Question 1

Suppose a monopolist is at the profit-maximizing output level. If the monopolist reduces output:

Accepted Answer

A)  both producer surplus and consumer surplus increase. 
B)  producer surplus falls but consumer surplus rises. 
C)  both producer surplus and consumer surplus decrease. 
D)  producer surplus rises but consumer surplus falls. 
A)  both producer surplus and consumer surplus increase. 
B)  producer surplus falls but consumer surplus rises. 
C)  both producer surplus and consumer surplus decrease. 
D)  producer surplus rises but consumer surplus falls.

Question 2

The deadweight loss from monopoly exists because:

Accepted Answer

A)  there are no net gains to society at the output level produced by a monopolist. 
B)  resource owners hired by the monopolist gain at the expense of consumers. 
C)  the monopolist produces at an output level at which no one can be made better off without making someone worse off. 
D)  the marginal benefit of the monopolist's product to society exceeds the monopolist's marginal cost. 
A)  there are no net gains to society at the output level produced by a monopolist. 
B)  resource owners hired by the monopolist gain at the expense of consumers. 
C)  the monopolist produces at an output level at which no one can be made better off without making someone worse off. 
D)  the marginal benefit of the monopolist's product to society exceeds the monopolist's marginal cost.

Question 3

If MR > MC, a monopolist should:

Accepted Answer

A)  decrease production. 
B)  increase production. 
C)  maintain the same level of production. 
D)  stop producing. 
A)  decrease production. 
B)  increase production. 
C)  maintain the same level of production. 
D)  stop producing.

Question 4

Refer to the graph shown. The welfare loss of monopoly is:

Accepted Answer

A)  1,137.5. 
B)  1,381.25. 
C)  2,112.5. 
D)  2,762.5. 
A)  1,137.5. 
B)  1,381.25. 
C)  2,112.5. 
D)  2,762.5.

Question 5

Suppose a monopolist is at the profit-maximizing output level. If the monopolist sells another unit of output:

Accepted Answer

A)  both producer surplus and consumer surplus increase. 
B)  producer surplus falls but consumer surplus rises. 
C)  both producer surplus and consumer surplus decrease. 
D)  producer surplus rises but consumer surplus falls. 
A)  both producer surplus and consumer surplus increase. 
B)  producer surplus falls but consumer surplus rises. 
C)  both producer surplus and consumer surplus decrease. 
D)  producer surplus rises but consumer surplus falls.

Question 6

Refer to the graph shown depicting a monopolistically competitive firm. The marginal revenue curve is represented by curve:

Accepted Answer

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

Question 7

In the case of a natural monopoly, as the number of firms in the industry increases, the average cost of producing a:

Accepted Answer

A)  fixed number of units decreases. 
B)  fixed number of units stays the same. 
C)  variable number of units stays the same. 
D)  fixed number of units increases. 
A)  fixed number of units decreases. 
B)  fixed number of units stays the same. 
C)  variable number of units stays the same. 
D)  fixed number of units increases.

Question 8

Under monopolistic competition, a long-run equilibrium exists when price equals:

Accepted Answer

A)  marginal cost. 
B)  average total cost. 
C)  minimum average total cost. 
D)  marginal revenue. 
A)  marginal cost. 
B)  average total cost. 
C)  minimum average total cost. 
D)  marginal revenue.

Question 9

Which of the following statements for a monopolistic competitor in long-run equilibrium is true?

Accepted Answer

A)  P = ATC = MC = MR. 
B)  P > ATC > (MC = MR). 
C)  P > (ATC = MC = MR). 
D)  (P = AT
C)  > (MC = MR). 
A)  P = ATC = MC = MR. 
B)  P > ATC > (MC = MR). 
C)  P > (ATC = MC = MR). 
D)  (P = AT
C)  > (MC = MR).

Question 10

For a monopolistic competitor:

Accepted Answer

A)  P = MR. 
B)  P > MR. 
C)  P = MC. 
D)  MR > MC. 
A)  P = MR. 
B)  P > MR. 
C)  P = MC. 
D)  MR > MC.

Question 11

Of the following, the most likely example of price discrimination is when:

Accepted Answer

A)  a firm sells different shoes for different prices. 
B)  hotels charge different rates for the same rooms when conventions are held. 
C)  restaurants charge different prices for chicken and beef. 
D)  supermarkets charge different prices for oranges and apples. 
A)  a firm sells different shoes for different prices. 
B)  hotels charge different rates for the same rooms when conventions are held. 
C)  restaurants charge different prices for chicken and beef. 
D)  supermarkets charge different prices for oranges and apples.

Question 12

Despite the fact that the Quick-Buzz Coffee Company provides a coupon in the local newspaper that can be redeemed for $1 off the price of its best-selling coffee beans, not all buyers actually use the coupon. Assuming everyone has a subscription to the newspaper, from this we know that:

Accepted Answer

A)  all coffee drinkers have a highly elastic demand. 
B)  all coffee drinkers have a highly inelastic demand. 
C)  the coffee drinkers who use the coupons have less elastic demand than the coffee drinkers who pay full price. 
D)  the coffee drinkers who use the coupons have more elastic demand than the coffee drinkers who pay full price. 
A)  all coffee drinkers have a highly elastic demand. 
B)  all coffee drinkers have a highly inelastic demand. 
C)  the coffee drinkers who use the coupons have less elastic demand than the coffee drinkers who pay full price. 
D)  the coffee drinkers who use the coupons have more elastic demand than the coffee drinkers who pay full price.

Question 13

Compared with a normal monopolist, an effective price-discriminating monopolist produces a:

Accepted Answer

A)  smaller output at a lower profit. 
B)  smaller output but at a larger profit. 
C)  larger output at a larger profit. 
D)  larger output but at a lower profit. 
A)  smaller output at a lower profit. 
B)  smaller output but at a larger profit. 
C)  larger output at a larger profit. 
D)  larger output but at a lower profit.

Question 14

Refer to the graph shown. If this monopolist were forced to set price equal to marginal cost, in the long run it probably would produce:

Accepted Answer

A)  0 units of output. 
B)  200 units of output. 
C)  400 units of output. 
D)  450 units of output. 
A)  0 units of output. 
B)  200 units of output. 
C)  400 units of output. 
D)  450 units of output.

Question 15

If a monopolist produces beyond the quantity where MC = MR:

Accepted Answer

A)  the increase in revenue is less than the increase in cost. 
B)  total revenue is less than total cost. 
C)  the increase in revenue exceeds the increase in cost. 
D)  total revenue exceeds total cost. 
A)  the increase in revenue is less than the increase in cost. 
B)  total revenue is less than total cost. 
C)  the increase in revenue exceeds the increase in cost. 
D)  total revenue exceeds total cost.

Question 16

Refer to the graph shown. The profit-maximizing monopolist produces output:

Accepted Answer

A)  Q1. 
B)  Q2. 
C)  Q3. 
D)  Q4. 
A)  Q1. 
B)  Q2. 
C)  Q3. 
D)  Q4.

Question 17

Long-run equilibrium for firms in monopolistically competitive industries is similar to that for firms in perfect competition in that:

Accepted Answer

A)  price equals minimum possible average total cost. 
B)  price equals marginal cost. 
C)  marginal revenue equals price. 
D)  price equals average total cost. 
A)  price equals minimum possible average total cost. 
B)  price equals marginal cost. 
C)  marginal revenue equals price. 
D)  price equals average total cost.

Question 18

Why do some stores offer senior citizens discounts on Tuesdays?

Accepted Answer

A)  Most stores are perfect competitors in their geographic region. 
B)  Senior citizens have perfectly inelastic demand curves, whereas other shoppers do not. 
C)  Senior citizens have more elastic demand schedules than do other shoppers. 
D)  Senior citizens have less elastic demand schedules than do other shoppers. 
A)  Most stores are perfect competitors in their geographic region. 
B)  Senior citizens have perfectly inelastic demand curves, whereas other shoppers do not. 
C)  Senior citizens have more elastic demand schedules than do other shoppers. 
D)  Senior citizens have less elastic demand schedules than do other shoppers.

Question 19

Refer to the graph shown. Suppose the industry is currently perfectly competitive but then is taken over by a monopolist. Assuming that the monopolist maximizes profit:

Accepted Answer

A)  the price of computers will increase from $400 to $600 but there will be no change in quantity demanded. 
B)  the price of computers will increase from $400 to $600 and the quantity demanded will fall from 400 to 200. 
C)  the price of computers will decrease from $600 to $400 and the quantity demanded will rise from 200 to 400. 
D)  there will be no effect on the price of computers. 
A)  the price of computers will increase from $400 to $600 but there will be no change in quantity demanded. 
B)  the price of computers will increase from $400 to $600 and the quantity demanded will fall from 400 to 200. 
C)  the price of computers will decrease from $600 to $400 and the quantity demanded will rise from 200 to 400. 
D)  there will be no effect on the price of computers.

Question 20

Refer to the graph shown. Assuming that this monopolist maximizes profit, the marginal cost of its last unit of output will be:

Accepted Answer

A)  $16. 
B)  $12. 
C)  $ 8. 
D)  $10. 
A)  $16. 
B)  $12. 
C)  $ 8. 
D)  $10.

Exam 14: Monopoly and Monopolistic Competition

Suppose a monopolist is at the profit-maximizing output level. If the monopolist reduces output:

The deadweight loss from monopoly exists because:

If MR > MC, a monopolist should:

Refer to the graph shown. The welfare loss of monopoly is:

Suppose a monopolist is at the profit-maximizing output level. If the monopolist sells another unit of output:

Refer to the graph shown depicting a monopolistically competitive firm. The marginal revenue curve is represented by curve:

In the case of a natural monopoly, as the number of firms in the industry increases, the average cost of producing a:

Under monopolistic competition, a long-run equilibrium exists when price equals:

Which of the following statements for a monopolistic competitor in long-run equilibrium is true?

For a monopolistic competitor:

Of the following, the most likely example of price discrimination is when:

Despite the fact that the Quick-Buzz Coffee Company provides a coupon in the local newspaper that can be redeemed for $1 off the price of its best-selling coffee beans, not all buyers actually use the coupon. Assuming everyone has a subscription to the newspaper, from this we know that:

Compared with a normal monopolist, an effective price-discriminating monopolist produces a:

Refer to the graph shown. If this monopolist were forced to set price equal to marginal cost, in the long run it probably would produce:

If a monopolist produces beyond the quantity where MC = MR:

Refer to the graph shown. The profit-maximizing monopolist produces output:

Long-run equilibrium for firms in monopolistically competitive industries is similar to that for firms in perfect competition in that:

Why do some stores offer senior citizens discounts on Tuesdays?

Refer to the graph shown. Suppose the industry is currently perfectly competitive but then is taken over by a monopolist. Assuming that the monopolist maximizes profit:

Refer to the graph shown. Assuming that this monopolist maximizes profit, the marginal cost of its last unit of output will be:

Economics and Economic Reasoning

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Who Gets What the Distribution of Income

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