Question 1

A single seller can set a high price for its product because

Accepted Answer

A) the product has a high elasticity of demand. 
B) the factors that motivate a monopoly are not the same as the factors that motivate a competitive firm. 
C) the product is price-inelastic. 
D) there are no other sellers of the product to undercut the price. 
E) the product has many close substitutes. 
A) the product has a high elasticity of demand. 
B) the factors that motivate a monopoly are not the same as the factors that motivate a competitive firm. 
C) the product is price-inelastic. 
D) there are no other sellers of the product to undercut the price. 
E) the product has many close substitutes.

Question 2

Suppose that for a monopoly average total cost is $3.50, marginal cost is $3.00, and marginal revenue is $3.00 with a selling price of $4.00. To maximize profits, the monopoly should

Accepted Answer

A) change neither price nor output. 
B) increase both output and price. 
C) decrease both output and price. 
D) increase output but decrease price. 
E) decrease output but increase price. 
A) change neither price nor output. 
B) increase both output and price. 
C) decrease both output and price. 
D) increase output but decrease price. 
E) decrease output but increase price.

Question 3

Average revenue is ____ price.

Accepted Answer

A) equal to 
B) less than 
C) greater than 
D) 1 divided by 
E) marginal revenue times 
A) equal to 
B) less than 
C) greater than 
D) 1 divided by 
E) marginal revenue times

Question 4

The purpose of patents and copyrights is to

Accepted Answer

A) give government a role in the economy. 
B) create monopolies. 
C) grant advantages to a privileged few. 
D) promote innovation. 
E) destroy competition. 
A) give government a role in the economy. 
B) create monopolies. 
C) grant advantages to a privileged few. 
D) promote innovation. 
E) destroy competition.

Question 5

The profit-maximizing output level is determined on a monopoly diagram by noting where the demand and marginal cost curves cross.

Accepted Answer

A) True 
 B)False

Question 6

To maximize profits, a monopoly charges a price greater than its marginal cost.

Accepted Answer

A) True 
 B)False

Question 7

Marginal revenue lies below the demand curve because

Accepted Answer

A) average revenue declines as output decreases. 
B) average revenue declines as output increases. 
C) average revenue stays the same as output changes. 
D) marginal revenue always equals average revenue. 
E) price increases as output increases. 
A) average revenue declines as output decreases. 
B) average revenue declines as output increases. 
C) average revenue stays the same as output changes. 
D) marginal revenue always equals average revenue. 
E) price increases as output increases.

Question 8

An industry in which there are low startup costs and a single firm prices its product very low for fear of new entry is called

Accepted Answer

A) an oligopoly. 
B) a contestable market. 
C) monopolistic competition. 
D) potential entry. 
E) a monopoly. 
A) an oligopoly. 
B) a contestable market. 
C) monopolistic competition. 
D) potential entry. 
E) a monopoly.

Question 9

A firm's market power can be realized by considering how much price changes in response to an output change.

Accepted Answer

A) True 
 B)False

Question 10

When the monopoly's marginal revenue is positive, its

Accepted Answer

A) total revenue decreases with increases in quantity. 
B) total revenue is at its maximum. 
C) total revenue increases with increases in quantity. 
D) elasticity of supply is less than 1. 
E) elasticity of demand is less than 1. 
A) total revenue decreases with increases in quantity. 
B) total revenue is at its maximum. 
C) total revenue increases with increases in quantity. 
D) elasticity of supply is less than 1. 
E) elasticity of demand is less than 1.

Question 11

Exhibit 10-7  
-Refer to Exhibit 10-7 for a monopoly. The profit-maximizing level of production is

Accepted Answer

A) 50. 
B) 70. 
C) 100. 
D) higher than 100. 
E) 0. 
A) 50. 
B) 70. 
C) 100. 
D) higher than 100. 
E) 0.

Question 12

A profit-maximizing monopoly with a straight-line demand will never produce when demand is inelastic because

Accepted Answer

A) price would be negative. 
B) consumers would buy nothing. 
C) revenue would be rising as cost falls. 
D) marginal revenue would be negative and could not equal marginal cost. 
E) there would be too few potential customers. 
A) price would be negative. 
B) consumers would buy nothing. 
C) revenue would be rising as cost falls. 
D) marginal revenue would be negative and could not equal marginal cost. 
E) there would be too few potential customers.

Question 13

Exhibit 10-10  
-Refer to Exhibit 10-10. Calculate the deadweight loss from the monopoly.

Accepted Answer

$97.50
Monopoly output, price, and margi

Question 14

Exhibit 10-4  
-Refer to Exhibit 10-4. At the profit-maximizing output level, total revenue is

Accepted Answer

A) $3,600. 
B) $2,400. 
C) $3,000. 
D) $1,200. 
E) $3,500. 
A) $3,600. 
B) $2,400. 
C) $3,000. 
D) $1,200. 
E) $3,500.

Question 15

Exhibit 10-4  
-For a monopoly, price can remain greater than average total cost in the long run.

Accepted Answer

A) True 
 B)False

Question 16

Exhibit 10-3  
-Refer to Exhibit 10-3. The profit-maximizing monopoly is earning economic profits in the amount of

Accepted Answer

A) $120. 
B) $48. 
C) $50. 
D) $70. 
E) $20. 
A) $120. 
B) $48. 
C) $50. 
D) $70. 
E) $20.

Question 17

What do you think about the merits and demerits of the patent law that protects newly-developed products in medical research?

Accepted Answer

One key merit of a patent is that it pro

Question 18

Consumer surplus is smaller if an industry is operated by a monopolistic firm than it is if an industry is operated by competitive firms.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following statements concerning price discrimination among consumers with different price elasticities is true?

Accepted Answer

A) Consumers are charged different prices because costs vary among consumers. 
B) A firm cannot price-discriminate unless it can identify different consumer types. 
C) It is possible for a competitive firm to price-discriminate. 
D) Price discrimination occurs when some ethnic groups can get service and others cannot. 
E) A firm can price-discriminate only if it has market power. 
A) Consumers are charged different prices because costs vary among consumers. 
B) A firm cannot price-discriminate unless it can identify different consumer types. 
C) It is possible for a competitive firm to price-discriminate. 
D) Price discrimination occurs when some ethnic groups can get service and others cannot. 
E) A firm can price-discriminate only if it has market power.

Question 20

The demand curve facing a monopoly firm

Accepted Answer

A) may well bend backward. 
B) suggests that the monopoly can sell additional units without lowering the price. 
C) is the market demand curve. 
D) is equal to its total revenue curve. 
E) is perfectly inelastic. 
A) may well bend backward. 
B) suggests that the monopoly can sell additional units without lowering the price. 
C) is the market demand curve. 
D) is equal to its total revenue curve. 
E) is perfectly inelastic.

Exam 10: Monopoly

A single seller can set a high price for its product because

Suppose that for a monopoly average total cost is $3.50, marginal cost is $3.00, and marginal revenue is $3.00 with a selling price of $4.00. To maximize profits, the monopoly should

Average revenue is ____ price.

The purpose of patents and copyrights is to

The profit-maximizing output level is determined on a monopoly diagram by noting where the demand and marginal cost curves cross.

To maximize profits, a monopoly charges a price greater than its marginal cost.

Marginal revenue lies below the demand curve because

An industry in which there are low startup costs and a single firm prices its product very low for fear of new entry is called

A firm's market power can be realized by considering how much price changes in response to an output change.

When the monopoly's marginal revenue is positive, its

Exhibit 10-7 -Refer to Exhibit 10-7 for a monopoly. The profit-maximizing level of production is

A profit-maximizing monopoly with a straight-line demand will never produce when demand is inelastic because

Exhibit 10-10 -Refer to Exhibit 10-10. Calculate the deadweight loss from the monopoly.

Exhibit 10-4 -Refer to Exhibit 10-4. At the profit-maximizing output level, total revenue is

Exhibit 10-4 -For a monopoly, price can remain greater than average total cost in the long run.

Exhibit 10-3 -Refer to Exhibit 10-3. The profit-maximizing monopoly is earning economic profits in the amount of

What do you think about the merits and demerits of the patent law that protects newly-developed products in medical research?

Consumer surplus is smaller if an industry is operated by a monopolistic firm than it is if an industry is operated by competitive firms.

Which of the following statements concerning price discrimination among consumers with different price elasticities is true?

The demand curve facing a monopoly firm

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Efficiency of Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth Around the World

International Trade

International Finance

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