Question 1

Exhibit 10-8  
-Refer to Exhibit 10-8. The deadweight loss from monopoly is area

Accepted Answer

A) DCF. 
B) BCE. 
C) ACF. 
D) ACD. 
E) BCG. 
A) DCF. 
B) BCE. 
C) ACF. 
D) ACD. 
E) BCG.

Question 2

A firm with market power can always sell more by raising the price of its product.

Accepted Answer

A) True 
 B)False

Question 3

Explain why participants in an industry would want the government to require licenses for them to operate, even if the licenses are costly to obtain.

Accepted Answer

Licensing is a barrier to entr

Question 4

The market demand curve that a monopoly faces implies that

Accepted Answer

A) the law of demand is still at work. 
B) cost does not matter. 
C) the monopoly can increase price indiscriminately and consumers have no choice but to pay it. 
D) the monopoly does not have to be concerned about making profits. 
E) an increase in output will not affect price. 
A) the law of demand is still at work. 
B) cost does not matter. 
C) the monopoly can increase price indiscriminately and consumers have no choice but to pay it. 
D) the monopoly does not have to be concerned about making profits. 
E) an increase in output will not affect price.

Question 5

A clothing store can sell two shirts for $20 each or three shirts for $15 each. At a quantity of three shirts sold, marginal revenue

Accepted Answer

A) is $45. 
B) is $15. 
C) is $5. 
D) cannot be determined from the information given. 
E) is $2. 
A) is $45. 
B) is $15. 
C) is $5. 
D) cannot be determined from the information given. 
E) is $2.

Question 6

A monopoly's marginal revenue curve

Accepted Answer

A) slopes upward. 
B) lies above the marginal cost curve at all points. 
C) is horizontal. 
D) is vertical. 
E) lies below the average revenue curve. 
A) slopes upward. 
B) lies above the marginal cost curve at all points. 
C) is horizontal. 
D) is vertical. 
E) lies below the average revenue curve.

Question 7

Exhibit 10-9  
-Refer to Exhibit 10-9. The difference between marginal benefit and marginal cost for the profit-maximizing monopoly is

Accepted Answer

A) A -  F. 
B) B- G. 
C) D - F. 
D) E - G. 
E) zero. 
A) A -  F. 
B) B- G. 
C) D - F. 
D) E - G. 
E) zero.

Question 8

Exhibit 10-4  
-Refer to Exhibit 10-4. The firm's maximum profit is

Accepted Answer

A) -$1,800. 
B) $600. 
C) $1,800. 
D) -$600. 
E) $0. 
A) -$1,800. 
B) $600. 
C) $1,800. 
D) -$600. 
E) $0.

Question 9

Exhibit 10-8  
-Refer to Exhibit 10-8. The difference in output levels between a profit-maximizing monopoly and a profit-maximizing competitive firm can be measured by the distance between points

Accepted Answer

A) B and C. 
B) D and C. 
C) D and E. 
D) E and C. 
E) G and C. 
A) B and C. 
B) D and C. 
C) D and E. 
D) E and C. 
E) G and C.

Question 10

For a monopoly, the demand curve shows

Accepted Answer

A) average revenue at each level of output. 
B) average cost at each level of output. 
C) marginal revenue at each level of output. 
D) marginal cost at each level of output. 
E) profits at each level of output. 
A) average revenue at each level of output. 
B) average cost at each level of output. 
C) marginal revenue at each level of output. 
D) marginal cost at each level of output. 
E) profits at each level of output.

Question 11

Exhibit 10-8  
-Which of the following statements is always correct?

Accepted Answer

A) Inefficiency is likely to occur under competition but is unlikely to occur in the monopoly market structure. 
B) A competitive firm is more able to engage in research and development than is a monopoly. 
C) Monopolies transfer some of the potential consumer surplus from buyers to sellers. 
D) Monopolies transfer some of the potential producer surplus from sellers to buyers. 
E) Monopolies transfer all of the potential consumer surplus from buyers and sellers to the government. 
A) Inefficiency is likely to occur under competition but is unlikely to occur in the monopoly market structure. 
B) A competitive firm is more able to engage in research and development than is a monopoly. 
C) Monopolies transfer some of the potential consumer surplus from buyers to sellers. 
D) Monopolies transfer some of the potential producer surplus from sellers to buyers. 
E) Monopolies transfer all of the potential consumer surplus from buyers and sellers to the government.

Question 12

Exhibit 10-2  
-To ascertain the profit-maximizing price on a monopoly diagram, one must first determine output by finding where

Accepted Answer

A) marginal cost and marginal revenue cross, and then doubling the amount indicated on the vertical axis to determine price. 
B) marginal cost and demand cross, and then looking at the vertical axis to determine price. 
C) marginal cost and marginal revenue cross, and then extending upward to the demand curve to determine price on the vertical axis. 
D) marginal cost and marginal revenue cross, and then looking at that point on the vertical axis to determine price. 
E) marginal revenue crosses the horizontal axis, and then noting what price demand indicates at that output level. 
A) marginal cost and marginal revenue cross, and then doubling the amount indicated on the vertical axis to determine price. 
B) marginal cost and demand cross, and then looking at the vertical axis to determine price. 
C) marginal cost and marginal revenue cross, and then extending upward to the demand curve to determine price on the vertical axis. 
D) marginal cost and marginal revenue cross, and then looking at that point on the vertical axis to determine price. 
E) marginal revenue crosses the horizontal axis, and then noting what price demand indicates at that output level.

Question 13

In the generic diagram for a monopoly, the firm's total profits are determined by

Accepted Answer

A) any price times the quantity at which the demand curve intersects the average total cost curve. 
B) any quantity times the price at which the demand curve intersects the average total cost curve. 
C) the price times quantity at which the demand curve intersects the marginal cost curve. 
D) the vertical difference between the marginal revenue curve and the marginal cost curve at the quantity at which the demand curve intersects the average total cost curve, times that quantity. 
E) the vertical difference between the demand curve and the average total cost curve at the quantity at which the marginal revenue curve intersects the marginal cost curve, times that quantity. 
A) any price times the quantity at which the demand curve intersects the average total cost curve. 
B) any quantity times the price at which the demand curve intersects the average total cost curve. 
C) the price times quantity at which the demand curve intersects the marginal cost curve. 
D) the vertical difference between the marginal revenue curve and the marginal cost curve at the quantity at which the demand curve intersects the average total cost curve, times that quantity. 
E) the vertical difference between the demand curve and the average total cost curve at the quantity at which the marginal revenue curve intersects the marginal cost curve, times that quantity.

Question 14

Which of the following statements about natural monopolies is not true?

Accepted Answer

A) Natural monopolies can be eliminated through technological change. 
B) Natural monopolies occur because of the nature of the market system. 
C) Cost-curve characteristics are one reason natural monopolies occur. 
D) Natural monopolies occur when minimum efficient scale is reached after demand is satisfied. 
E) The average total costs of natural monopolies continue to decline over production. 
A) Natural monopolies can be eliminated through technological change. 
B) Natural monopolies occur because of the nature of the market system. 
C) Cost-curve characteristics are one reason natural monopolies occur. 
D) Natural monopolies occur when minimum efficient scale is reached after demand is satisfied. 
E) The average total costs of natural monopolies continue to decline over production.

Question 15

Which of the following is a characteristic of a monopoly?

Accepted Answer

A) Free entry 
B) Single buyer 
C) Price-maker 
D) Price-taker 
E) Product differentiation 
A) Free entry 
B) Single buyer 
C) Price-maker 
D) Price-taker 
E) Product differentiation

Question 16

Why is the marginal revenue curve for a monopoly steeper than its demand curve?

Accepted Answer

As price falls along a monopoly's demand

Question 17

Suppose a monopoly is producing at an output such that the price elasticity of demand is 0.8. Then

Accepted Answer

A) there is not enough information to reach any conclusion listed. 
B) price equals marginal cost. 
C) output should be increased. 
D) the monopoly is probably maximizing profits. 
E) marginal revenue is less than marginal cost. 
A) there is not enough information to reach any conclusion listed. 
B) price equals marginal cost. 
C) output should be increased. 
D) the monopoly is probably maximizing profits. 
E) marginal revenue is less than marginal cost.

Question 18

A market in which a single seller is required for efficient production is called a

Accepted Answer

A) pure monopoly. 
B) regulated industry. 
C) natural monopoly. 
D) competitive market. 
E) contestable market. 
A) pure monopoly. 
B) regulated industry. 
C) natural monopoly. 
D) competitive market. 
E) contestable market.

Question 19

The profit-maximizing behavior of a monopoly is different from that of a competitive firm in that

Accepted Answer

A) their cost structures are different. 
B) a monopoly can control only output level whereas a competitive firm can control only price. 
C) a monopoly can control only price whereas a competitive firm can control only output level. 
D) a monopoly can control both price and output level, but a competitive firm can control only output level. 
E) a monopoly can control both price and output level, whereas a competitive firm can control neither price nor output level. 
A) their cost structures are different. 
B) a monopoly can control only output level whereas a competitive firm can control only price. 
C) a monopoly can control only price whereas a competitive firm can control only output level. 
D) a monopoly can control both price and output level, but a competitive firm can control only output level. 
E) a monopoly can control both price and output level, whereas a competitive firm can control neither price nor output level.

Question 20

Several monopolists can exist in a single market.

Accepted Answer

A) True 
 B)False

Exam 10: Monopoly

Exhibit 10-8 -Refer to Exhibit 10-8. The deadweight loss from monopoly is area

A firm with market power can always sell more by raising the price of its product.

Explain why participants in an industry would want the government to require licenses for them to operate, even if the licenses are costly to obtain.

The market demand curve that a monopoly faces implies that

A clothing store can sell two shirts for $20 each or three shirts for $15 each. At a quantity of three shirts sold, marginal revenue

A monopoly's marginal revenue curve

Exhibit 10-9 -Refer to Exhibit 10-9. The difference between marginal benefit and marginal cost for the profit-maximizing monopoly is

Exhibit 10-4 -Refer to Exhibit 10-4. The firm's maximum profit is

Exhibit 10-8 -Refer to Exhibit 10-8. The difference in output levels between a profit-maximizing monopoly and a profit-maximizing competitive firm can be measured by the distance between points

For a monopoly, the demand curve shows

Exhibit 10-8 -Which of the following statements is always correct?

Exhibit 10-2 -To ascertain the profit-maximizing price on a monopoly diagram, one must first determine output by finding where

In the generic diagram for a monopoly, the firm's total profits are determined by

Which of the following statements about natural monopolies is not true?

Which of the following is a characteristic of a monopoly?

Why is the marginal revenue curve for a monopoly steeper than its demand curve?

Suppose a monopoly is producing at an output such that the price elasticity of demand is 0.8. Then

A market in which a single seller is required for efficient production is called a

The profit-maximizing behavior of a monopoly is different from that of a competitive firm in that

Several monopolists can exist in a single market.

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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