Question 1

In monopoly and perfect competition,a firm should expand production when

Accepted Answer

A) Marginal revenue is below marginal cost. 
B) Price is below marginal cost. 
C) Marginal revenue is above marginal cost. 
D) Price is above marginal cost. 
A) Marginal revenue is below marginal cost. 
B) Price is below marginal cost. 
C) Marginal revenue is above marginal cost. 
D) Price is above marginal cost.

Question 2

There is lack of strong incentives in a monopoly industry,relative to a competitive industry to

Accepted Answer

A) Lower prices and increase output. 
B) Inhibit productivity advances. 
C) Increase innovation. 
D) Use minimum average cost pricing. 
A) Lower prices and increase output. 
B) Inhibit productivity advances. 
C) Increase innovation. 
D) Use minimum average cost pricing.

Question 3

A multi-plant monopolist produces more than if each of its plants were a separate firm in a competitive market.

Accepted Answer

A) True 
 B)False

Question 4

Refer to Figure 24.3.Which of the following statements is true about the price elasticity of demand at price P2?

Accepted Answer

A) The price elasticity is elastic. 
B) The price elasticity is unitary. 
C) The price elasticity is inelastic. 
D) The price elasticity is zero. 
A) The price elasticity is elastic. 
B) The price elasticity is unitary. 
C) The price elasticity is inelastic. 
D) The price elasticity is zero.

Question 5

Table 24.1 Monopoly Costs and Revenue
$$\begin{array} { | c | c | c | } 
\hline \text { Quantity } & \text { Price } & \text { Total Cost } \
\hline 1 & \$ 500 & \$ 400 \
\hline 2 & \$ 450 & \$ 650 \
\hline 3 & \$ 400 & \$ 950 \
\hline 4 & \$ 350 & \$ 1,300 \
\hline 5 & \$ 300 & \$ 1,700 \
\hline
\end{array}$$ In Table 24.1,according to the profit maximization rule,at the profit-maximizing level of output,total cost is

Accepted Answer

A) $900. 
B) $1,200. 
C) $650. 
D) $950. 
A) $900. 
B) $1,200. 
C) $650. 
D) $950.

Question 6

Monopolists can charge any price and sell any amount of output they want because no competition exists.

Accepted Answer

A) True 
 B)False

Question 7

Consumers may not experience the benefits of economies of scale because a natural monopoly

Accepted Answer

A) Has higher costs with higher output. 
B) Engages in marginal cost pricing. 
C) Increases output beyond efficient levels. 
D) Charges prices higher than competitive levels. 
A) Has higher costs with higher output. 
B) Engages in marginal cost pricing. 
C) Increases output beyond efficient levels. 
D) Charges prices higher than competitive levels.

Question 8

A monopolist with the ability to use price discrimination produces more to maximize profit than it would if it could charge only one price.

Accepted Answer

A) True 
 B)False

Question 9

Table 24.1 Monopoly Costs and Revenue
$$\begin{array} { | c | c | c | } 
\hline \text { Quantity } & \text { Price } & \text { Total Cost } \
\hline 1 & \$ 500 & \$ 400 \
\hline 2 & \$ 450 & \$ 650 \
\hline 3 & \$ 400 & \$ 950 \
\hline 4 & \$ 350 & \$ 1,300 \
\hline 5 & \$ 300 & \$ 1,700 \
\hline
\end{array}$$ In Table 24.1,according to the profit maximization rule,at the profit-maximizing level of output,total revenue is

Accepted Answer

A) $900. 
B) $1,200. 
C) $650. 
D) $950. 
A) $900. 
B) $1,200. 
C) $650. 
D) $950.

Question 10

Table 24.1 Monopoly Costs and Revenue
$$\begin{array} { | c | c | c | } 
\hline \text { Quantity } & \text { Price } & \text { Total Cost } \
\hline 1 & \$ 500 & \$ 400 \
\hline 2 & \$ 450 & \$ 650 \
\hline 3 & \$ 400 & \$ 950 \
\hline 4 & \$ 350 & \$ 1,300 \
\hline 5 & \$ 300 & \$ 1,700 \
\hline
\end{array}$$ In Table 24.1,according to the profit maximization rule,at the profit-maximizing level of output marginal,cost is

Accepted Answer

A) $200. 
B) $250. 
C) $300. 
D) $350. 
A) $200. 
B) $250. 
C) $300. 
D) $350.

Question 11

Table 24.1 Monopoly Costs and Revenue
$$\begin{array} { | c | c | c | } 
\hline \text { Quantity } & \text { Price } & \text { Total Cost } \
\hline 1 & \$ 500 & \$ 400 \
\hline 2 & \$ 450 & \$ 650 \
\hline 3 & \$ 400 & \$ 950 \
\hline 4 & \$ 350 & \$ 1,300 \
\hline 5 & \$ 300 & \$ 1,700 \
\hline
\end{array}$$ In Table 24.1,using the profit maximization rule,a monopolist will produce

Accepted Answer

A) 1 unit. 
B) 3 units. 
C) 4 units. 
D) 5 units. 
A) 1 unit. 
B) 3 units. 
C) 4 units. 
D) 5 units.

Question 12

Explain the concept of market power.Why does a monopolist have market power while a perfectly competitive firm does not?

Accepted Answer

Market power refers to the ability of a

Question 13

Both a competitive industry and a monopoly

Accepted Answer

A) Use marginal cost pricing. 
B) Maximize profit per unit where P = MC. 
C) Face downward-sloping market demand curves. 
D) Produce products that have many identical substitutes. 
A) Use marginal cost pricing. 
B) Maximize profit per unit where P = MC. 
C) Face downward-sloping market demand curves. 
D) Produce products that have many identical substitutes.

Question 14

The World View article "Russia's Sable Monopoly Persists" provides evidence that

Accepted Answer

A) Prices are lower than they would be in a competitive sable market. 
B) Long-run economic profit is zero. 
C) Output of sable is lower than it would be in a competitive market. 
D) There are no barriers to entry in the sable market. 
A) Prices are lower than they would be in a competitive sable market. 
B) Long-run economic profit is zero. 
C) Output of sable is lower than it would be in a competitive market. 
D) There are no barriers to entry in the sable market.

Question 15

For a monopoly,the marginal revenue from selling an extra unit of output is less than the price of that unit.

Accepted Answer

A) True 
 B)False

Question 16

The marginal revenue of a monopolist

Accepted Answer

A) Is equal to price at all output levels. 
B) Is above a downward-sloping demand curve. 
C) Is positive up to the rate of output that maximizes total revenue. 
D) Is negative up to the rate of output that maximizes total revenue. 
A) Is equal to price at all output levels. 
B) Is above a downward-sloping demand curve. 
C) Is positive up to the rate of output that maximizes total revenue. 
D) Is negative up to the rate of output that maximizes total revenue.

Question 17

Microsoft's argument against the government's antitrust suit included all but which one of the following?

Accepted Answer

A) It dominated the computer industry because it produced the best products. 
B) It must behave like a competitive firm because of potential competition. 
C) The market,rather than the government,could make the best decision for consumers. 
D) It was a natural monopolist. 
A) It dominated the computer industry because it produced the best products. 
B) It must behave like a competitive firm because of potential competition. 
C) The market,rather than the government,could make the best decision for consumers. 
D) It was a natural monopolist.

Question 18

Which of the following rules is satisfied when a monopoly maximizes profits?

Accepted Answer

A) Price = AVC. 
B) Price  MC. 
A) Price = AVC. 
B) Price  MC.

Question 19

The ultimate market constraint on the exercise of market power

Accepted Answer

A) Is the demand curve facing the monopolist. 
B) Is marginal cost pricing. 
C) Is the ATC curve facing the monopolist. 
D) Is barriers to entry. 
A) Is the demand curve facing the monopolist. 
B) Is marginal cost pricing. 
C) Is the ATC curve facing the monopolist. 
D) Is barriers to entry.

Question 20

If the entire output of a market is produced by a single seller,the firm

Accepted Answer

A) Is a monopoly. 
B) Faces perfectly inelastic demand. 
C) Can charge any price it wants and not lose customers. 
D) Is producing a new product. 
A) Is a monopoly. 
B) Faces perfectly inelastic demand. 
C) Can charge any price it wants and not lose customers. 
D) Is producing a new product.

Exam 24: Monopoly

In monopoly and perfect competition,a firm should expand production when

There is lack of strong incentives in a monopoly industry,relative to a competitive industry to

A multi-plant monopolist produces more than if each of its plants were a separate firm in a competitive market.

Refer to Figure 24.3.Which of the following statements is true about the price elasticity of demand at price P2?

Table 24.1 Monopoly Costs and Revenue Quantity Price Total Cost 1 \ 500 \ 400 2 \ 450 \ 650 3 \ 400 \ 950 4 \ 350 \ 1,300 5 \ 300 \ 1,700 In Table 24.1,according to the profit maximization rule,at the profit-maximizing level of output,total cost is

Monopolists can charge any price and sell any amount of output they want because no competition exists.

Consumers may not experience the benefits of economies of scale because a natural monopoly

A monopolist with the ability to use price discrimination produces more to maximize profit than it would if it could charge only one price.

Table 24.1 Monopoly Costs and Revenue Quantity Price Total Cost 1 \ 500 \ 400 2 \ 450 \ 650 3 \ 400 \ 950 4 \ 350 \ 1,300 5 \ 300 \ 1,700 In Table 24.1,according to the profit maximization rule,at the profit-maximizing level of output,total revenue is

Table 24.1 Monopoly Costs and Revenue Quantity Price Total Cost 1 \ 500 \ 400 2 \ 450 \ 650 3 \ 400 \ 950 4 \ 350 \ 1,300 5 \ 300 \ 1,700 In Table 24.1,according to the profit maximization rule,at the profit-maximizing level of output marginal,cost is

Table 24.1 Monopoly Costs and Revenue Quantity Price Total Cost 1 \ 500 \ 400 2 \ 450 \ 650 3 \ 400 \ 950 4 \ 350 \ 1,300 5 \ 300 \ 1,700 In Table 24.1,using the profit maximization rule,a monopolist will produce

Explain the concept of market power.Why does a monopolist have market power while a perfectly competitive firm does not?

Both a competitive industry and a monopoly

The World View article "Russia's Sable Monopoly Persists" provides evidence that

For a monopoly,the marginal revenue from selling an extra unit of output is less than the price of that unit.

The marginal revenue of a monopolist

Microsoft's argument against the government's antitrust suit included all but which one of the following?

Which of the following rules is satisfied when a monopoly maximizes profits?

The ultimate market constraint on the exercise of market power

If the entire output of a market is produced by a single seller,the firm

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Refer to Figure 24.3.Which of the following statements is true about the price elasticity of demand at price P₂?