Question 1

Suppose Firm X is a monopolist and is receiving positive economic profits.What prevents other firms from directly competing away the profits?

Accepted Answer

A)  high barriers to entry 
B)  antitrust laws 
C)  low barriers to entry 
D)  diseconomies of scale 
E)  none of the above 
A)  high barriers to entry 
B)  antitrust laws 
C)  low barriers to entry 
D)  diseconomies of scale 
E)  none of the above A

Question 2

Exhibit 24-2
  
-Refer to Exhibit 24-2.This monopolist is earning

Accepted Answer

A)  an economic loss of area P0P3FA. 
B)  an economic loss of area P0P2CA. 
C)  an economic profit of area P2P3FC. 
D)  an economic profit of area P0P2CA. 
A)  an economic loss of area P0P3FA. 
B)  an economic loss of area P0P2CA. 
C)  an economic profit of area P2P3FC. 
D)  an economic profit of area P0P2CA. C

Question 3

The demand curve facing a monopolist is always

Accepted Answer

A)  the same as the industry demand curve. 
B)  perfectly inelastic. 
C)  perfectly elastic. 
D)  unit elastic. 
A)  the same as the industry demand curve. 
B)  perfectly inelastic. 
C)  perfectly elastic. 
D)  unit elastic. A

Question 4

A monopolist maximizes profits at the output at which

Accepted Answer

A)  total revenue is at its greatest, assuming that the firm has both fixed and variable costs. 
B)  price equals marginal cost. 
C)  price exceeds marginal cost by the greatest amount. 
D)  none of the above 
A)  total revenue is at its greatest, assuming that the firm has both fixed and variable costs. 
B)  price equals marginal cost. 
C)  price exceeds marginal cost by the greatest amount. 
D)  none of the above

Question 5

Exhibit 24-3
  
-Refer to Exhibit 24-3.The profit-maximizing single-price monopolist produces output

Accepted Answer

A)  q1. 
B)  q2. 
C)  q3. 
D)  q4. 
A)  q1. 
B)  q2. 
C)  q3. 
D)  q4.

Question 6

The Townsend Acts,passed by the British Parliament in 1767,imposed taxes on various products imported into the American colonies.

Accepted Answer

A) True 
 B)False

Question 7

A monopoly may exist because

Accepted Answer

A)  government has refused to grant a public franchise. 
B)  one firm has the exclusive ownership of a necessary resource. 
C)  the firm is so large and is currently experiencing such vast diseconomies of scale that it can out-compete all newcomers. 
D)  a and b 
E)  a, b, and c 
A)  government has refused to grant a public franchise. 
B)  one firm has the exclusive ownership of a necessary resource. 
C)  the firm is so large and is currently experiencing such vast diseconomies of scale that it can out-compete all newcomers. 
D)  a and b 
E)  a, b, and c

Question 8

The difference between profit seeking under perfect competition and profit seeking under monopoly is that

Accepted Answer

A)  under the former output will increase and price will decrease, whereas under the latter only output will increase. 
B)  under the former output will increase and price may increase, whereas under the latter output will increase and price will decrease. 
C)  under the former new firms will enter the industry, whereas under the latter the firm will simply raise its price and earn higher profits. 
D)  none of the above 
A)  under the former output will increase and price will decrease, whereas under the latter only output will increase. 
B)  under the former output will increase and price may increase, whereas under the latter output will increase and price will decrease. 
C)  under the former new firms will enter the industry, whereas under the latter the firm will simply raise its price and earn higher profits. 
D)  none of the above

Question 9

"Rent-seeking" refers to

Accepted Answer

A)  trying to pay the lowest rent possible for an apartment or house. 
B)  trying to lower rent that is paid on a factory in order to lower fixed costs. 
C)  the actions of individuals who spend resources to influence public policy in the hope of transferring income to themselves from others. 
D)  the fact that the deadweight loss triangle is a genuine cost of monopoly. 
E)  none of the above 
A)  trying to pay the lowest rent possible for an apartment or house. 
B)  trying to lower rent that is paid on a factory in order to lower fixed costs. 
C)  the actions of individuals who spend resources to influence public policy in the hope of transferring income to themselves from others. 
D)  the fact that the deadweight loss triangle is a genuine cost of monopoly. 
E)  none of the above

Question 10

Which of the following is the best example of price discrimination?

Accepted Answer

A)  a cellular telephone company charging lower rates to weekend callers than weekday callers 
B)  a gas station charging less per gallon to customers who pay cash than customers who use a credit card 
C)  an auto insurance company charging a higher premium to a seventeen year old boy with a driving record that includes three accidents than the premium charged to a middle-aged driver with a clean driving record 
D)  a private attorney charging higher fees to clients receiving special services than clients receiving regular services 
A)  a cellular telephone company charging lower rates to weekend callers than weekday callers 
B)  a gas station charging less per gallon to customers who pay cash than customers who use a credit card 
C)  an auto insurance company charging a higher premium to a seventeen year old boy with a driving record that includes three accidents than the premium charged to a middle-aged driver with a clean driving record 
D)  a private attorney charging higher fees to clients receiving special services than clients receiving regular services

Question 11

The term "arbitrage" refers to

Accepted Answer

A)  buying a good in a market where its price is high and selling the good in another market where its price is lower. 
B)  buying a good in a market where its price is low and selling the good in another market where its price is higher. 
C)  selling a good in a market where its price is high. 
D)  selling a good in a market where its price is low. 
A)  buying a good in a market where its price is high and selling the good in another market where its price is lower. 
B)  buying a good in a market where its price is low and selling the good in another market where its price is higher. 
C)  selling a good in a market where its price is high. 
D)  selling a good in a market where its price is low.

Question 12

Which of the following is descriptive of rent-seeking?

Accepted Answer

A)  A domestic company hires a lobbyist to go to Washington, D.C. and try to influence legislators to impose tariffs on Brazilian (imported) goods that compete with the good it produces. 
B)  Company X hires an accountant to work for it. 
C)  Jill pays her apartment rent a few days late each month and usually ends up having to pay a late fee. 
D)  This year Bob earned a large profit from the small business he owns and operates. 
E)  b and d 
A)  A domestic company hires a lobbyist to go to Washington, D.C. and try to influence legislators to impose tariffs on Brazilian (imported) goods that compete with the good it produces. 
B)  Company X hires an accountant to work for it. 
C)  Jill pays her apartment rent a few days late each month and usually ends up having to pay a late fee. 
D)  This year Bob earned a large profit from the small business he owns and operates. 
E)  b and d

Question 13

Economic rent is a payment in excess of

Accepted Answer

A)  average fixed cost. 
B)  average variable cost. 
C)  opportunity cost. 
D)  explicit cost, but not necessarily implicit cost. 
E)  none of the above 
A)  average fixed cost. 
B)  average variable cost. 
C)  opportunity cost. 
D)  explicit cost, but not necessarily implicit cost. 
E)  none of the above

Question 14

Exhibit 24-1
  
-Refer to Exhibit 24-1.If the product is produced under single-price monopoly,what do total costs equal at the profit maximizing level of output?

Accepted Answer

A)  area 0P1BQ1 
B)  area BCA 
C)  area P1P2CB 
D)  area P2CAP1 
E)  none of the above 
A)  area 0P1BQ1 
B)  area BCA 
C)  area P1P2CB 
D)  area P2CAP1 
E)  none of the above

Question 15

If a monopoly firm produces the quantity of output at which MR = MC,and charges a price greater than average total cost,it necessarily

Accepted Answer

A)  minimizes the difference between total fixed cost and total variable. 
B)  maximizes the difference between total fixed cost and total variable cost. 
C)  maximizes total revenue. 
D)  earns profit. 
E)  a, b, and d 
A)  minimizes the difference between total fixed cost and total variable. 
B)  maximizes the difference between total fixed cost and total variable cost. 
C)  maximizes total revenue. 
D)  earns profit. 
E)  a, b, and d

Question 16

A natural monopoly exists when

Accepted Answer

A)  a monopolist produces a product, the main component of which is a natural resource. 
B)  economies of scale are so large that only one firm can survive and achieve low unit costs. 
C)  a firm is the exclusive owner of a key resource necessary to produce the firm's product. 
D)  there are no close substitutes for a firm's product. 
A)  a monopolist produces a product, the main component of which is a natural resource. 
B)  economies of scale are so large that only one firm can survive and achieve low unit costs. 
C)  a firm is the exclusive owner of a key resource necessary to produce the firm's product. 
D)  there are no close substitutes for a firm's product.

Question 17

Exhibit 24-7
  
-Refer to Exhibit 24-7.The maximum profits earned by a single-price monopolist producing good X are

Accepted Answer

A)  $9,000. 
B)  $4,500. 
C)  $2,250. 
D)  $1,125. 
A)  $9,000. 
B)  $4,500. 
C)  $2,250. 
D)  $1,125.

Question 18

For the monopoly firm that does not engage in perfect price discrimination,

Accepted Answer

A)  the marginal revenue curve lies below the demand curve. 
B)  the marginal revenue curve and demand curve are the same. 
C)  the marginal revenue curve lies above the demand curve. 
D)  marginal revenue equals price. 
E)  c and d 
A)  the marginal revenue curve lies below the demand curve. 
B)  the marginal revenue curve and demand curve are the same. 
C)  the marginal revenue curve lies above the demand curve. 
D)  marginal revenue equals price. 
E)  c and d

Question 19

Which of the following statements is true?

Accepted Answer

A)  The perfectly competitive firm produces a level of output at which P=MC. 
B)  The single-price monopolist produces a level of output at which P > MC. 
C)  The perfectly price-discriminating monopolist produces a level of output at which P>MC. 
D)  a and b 
E)  all of the above 
A)  The perfectly competitive firm produces a level of output at which P=MC. 
B)  The single-price monopolist produces a level of output at which P > MC. 
C)  The perfectly price-discriminating monopolist produces a level of output at which P>MC. 
D)  a and b 
E)  all of the above

Question 20

As long as the demand curve lies above the marginal revenue curve for a monopolist,it will charge a price for its product that is

Accepted Answer

A)  above total cost. 
B)  below marginal cost. 
C)  above marginal cost. 
D)  above average total cost. 
E)  c and d 
A)  above total cost. 
B)  below marginal cost. 
C)  above marginal cost. 
D)  above average total cost. 
E)  c and d

Exam 24: Monopoly

Suppose Firm X is a monopolist and is receiving positive economic profits.What prevents other firms from directly competing away the profits?

Exhibit 24-2 -Refer to Exhibit 24-2.This monopolist is earning

The demand curve facing a monopolist is always

A monopolist maximizes profits at the output at which

Exhibit 24-3 -Refer to Exhibit 24-3.The profit-maximizing single-price monopolist produces output

The Townsend Acts,passed by the British Parliament in 1767,imposed taxes on various products imported into the American colonies.

A monopoly may exist because

The difference between profit seeking under perfect competition and profit seeking under monopoly is that

"Rent-seeking" refers to

Which of the following is the best example of price discrimination?

The term "arbitrage" refers to

Which of the following is descriptive of rent-seeking?

Economic rent is a payment in excess of

Exhibit 24-1 -Refer to Exhibit 24-1.If the product is produced under single-price monopoly,what do total costs equal at the profit maximizing level of output?

If a monopoly firm produces the quantity of output at which MR = MC,and charges a price greater than average total cost,it necessarily

A natural monopoly exists when

Exhibit 24-7 -Refer to Exhibit 24-7.The maximum profits earned by a single-price monopolist producing good X are

For the monopoly firm that does not engage in perfect price discrimination,

Which of the following statements is true?

As long as the demand curve lies above the marginal revenue curve for a monopolist,it will charge a price for its product that is

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