Question 1

Refer to the graph shown. If this monopolist produces 700 units of output per day, it:

Accepted Answer

A)  can increase profit by producing more. 
B)  can increase profit by producing less. 
C)  will be maximizing profit. 
D)  will incur economic losses. 
A)  can increase profit by producing more. 
B)  can increase profit by producing less. 
C)  will be maximizing profit. 
D)  will incur economic losses. B

Question 2

There are many restaurants in a city, each one offering food and services that differ from those of its competitors. There is also free entry of sellers into the market, and each seller serves a very small fraction of the total number of meals served each day. The restaurant industry in Raleigh is best categorized as:

Accepted Answer

A)  an oligopoly. 
B)  monopolistically competitive. 
C)  a pure monopoly. 
D)  perfectly competitive. 
A)  an oligopoly. 
B)  monopolistically competitive. 
C)  a pure monopoly. 
D)  perfectly competitive. B

Question 3

A significant difference between monopoly and perfect competition is that:

Accepted Answer

A)  free entry and exit is possible in a monopolized industry but impossible in a competitive industry. 
B)  competitive firms control market supply, but monopolies do not. 
C)  the monopolist's demand curve is the industry demand curve, whereas the competitive firm's demand curve is perfectly elastic. 
D)  profits are driven to zero in a monopolized industry but may be positive in a competitive industry. 
A)  free entry and exit is possible in a monopolized industry but impossible in a competitive industry. 
B)  competitive firms control market supply, but monopolies do not. 
C)  the monopolist's demand curve is the industry demand curve, whereas the competitive firm's demand curve is perfectly elastic. 
D)  profits are driven to zero in a monopolized industry but may be positive in a competitive industry. C

Question 4

A natural monopoly:

Accepted Answer

A)  has an average total cost curve that reaches minimum at a low level of output. 
B)  is usually subject to antitrust suits. 
C)  is usually allowed to choose its price so as to maximize profits in the United States. 
D)  occurs when a single firm can supply the entire market demand for a product at a lower average total cost than would be possible if two or more firms supplied the market. 
A)  has an average total cost curve that reaches minimum at a low level of output. 
B)  is usually subject to antitrust suits. 
C)  is usually allowed to choose its price so as to maximize profits in the United States. 
D)  occurs when a single firm can supply the entire market demand for a product at a lower average total cost than would be possible if two or more firms supplied the market.

Question 5

Microsoft sells a special version of its Windows operating system at a low price in countries where cheap pirated software is widespread. Since the cost of producing another copy of this software is the same as the cost of producing another copy of the regular Windows product, why is Microsoft charging this lower price?

Accepted Answer

A)  It is trying to take advantage of the different demand elasticities in the different countries. 
B)  The price differential is explained by the lower cost to develop the new software. 
C)  The price differences are due to differences in cost among countries. 
D)  The differential pricing reflects the differences in the barriers to entry. 
A)  It is trying to take advantage of the different demand elasticities in the different countries. 
B)  The price differential is explained by the lower cost to develop the new software. 
C)  The price differences are due to differences in cost among countries. 
D)  The differential pricing reflects the differences in the barriers to entry.

Question 6

A price-discriminating monopolist will make less in profit than will one that does not price-discriminate.

Accepted Answer

A) True 
 B)False

Question 7

Under monopolistic competition, a firm's ability to influence the price of the product it sells arises because:

Accepted Answer

A)  sellers in the market have large market shares. 
B)  sellers in the market have small market shares. 
C)  the product of each seller is differentiated from that of others. 
D)  each seller sells a standardized product. 
A)  sellers in the market have large market shares. 
B)  sellers in the market have small market shares. 
C)  the product of each seller is differentiated from that of others. 
D)  each seller sells a standardized product.

Question 8

All of the following are good examples of network externalities except:

Accepted Answer

A)  Facebook. 
B)  cigarettes. 
C)  computer software. 
D)  the Internet. 
A)  Facebook. 
B)  cigarettes. 
C)  computer software. 
D)  the Internet.

Question 9

Monopolies that exist because economies of scale create a barrier to entry are called:

Accepted Answer

A)  normal monopolies. 
B)  natural monopolies. 
C)  price-discriminating monopolies. 
D)  government monopolies. 
A)  normal monopolies. 
B)  natural monopolies. 
C)  price-discriminating monopolies. 
D)  government monopolies.

Question 10

If a monopolistically competitive firm is earning economic profits in the short run:

Accepted Answer

A)  these profits will persist in the long run because of the firm's limited monopoly power. 
B)  these profits will be eliminated in the long run as new firms enter the industry. 
C)  its output will increase in the long run. 
D)  price will be driven down to minimum average total cost in the long run. 
A)  these profits will persist in the long run because of the firm's limited monopoly power. 
B)  these profits will be eliminated in the long run as new firms enter the industry. 
C)  its output will increase in the long run. 
D)  price will be driven down to minimum average total cost in the long run.

Question 11

Refer to the following graph.   If the demand curve is curve D for a monopoly, the marginal revenue curve is:

Accepted Answer

A)  A, which intersects the x-axis at 1/4 the quantity where the demand curve intersects the x-axis. 
B)  B, which intersects the x-axis at 1/2 the quantity where the demand curve intersects the x-axis. 
C)  C, which intersects the x-axis at 3/4 the quantity where the demand curve intersects the x-axis. 
D)  D, which intersects the x-axis at the same quantity where the demand curve intersects the x-axis. 
A)  A, which intersects the x-axis at 1/4 the quantity where the demand curve intersects the x-axis. 
B)  B, which intersects the x-axis at 1/2 the quantity where the demand curve intersects the x-axis. 
C)  C, which intersects the x-axis at 3/4 the quantity where the demand curve intersects the x-axis. 
D)  D, which intersects the x-axis at the same quantity where the demand curve intersects the x-axis.

Question 12

A British waste management company acquired two other companies that specialized in disposal of hazardous wastes even though the two companies were losing money. Planning and regulatory requirements in the United Kingdom make it difficult for firms to establish new hazardous waste landfills, and the combined companies would control most hazardous waste landfills in some parts of the country. How do the planning and regulatory requirements affect the market for hazardous waste?

Accepted Answer

A)  They create a burden on the company, and so it probably will lobby to repeal them. 
B)  They make the market for hazardous waste disposal into a contestable market. 
C)  They make the market for hazardous waste disposal into a monopolistically competitive market. 
D)  They help the merged companies because it will be expensive for other firms to enter the market to compete with them. 
A)  They create a burden on the company, and so it probably will lobby to repeal them. 
B)  They make the market for hazardous waste disposal into a contestable market. 
C)  They make the market for hazardous waste disposal into a monopolistically competitive market. 
D)  They help the merged companies because it will be expensive for other firms to enter the market to compete with them.

Question 13

Refer to the graph shown. The areas that represent the net gain to society of eliminating the monopoly are:

Accepted Answer

A)  A and B. 
B)  A and C. 
C)  D and B. 
D)  D and C. 
A)  A and B. 
B)  A and C. 
C)  D and B. 
D)  D and C.

Question 14

Refer to the graph shown depicting a monopolistically competitive firm. The average total cost curve is represented by curve:

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  D. 
A)  A. 
B)  B. 
C)  C. 
D)  D.

Question 15

When a monopolistically competitive firm is in long-run equilibrium, average total cost is at its minimum.

Accepted Answer

A) True 
 B)False

Question 16

A perfectly price-discriminating monopolist:

Accepted Answer

A)  shifts the demand curve for its product to the right by producing where MC = MR. 
B)  will cause a greater welfare loss than will a monopolist that is not price-discriminating. 
C)  captures some or all of the consumer surplus. 
D)  increases both consumer surplus and producer surplus. 
A)  shifts the demand curve for its product to the right by producing where MC = MR. 
B)  will cause a greater welfare loss than will a monopolist that is not price-discriminating. 
C)  captures some or all of the consumer surplus. 
D)  increases both consumer surplus and producer surplus.

Question 17

Refer to the graph shown. If this graph represents a competitive market, the equilibrium price and quantity will be:

Accepted Answer

A)  $13.50 and 325, respectively. 
B)  $7 and 325, respectively. 
C)  $10 and 500, respectively. 
D)  $7 and 750, respectively. 
A)  $13.50 and 325, respectively. 
B)  $7 and 325, respectively. 
C)  $10 and 500, respectively. 
D)  $7 and 750, respectively.

Question 18

Monopoly is a market structure in which:

Accepted Answer

A)  one firm makes up the entire market. 
B)  a few firms dominate the market. 
C)  many firms produce differentiated products. 
D)  many firms produce identical products. 
A)  one firm makes up the entire market. 
B)  a few firms dominate the market. 
C)  many firms produce differentiated products. 
D)  many firms produce identical products.

Question 19

When a monopolistically competitive industry is in long-run equilibrium:

Accepted Answer

A)  firms earn economic profits. 
B)  firms earn zero economic profits. 
C)  price equals minimum average total cost. 
D)  price equals marginal cost. 
A)  firms earn economic profits. 
B)  firms earn zero economic profits. 
C)  price equals minimum average total cost. 
D)  price equals marginal cost.

Question 20

Refer to the graph shown. If the government set the selling price equal to the marginal cost, the firm in the graph would be:

Accepted Answer

A)  making economic profits. 
B)  making normal profits. 
C)  sustaining losses and eventually would go out of business. 
D)  making zero economic profits. 
A)  making economic profits. 
B)  making normal profits. 
C)  sustaining losses and eventually would go out of business. 
D)  making zero economic profits.

Refer to the graph shown. If this monopolist produces 700 units of output per day, it:

A significant difference between monopoly and perfect competition is that:

A natural monopoly:

A price-discriminating monopolist will make less in profit than will one that does not price-discriminate.

Under monopolistic competition, a firm's ability to influence the price of the product it sells arises because:

All of the following are good examples of network externalities except:

Monopolies that exist because economies of scale create a barrier to entry are called:

If a monopolistically competitive firm is earning economic profits in the short run:

Refer to the following graph. If the demand curve is curve D for a monopoly, the marginal revenue curve is:

Refer to the graph shown. The areas that represent the net gain to society of eliminating the monopoly are:

Refer to the graph shown depicting a monopolistically competitive firm. The average total cost curve is represented by curve:

When a monopolistically competitive firm is in long-run equilibrium, average total cost is at its minimum.

A perfectly price-discriminating monopolist:

Refer to the graph shown. If this graph represents a competitive market, the equilibrium price and quantity will be:

Monopoly is a market structure in which:

When a monopolistically competitive industry is in long-run equilibrium:

Refer to the graph shown. If the government set the selling price equal to the marginal cost, the firm in the graph would be:

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Market Failure Versus Government Failure

Comparative Advantage, Exchange Rates, and Globalization

International Trade Policy

Production and Cost Analysis I

Production and Cost Analysis II

Perfect Competition

Oligopoly and Antitrust Policy

Real-World Competition and Technology

Work and the Labor Market

Who Gets What the Distribution of Income

The Logic of Individual Choice: the Foundation of Supply and Demand

Game Theory, Strategic Decision Making, and Behavioral Economics

Thinking Like a Modern Economist

Behavioral Economics and Modern Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

Filters

Exam 14: Monopoly and Monopolistic Competition

Refer to the graph shown. If this monopolist produces 700 units of output per day, it:

A significant difference between monopoly and perfect competition is that:

A natural monopoly:

A price-discriminating monopolist will make less in profit than will one that does not price-discriminate.

Under monopolistic competition, a firm's ability to influence the price of the product it sells arises because:

All of the following are good examples of network externalities except:

Monopolies that exist because economies of scale create a barrier to entry are called:

If a monopolistically competitive firm is earning economic profits in the short run:

Refer to the following graph. If the demand curve is curve D for a monopoly, the marginal revenue curve is:

Refer to the graph shown. The areas that represent the net gain to society of eliminating the monopoly are:

Refer to the graph shown depicting a monopolistically competitive firm. The average total cost curve is represented by curve:

When a monopolistically competitive firm is in long-run equilibrium, average total cost is at its minimum.

A perfectly price-discriminating monopolist:

Refer to the graph shown. If this graph represents a competitive market, the equilibrium price and quantity will be:

Monopoly is a market structure in which:

When a monopolistically competitive industry is in long-run equilibrium:

Refer to the graph shown. If the government set the selling price equal to the marginal cost, the firm in the graph would be:

Economics and Economic Reasoning

The Production Possibility Model, Trade, and Globalization

Economic Institutions

Supply and Demand

Using Supply and Demand

Describing Supply and Demand: Elasticities

Taxation and Government Intervention

Market Failure Versus Government Failure

Comparative Advantage, Exchange Rates, and Globalization

International Trade Policy

Production and Cost Analysis I

Production and Cost Analysis II

Perfect Competition

Oligopoly and Antitrust Policy

Real-World Competition and Technology

Work and the Labor Market

Who Gets What the Distribution of Income

The Logic of Individual Choice: the Foundation of Supply and Demand

Game Theory, Strategic Decision Making, and Behavioral Economics

Thinking Like a Modern Economist

Behavioral Economics and Modern Economic Policy

Microeconomic Policy, Economic Reasoning, and Beyond

Filters