Question 1

Marginal revenue and demand are unrelated.

Accepted Answer

A) True 
 B)False

Question 2

Suppose a firm decides to cut its production in half. One could claim that this firm has market power if there is a significant change in the

Accepted Answer

A) firm's total cost. 
B) market price of the product. 
C) firm's total revenue. 
D) firm's marginal revenue. 
E) firm's average revenue. 
A) firm's total cost. 
B) market price of the product. 
C) firm's total revenue. 
D) firm's marginal revenue. 
E) firm's average revenue.

Question 3

Exhibit 10-9  
-The price-cost margin is approximately equal to the

Accepted Answer

A) marginal cost minus price. 
B) price elasticity of demand. 
C) inverse of the price elasticity of demand. 
D) ratio of price divided by marginal cost. 
E) difference between price and marginal cost. 
A) marginal cost minus price. 
B) price elasticity of demand. 
C) inverse of the price elasticity of demand. 
D) ratio of price divided by marginal cost. 
E) difference between price and marginal cost.

Question 4

Refer to the figure below. Calculate the monopolist's profit at the profit-maximizing output level.

Accepted Answer

F-$600
Profit-maximizing outpu

Question 5

A monopoly can earn economic profit in the long run.

Accepted Answer

A) True 
 B)False

Question 6

When the price elasticity of demand is less than 1, then marginal revenue is

Accepted Answer

A) equal to 0. 
B) positive. 
C) negative. 
D) greater than 1. 
E) infinity. 
A) equal to 0. 
B) positive. 
C) negative. 
D) greater than 1. 
E) infinity.

Question 7

Many U.S. cities limit the number of taxis by restricting the number of licenses. The result, in comparison with free entry into the taxi industry, is

Accepted Answer

A) better taxi service. 
B) increased competition in the taxi industry. 
C) higher taxi fares. 
D) lower taxi fares. 
E) free taxi rides. 
A) better taxi service. 
B) increased competition in the taxi industry. 
C) higher taxi fares. 
D) lower taxi fares. 
E) free taxi rides.

Question 8

When long-run average cost falls over such a great range of output that it reaches a minimum at a greater output than consumers demand, we call a firm in such a market a natural

Accepted Answer

A) monopoly. 
B) competitor. 
C) oligopoly. 
D) monopsony. 
E) industry. 
A) monopoly. 
B) competitor. 
C) oligopoly. 
D) monopsony. 
E) industry.

Question 9

The marginal revenue curve of a monopoly will

Accepted Answer

A) decrease at a faster rate than price because any reduction in price applies to all units sold. 
B) lie above the demand curve. 
C) increase at a faster rate than price because marginal revenue is always greater than price. 
D) decrease at a faster rate than price because any reduction in price applies only to extra units sold. 
E) equal the demand curve. 
A) decrease at a faster rate than price because any reduction in price applies to all units sold. 
B) lie above the demand curve. 
C) increase at a faster rate than price because marginal revenue is always greater than price. 
D) decrease at a faster rate than price because any reduction in price applies only to extra units sold. 
E) equal the demand curve.

Question 10

Exhibit 10-1  
-Refer to Exhibit 10-1. Profits are maximized when the level of output is

Accepted Answer

A) 10 units. 
B) 50 units. 
C) 90 units. 
D) more than 90 units. 
E) 0 units. 
A) 10 units. 
B) 50 units. 
C) 90 units. 
D) more than 90 units. 
E) 0 units.

Question 11

Marginal revenue is positive when the price elasticity of demand is greater than 1.

Accepted Answer

A) True 
 B)False

Question 12

Exhibit 10-10  
-A firm that takes advantage of economies of scale and expands to become the only producer in the industry is called

Accepted Answer

A) a monopolistically-competitive firm. 
B) an oligopoly. 
C) a cartel. 
D) a competitive firm. 
E) a natural monopoly. 
A) a monopolistically-competitive firm. 
B) an oligopoly. 
C) a cartel. 
D) a competitive firm. 
E) a natural monopoly.

Question 13

If, at a sales level of 100 units, a monopoly's marginal revenue is $5, then

Accepted Answer

A) at a sales level of more than 100 units, marginal revenue will be more than $5. 
B) at a sales level of more than 100 units, marginal revenue will be $5. 
C) at a sales level of less than 100 units, marginal revenue will be $5. 
D) at a sales level of more than 100 units, marginal revenue will be less than $5. 
E) total revenue is $500. 
A) at a sales level of more than 100 units, marginal revenue will be more than $5. 
B) at a sales level of more than 100 units, marginal revenue will be $5. 
C) at a sales level of less than 100 units, marginal revenue will be $5. 
D) at a sales level of more than 100 units, marginal revenue will be less than $5. 
E) total revenue is $500.

Question 14

Suppose you have the following information for a monopoly.

Accepted Answer

The answer of Suppose you have the following information for...

Question 15

Suppose the government wants to encourage a monopolist to produce more by paying a subsidy (a negative tax) for each unit produced. Draw a diagram to explain this situation. How do price and quantity change? Show what happens to deadweight loss.

Accepted Answer

As a result of the subsidy, the marginal

Question 16

Exhibit 10-4  
-Refer to Exhibit 10-4. The profit-maximizing price is

Accepted Answer

A) $6. 
B) $10. 
C) $18. 
D) $15. 
E) $12. 
A) $6. 
B) $10. 
C) $18. 
D) $15. 
E) $12.

Question 17

The reason a monopoly produces less than a competitive industry with identical costs is that

Accepted Answer

A) in a competitive industry there are more firms, which leaves more money available for production. 
B) There is not enough information to answer this question. 
C) competitive firms' marginal revenue equals marginal cost, so the industry produces at the point at which demand and marginal cost cross instead of the point at which marginal revenue and marginal cost cross. 
D) monopolies are usually regulated industries, and the government limits production. 
E) production costs are always higher for monopolies than for competitive firms. 
A) in a competitive industry there are more firms, which leaves more money available for production. 
B) There is not enough information to answer this question. 
C) competitive firms' marginal revenue equals marginal cost, so the industry produces at the point at which demand and marginal cost cross instead of the point at which marginal revenue and marginal cost cross. 
D) monopolies are usually regulated industries, and the government limits production. 
E) production costs are always higher for monopolies than for competitive firms.

Question 18

A monopoly's marginal revenue is less than its price because

Accepted Answer

A) its demand curve slopes upward 
B) its demand curve is horizontal. 
C) each additional unit can be sold for a different price. 
D) each additional unit can be sold only if the price is increased for all other units sold. 
E) each additional unit can be sold only if the price is reduced for all units sold. 
A) its demand curve slopes upward 
B) its demand curve is horizontal. 
C) each additional unit can be sold for a different price. 
D) each additional unit can be sold only if the price is increased for all other units sold. 
E) each additional unit can be sold only if the price is reduced for all units sold.

Question 19

Exhibit 10-8  
-Refer to Exhibit 10-8. The loss to consumers from monopoly includes area

Accepted Answer

A) ACF only. 
B) ECG only. 
C) ACD and more. 
D) BCG only. 
E) DCF and more. 
A) ACF only. 
B) ECG only. 
C) ACD and more. 
D) BCG only. 
E) DCF and more.

Question 20

Monopoly means that

Accepted Answer

A) government regulates the industry. 
B) the firm has control over market price but not output. 
C) the firm has a patent. 
D) one seller exists in a market in which there are no close substitutes. 
E) a small number of firms are producing standardized products. 
A) government regulates the industry. 
B) the firm has control over market price but not output. 
C) the firm has a patent. 
D) one seller exists in a market in which there are no close substitutes. 
E) a small number of firms are producing standardized products.

Exam 10: Monopoly

Marginal revenue and demand are unrelated.

Suppose a firm decides to cut its production in half. One could claim that this firm has market power if there is a significant change in the

Exhibit 10-9 -The price-cost margin is approximately equal to the

Refer to the figure below. Calculate the monopolist's profit at the profit-maximizing output level.

A monopoly can earn economic profit in the long run.

When the price elasticity of demand is less than 1, then marginal revenue is

Many U.S. cities limit the number of taxis by restricting the number of licenses. The result, in comparison with free entry into the taxi industry, is

When long-run average cost falls over such a great range of output that it reaches a minimum at a greater output than consumers demand, we call a firm in such a market a natural

The marginal revenue curve of a monopoly will

Exhibit 10-1 -Refer to Exhibit 10-1. Profits are maximized when the level of output is

Marginal revenue is positive when the price elasticity of demand is greater than 1.

Exhibit 10-10 -A firm that takes advantage of economies of scale and expands to become the only producer in the industry is called

If, at a sales level of 100 units, a monopoly's marginal revenue is $5, then

Suppose you have the following information for a monopoly.

Suppose the government wants to encourage a monopolist to produce more by paying a subsidy (a negative tax) for each unit produced. Draw a diagram to explain this situation. How do price and quantity change? Show what happens to deadweight loss.

Exhibit 10-4 -Refer to Exhibit 10-4. The profit-maximizing price is

The reason a monopoly produces less than a competitive industry with identical costs is that

A monopoly's marginal revenue is less than its price because

Exhibit 10-8 -Refer to Exhibit 10-8. The loss to consumers from monopoly includes area

Monopoly means that

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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