D)  $9; 300 
A)  $15; 100 
B)  $12; 200 
C)  $6; 400 
D)  $9; 300

Question 12

-The unregulated, single-price monopolist illustrated in the figure above has a total revenue of

Accepted Answer

A)  $8.00 per day. 
B)  $16.00 per day. 
C)  $36.00 per day. 
D)  $40.00 per day. 
A)  $8.00 per day. 
B)  $16.00 per day. 
C)  $36.00 per day. 
D)  $40.00 per day.

Question 13

In the case of a perfectly price-discriminating monopoly, there is no

Accepted Answer

A)  transfer of consumer surplus to the producer. 
B)  deadweight loss. 
C)  producer surplus. 
D)  economic profit. 
A)  transfer of consumer surplus to the producer. 
B)  deadweight loss. 
C)  producer surplus. 
D)  economic profit.

Question 14

What is rent seeking? How does rent seeking affect the deadweight loss from monopoly?

Accepted Answer

Rent seeking is the act of obtaining spe

Question 15

-If the industry in the above figure was perfectly competitive, the level of output would

Accepted Answer

A)  be less than the single-price monopoly level of output. 
B)  be the same as the single-price monopoly level of output. 
C)  exceed the single-price monopoly level of output by 20 units per day. 
D)  exceed the single-price monopoly level of output by 60 units per day. 
A)  be less than the single-price monopoly level of output. 
B)  be the same as the single-price monopoly level of output. 
C)  exceed the single-price monopoly level of output by 20 units per day. 
D)  exceed the single-price monopoly level of output by 60 units per day.

Question 16

Perfect price discrimination

Accepted Answer

A)  turns all the producer surplus into consumer surplus. 
B)  turns all the consumer surplus into economic profit. 
C)  creates a deadweight loss. 
D)  cannot result in profit maximization. 
A)  turns all the producer surplus into consumer surplus. 
B)  turns all the consumer surplus into economic profit. 
C)  creates a deadweight loss. 
D)  cannot result in profit maximization.

Question 17

The United States Mint is the only legal entity to produce circulating coinage for the United States. What are the barriers to entry, if any, that protect this firm from competition?

Accepted Answer

A)  The United States Mint is a natural monopoly. 
B)  The United States Mint has a government license to produce coinage. 
C)  The United States Mint is a public franchise to produce coinage. 
D)  The United States Mint has a patent or copyright to produce coinage. 
A)  The United States Mint is a natural monopoly. 
B)  The United States Mint has a government license to produce coinage. 
C)  The United States Mint is a public franchise to produce coinage. 
D)  The United States Mint has a patent or copyright to produce coinage.

Question 18

-In the figure above, compared to a perfectly competitive industry with the same costs, a single-price, unregulated monopoly will decrease production by

Accepted Answer

A)  zero. 
B)  2 units per day. 
C)  4 units per day. 
D)  6 units per day. 
A)  zero. 
B)  2 units per day. 
C)  4 units per day. 
D)  6 units per day.

Question 19

Efforts by a firm to obtain a monopoly

Accepted Answer

A)  are called price discrimination. 
B)  increase consumer surplus. 
C)  are called rent seeking. 
D)  are called price taking. 
A)  are called price discrimination. 
B)  increase consumer surplus. 
C)  are called rent seeking. 
D)  are called price taking.

Question 20

What is price discrimination? Can a perfectly competitive firm price discriminate? Explain you answer.

Accepted Answer

Price discrimination is the practice of

Exam 13: Monopoly

If the regulator wanted to maximize the total surplus in a natural monopoly market, the regulator has the firm set its price equal to its

Buying a monopoly from the existing owner does not ensure an economic profit because

A natural monopoly that is regulated to set its price according to the marginal cost pricing rule will

-The table above gives the demand schedule for water bottled by Wanda's Healthy Waters. Wanda's marginal cost is a constant $4 a bottle and has no fixed cost. Wanda's makes an economic profit of ________ a day.

In order to maximize its profit, a single-price monopoly always produces output in the inelastic range of the demand for its product.

A monopoly

-In a small town, Marilyn's Christmas Tree Lot has a monopoly on sales of Christmas trees. In order to increase her sales from 100 trees to 101 trees, she must drop the price of all of her trees from $20 to $19. What is the marginal revenue?

-The unregulated, single-price monopoly shown in the figure above will produce where its demand

The monopolist always maximizes its profits by producing the amount of output that sets the marginal revenue equal to zero.

-If an average cost pricing rule is imposed on the natural monopoly in the figure above, then the firm will

-Roxie's Movie Theatre is the only one in town. The table above gives the demand schedule for movies. If Roxie's is a single-price monopoly and the marginal cost of a movie is $6, Roxie's will charge ________ a movie and will sell ________ movie tickets a week.

-The unregulated, single-price monopolist illustrated in the figure above has a total revenue of

In the case of a perfectly price-discriminating monopoly, there is no

What is rent seeking? How does rent seeking affect the deadweight loss from monopoly?

-If the industry in the above figure was perfectly competitive, the level of output would

Perfect price discrimination

The United States Mint is the only legal entity to produce circulating coinage for the United States. What are the barriers to entry, if any, that protect this firm from competition?

-In the figure above, compared to a perfectly competitive industry with the same costs, a single-price, unregulated monopoly will decrease production by

Efforts by a firm to obtain a monopoly

What is price discrimination? Can a perfectly competitive firm price discriminate? Explain you answer.

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

-Roxie's Movie Theatre is the only one in town. The table above gives the demand schedule for movies. If Roxie's is a single-price monopoly and the marginal cost of a movie is $6, Roxie's will charge a movie and will sell movie tickets a week.