Question 1

If the market price changes substantially when a firm cuts its level of production, then the firm is most likely to be

Accepted Answer

A) a competitor. 
B) a monopoly. 
C) both a competitor and a monopoly. 
D) neither a competitor nor a monopoly. 
E) a firm with no market power. 
A) a competitor. 
B) a monopoly. 
C) both a competitor and a monopoly. 
D) neither a competitor nor a monopoly. 
E) a firm with no market power.

Question 2

Some argue that the system of in-state and out-of-state tuition at public universities is an example of price discrimination. Is this argument valid? What conditions are necessary for a university to engage in price discrimination?

Accepted Answer

The system of in-state and out-of-state

Question 3

The profit-maximizing output level is determined on a monopoly diagram by finding the point at which the demand and marginal cost curves cross.

Accepted Answer

A) True 
 B)False

Question 4

Marginal revenue of a monopoly

Accepted Answer

A) lies above the demand curve. 
B) equals average revenue. 
C) declines as output is increased. 
D) increases as output is increased. 
E) is the short-run aggregate supply curve. 
A) lies above the demand curve. 
B) equals average revenue. 
C) declines as output is increased. 
D) increases as output is increased. 
E) is the short-run aggregate supply curve.

Question 5

Why does a monopoly have less incentive than a competitive firm to keep costs low, even though both maximize profits?

Accepted Answer

A monopolist, by definition, has no comp

Question 6

The price-cost margin is equal to the price elasticity of demand.

Accepted Answer

A) True 
 B)False

Question 7

A monopoly cannot incur a loss.

Accepted Answer

A) True 
 B)False

Question 8

The table below gives a rate schedule for a long-distance phone call between two regions using a national carrier.   Explain why these different long-distance rates are contingent on the time of day.

Accepted Answer

In the evening, people are mor

Question 9

Exhibit 10-2  
-Refer to Exhibit 10-2. Suppose fixed costs are $10. What are the profit-maximizing output, output price, and total profit?

Accepted Answer

4; $38; $88 MR₄ = 26; MR

Question 10

Which of the following statements is false?

Accepted Answer

A) A competitive firm maximizes profit when marginal revenue equals marginal cost. 
B) When a competitive firm increases output by one unit, revenue increases by an amount equal to market price. 
C) A monopoly and a competitive firm use a similar rule for setting output to maximize profit. 
D) When a monopoly increases output by one unit, revenue increases by an amount less than market price. 
E) A monopoly maximizes profit when price equals marginal cost. 
A) A competitive firm maximizes profit when marginal revenue equals marginal cost. 
B) When a competitive firm increases output by one unit, revenue increases by an amount equal to market price. 
C) A monopoly and a competitive firm use a similar rule for setting output to maximize profit. 
D) When a monopoly increases output by one unit, revenue increases by an amount less than market price. 
E) A monopoly maximizes profit when price equals marginal cost.

Question 11

Draw a generic monopoly diagram, using a minimum number of curves to illustrate profit-maximizing output and price and the monopoly's profits.

Accepted Answer

From the figure below, P_M is

Question 12

Suppose there are 1,000 firms in a market, and market demand has a price elasticity of 0.5. Initially, all firms produce the same output and the market price is $5. One firm then decides to double its output. By how much will price change? Show your work.

Accepted Answer

$.01
Market output increases 1/1000, or

Question 13

Exhibit 10-10  
-Refer to Exhibit 10-10. Calculate the total surplus lost to consumers as a result of monopoly activity.

Accepted Answer

$30
Monopoly price is $23. Eff

Question 14

When a firm price-discriminates among consumers with different price elasticities of demand, it

Accepted Answer

A) has the same price-cost margin in each market. 
B) sets up an auction to determine who will pay the most. 
C) maximizes profit in one market while taking losses in another. 
D) equates price and marginal cost in each market. 
E) creates a deadweight loss in each market. 
A) has the same price-cost margin in each market. 
B) sets up an auction to determine who will pay the most. 
C) maximizes profit in one market while taking losses in another. 
D) equates price and marginal cost in each market. 
E) creates a deadweight loss in each market.

Question 15

Exhibit 10-6  
-Refer to Exhibit 10-6. The firm is most likely

Accepted Answer

A) a competitor. 
B) a monopoly. 
C) either a competitor or a monopoly. 
D) neither a competitor nor a monopoly. 
E) a nonprofit organization. 
A) a competitor. 
B) a monopoly. 
C) either a competitor or a monopoly. 
D) neither a competitor nor a monopoly. 
E) a nonprofit organization.

Question 16

A monopoly always produces less than a competitive industry with identical costs.

Accepted Answer

A) True 
 B)False

Question 17

Explain why decreasing or increasing output beyond the point at which marginal cost equals marginal revenue will reduce profits for a monopoly.

Accepted Answer

By virtue of the shape of the marginal r

Question 18

A profit-maximizing monopoly produces at the point at which marginal cost equals marginal revenue, while a profit-maximizing competitive firm produces at the point at which marginal cost equals price.

Accepted Answer

A) True 
 B)False

Question 19

For a given price and average total cost, a monopoly's economic profits are computed differently than the economic profits of competitors.

Accepted Answer

A) True 
 B)False

Question 20

Exhibit 10-3  
-Refer to Exhibit 10-3. The profit-maximizing price and output are ____ and ____, respectively.

Accepted Answer

A) $10; 20 
B) $5; 20 
C) $11; 20 
D) $10; 24 
E) $11; 24 
A) $10; 20 
B) $5; 20 
C) $11; 20 
D) $10; 24 
E) $11; 24

Exam 10: Monopoly

If the market price changes substantially when a firm cuts its level of production, then the firm is most likely to be

Some argue that the system of in-state and out-of-state tuition at public universities is an example of price discrimination. Is this argument valid? What conditions are necessary for a university to engage in price discrimination?

The profit-maximizing output level is determined on a monopoly diagram by finding the point at which the demand and marginal cost curves cross.

Marginal revenue of a monopoly

Why does a monopoly have less incentive than a competitive firm to keep costs low, even though both maximize profits?

The price-cost margin is equal to the price elasticity of demand.

A monopoly cannot incur a loss.

The table below gives a rate schedule for a long-distance phone call between two regions using a national carrier. Explain why these different long-distance rates are contingent on the time of day.

Exhibit 10-2 -Refer to Exhibit 10-2. Suppose fixed costs are $10. What are the profit-maximizing output, output price, and total profit?

Which of the following statements is false?

Draw a generic monopoly diagram, using a minimum number of curves to illustrate profit-maximizing output and price and the monopoly's profits.

Suppose there are 1,000 firms in a market, and market demand has a price elasticity of 0.5. Initially, all firms produce the same output and the market price is $5. One firm then decides to double its output. By how much will price change? Show your work.

Exhibit 10-10 -Refer to Exhibit 10-10. Calculate the total surplus lost to consumers as a result of monopoly activity.

When a firm price-discriminates among consumers with different price elasticities of demand, it

Exhibit 10-6 -Refer to Exhibit 10-6. The firm is most likely

A monopoly always produces less than a competitive industry with identical costs.

Explain why decreasing or increasing output beyond the point at which marginal cost equals marginal revenue will reduce profits for a monopoly.

A profit-maximizing monopoly produces at the point at which marginal cost equals marginal revenue, while a profit-maximizing competitive firm produces at the point at which marginal cost equals price.

For a given price and average total cost, a monopoly's economic profits are computed differently than the economic profits of competitors.

Exhibit 10-3 -Refer to Exhibit 10-3. The profit-maximizing price and output are ____ and ____, respectively.

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 10-3 -Refer to Exhibit 10-3. The profit-maximizing price and output are and , respectively.