Question 1

One barrier to entry is a patent granted by the government.

Accepted Answer

A) True 
 B)False

Question 2

When a profit-maximizing monopoly produces an output for which marginal revenue is less than marginal cost, the firm is

Accepted Answer

A) making a profit. 
B) producing too little. 
C) producing too much. 
D) breaking even. 
E) incurring a loss. 
A) making a profit. 
B) producing too little. 
C) producing too much. 
D) breaking even. 
E) incurring a loss.

Question 3

An example of price discrimination with a quantity discount is

Accepted Answer

A) Wal-Mart selling for less by moving a large volume of merchandise. 
B) charging commercial telephone users higher fees. 
C) sightseeing tours. 
D) lower long-distance charges the more you use the service. 
E) one person buying 100 units of a good and being charged less total shipping than 100 people buying one unit each. 
A) Wal-Mart selling for less by moving a large volume of merchandise. 
B) charging commercial telephone users higher fees. 
C) sightseeing tours. 
D) lower long-distance charges the more you use the service. 
E) one person buying 100 units of a good and being charged less total shipping than 100 people buying one unit each.

Question 4

Refer to the figure. Calculate the monopoly's profits at the profit-maximizing output level.

Accepted Answer

$50
Profit-maximizing output i

Question 5

If, at an output of 10 units, a monopoly is earning a positive profit (marginal revenue is $6 and marginal cost is $4), then the monopoly

Accepted Answer

A) should raise the price at the current output level. 
B) should reduce output. 
C) is in equilibrium. 
D) should increase output. 
E) should reduce output before increasing it. 
A) should raise the price at the current output level. 
B) should reduce output. 
C) is in equilibrium. 
D) should increase output. 
E) should reduce output before increasing it.

Question 6

Exhibit 10-5  
-Which of the following statements concerning a monopoly is false?

Accepted Answer

A) A monopoly, like a competitive firm, will shut down when revenues are less than variable costs. 
B) It is possible for a monopoly to suffer losses in the long run. 
C) Monopolies cannot suffer losses. 
D) A monopoly can enjoy economic profits in the long run. 
E) A monopoly can suffer losses in the short run. 
A) A monopoly, like a competitive firm, will shut down when revenues are less than variable costs. 
B) It is possible for a monopoly to suffer losses in the long run. 
C) Monopolies cannot suffer losses. 
D) A monopoly can enjoy economic profits in the long run. 
E) A monopoly can suffer losses in the short run.

Question 7

A natural monopoly arises when the government creates a legal barrier that prevents firms from entering a market.

Accepted Answer

A) True 
 B)False

Question 8

A firm can be the sole seller of a product but still not be a monopoly if

Accepted Answer

A) the firm is not making profits. 
B) the firm is not large. 
C) the product has many close substitutes. 
D) the market price is high. 
E) the cost of production is high relative to price. 
A) the firm is not making profits. 
B) the firm is not large. 
C) the product has many close substitutes. 
D) the market price is high. 
E) the cost of production is high relative to price.

Question 9

For a monopoly, when demand is elastic, marginal revenue is

Accepted Answer

A) zero and total revenue is at its maximum. 
B) positive and total revenue is falling. 
C) positive and total revenue is rising. 
D) negative and total revenue is rising. 
E) negative and total revenue is falling. 
A) zero and total revenue is at its maximum. 
B) positive and total revenue is falling. 
C) positive and total revenue is rising. 
D) negative and total revenue is rising. 
E) negative and total revenue is falling.

Question 10

A monopoly's profit-maximizing price is determined by noting on the demand curve the point at which the quantity supplied equals the quantity demanded.

Accepted Answer

A) True 
 B)False

Question 11

Exhibit 10-5  
-Refer to Exhibit 10-5 for a profit-maximizing monopoly. If the average total cost for the monopoly producing 50 units equals $13, then it will

Accepted Answer

A) make a total economic profit of $5. 
B) make a total economic profit of $100. 
C) incur a loss of $5. 
D) incur a loss of $100. 
E) break even. 
A) make a total economic profit of $5. 
B) make a total economic profit of $100. 
C) incur a loss of $5. 
D) incur a loss of $100. 
E) break even.

Question 12

Apple Computers is a monopoly in the computer industry because it is the only firm producing Macintosh computers.

Accepted Answer

A) True 
 B)False

Question 13

Exhibit 10-9  
-Refer to Exhibit 10-9. For a profit-maximizing monopoly, its price is at point ____ while its marginal cost is at point ____.

Accepted Answer

A) F; A 
B) A; F 
C) A; A 
D) D; F 
E) A; C 
A) F; A 
B) A; F 
C) A; A 
D) D; F 
E) A; C

Question 14

A monopoly's consumers' marginal benefit is less than its marginal cost.

Accepted Answer

A) True 
 B)False

Question 15

A firm can exercise price discrimination only when it

Accepted Answer

A) has market power over a product. 
B) has a lot of competitors. 
C) produces homogenous products. 
D) has no fixed costs. 
E) has very few buyers. 
A) has market power over a product. 
B) has a lot of competitors. 
C) produces homogenous products. 
D) has no fixed costs. 
E) has very few buyers.

Question 16

On a monopoly diagram showing demand, marginal revenue, marginal cost, and average total cost, which of the following cannot be illustrated?

Accepted Answer

A) Marginal cost 
B) Market price 
C) Total costs 
D) Market output 
E) Fixed costs 
A) Marginal cost 
B) Market price 
C) Total costs 
D) Market output 
E) Fixed costs

Question 17

A monopoly is a price-taker.

Accepted Answer

A) True 
 B)False

Question 18

Price discrimination is the practice of

Accepted Answer

A) selling the same product to different consumers at the same price. 
B) selling the same product to different consumers at different prices. 
C) selling different products to consumers at different prices. 
D) selling a product at a price that no one can afford. 
E) selling a product at a price that is below its average total cost. 
A) selling the same product to different consumers at the same price. 
B) selling the same product to different consumers at different prices. 
C) selling different products to consumers at different prices. 
D) selling a product at a price that no one can afford. 
E) selling a product at a price that is below its average total cost.

Question 19

Exhibit 10-3  
-Refer to Exhibit 10-3. If the firm produces 24 units and its average total cost is 8, then it

Accepted Answer

A) makes a profit of $50. 
B) makes a profit of $48. 
C) suffers a loss of $50. 
D) suffers a loss of $48. 
E) breaks even. 
A) makes a profit of $50. 
B) makes a profit of $48. 
C) suffers a loss of $50. 
D) suffers a loss of $48. 
E) breaks even.

Question 20

For a monopoly, the marginal revenue curve lies below the demand curve.

Accepted Answer

A) True 
 B)False

Exam 10: Monopoly

One barrier to entry is a patent granted by the government.

When a profit-maximizing monopoly produces an output for which marginal revenue is less than marginal cost, the firm is

An example of price discrimination with a quantity discount is

Refer to the figure. Calculate the monopoly's profits at the profit-maximizing output level.

If, at an output of 10 units, a monopoly is earning a positive profit (marginal revenue is $6 and marginal cost is $4), then the monopoly

Exhibit 10-5 -Which of the following statements concerning a monopoly is false?

A natural monopoly arises when the government creates a legal barrier that prevents firms from entering a market.

A firm can be the sole seller of a product but still not be a monopoly if

For a monopoly, when demand is elastic, marginal revenue is

A monopoly's profit-maximizing price is determined by noting on the demand curve the point at which the quantity supplied equals the quantity demanded.

Exhibit 10-5 -Refer to Exhibit 10-5 for a profit-maximizing monopoly. If the average total cost for the monopoly producing 50 units equals $13, then it will

Apple Computers is a monopoly in the computer industry because it is the only firm producing Macintosh computers.

Exhibit 10-9 -Refer to Exhibit 10-9. For a profit-maximizing monopoly, its price is at point ____ while its marginal cost is at point ____.

A monopoly's consumers' marginal benefit is less than its marginal cost.

A firm can exercise price discrimination only when it

On a monopoly diagram showing demand, marginal revenue, marginal cost, and average total cost, which of the following cannot be illustrated?

A monopoly is a price-taker.

Price discrimination is the practice of

Exhibit 10-3 -Refer to Exhibit 10-3. If the firm produces 24 units and its average total cost is 8, then it

For a monopoly, the marginal revenue curve lies below the demand curve.

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

Filters

Exhibit 10-9 -Refer to Exhibit 10-9. For a profit-maximizing monopoly, its price is at point while its marginal cost is at point .