Question 1

Refer to the graph shown. If this firm is maximizing profit, it will:

Accepted Answer

A)  earn just normal profits, that is, zero economic profits. 
B)  earn economic profits. 
C)  incur a loss. 
D)  make enough to cover its variable costs but not its fixed costs. 
A)  earn just normal profits, that is, zero economic profits. 
B)  earn economic profits. 
C)  incur a loss. 
D)  make enough to cover its variable costs but not its fixed costs.

Question 2

If P = 3Qs + 3 represents market supply for a competitive industry and market demand is given by Qd = 31 - 1/3 P, the equilibrium quantity is:

Accepted Answer

A)  10. 
B)  15. 
C)  20. 
D)  48. 
A)  10. 
B)  15. 
C)  20. 
D)  48.

Question 3

Refer to the graph shown of a monopolistically competitive firm. You can conclude that:

Accepted Answer

A)  new firms will enter the industry in the long run. 
B)  existing firms will exit the industry in the long run. 
C)  the industry is in long-run equilibrium. 
D)  the price of dresses is equal to the minimum possible average total cost. 
A)  new firms will enter the industry in the long run. 
B)  existing firms will exit the industry in the long run. 
C)  the industry is in long-run equilibrium. 
D)  the price of dresses is equal to the minimum possible average total cost.

Question 4

In the absence of economies of scale, advertising and product differentiation:

Accepted Answer

A)  reduce social welfare by increasing average total cost. 
B)  increase social welfare by giving consumers a greater variety of goods to choose from. 
C)  have an uncertain effect on welfare because they increase both average total cost and product variety. 
D)  benefit consumers if product variety increases. 
A)  reduce social welfare by increasing average total cost. 
B)  increase social welfare by giving consumers a greater variety of goods to choose from. 
C)  have an uncertain effect on welfare because they increase both average total cost and product variety. 
D)  benefit consumers if product variety increases.

Question 5

A market structure in which one firm makes up the entire market is:

Accepted Answer

A)  a monopoly. 
B)  perfect competition. 
C)  an oligopoly. 
D)  monopolistic competition. 
A)  a monopoly. 
B)  perfect competition. 
C)  an oligopoly. 
D)  monopolistic competition.

Question 6

Refer to the graph shown. If hamburgers are produced by a pure monopoly that maximizes profit, the price of hamburger dinners will be:

Accepted Answer

A)  $ 2. 
B)  $ 4. 
C)  $ 5. 
D)  $ 6. 
A)  $ 2. 
B)  $ 4. 
C)  $ 5. 
D)  $ 6.

Question 7

Refer to the graph shown. If this monopolist were allowed to choose the profit-maximizing level of output, it would produce:

Accepted Answer

A)  300 units of output. 
B)  400 units of output. 
C)  500 units of output. 
D)  800 units of output. 
A)  300 units of output. 
B)  400 units of output. 
C)  500 units of output. 
D)  800 units of output.

Question 8

Since marginal revenue is less than price for a monopolist, a monopolist maximizes profits by equating marginal revenue and marginal cost, not price and marginal cost.

Accepted Answer

A) True 
 B)False

Question 9

If there were no barriers to entry:

Accepted Answer

A)  natural monopolies would still exist. 
B)  patents could still be offered by the government. 
C)  "just" monopolies would still exist. 
D)  firms would compete away monopoly profits. 
A)  natural monopolies would still exist. 
B)  patents could still be offered by the government. 
C)  "just" monopolies would still exist. 
D)  firms would compete away monopoly profits.

Question 10

Refer to the graph shown. If the price of the product is $1 and the firm is a natural monopoly:

Accepted Answer

A)  there will be a surplus of the product. 
B)  the firm will earn economic profit by satisfying the market quantity demanded at that price. 
C)  the firm can earn profit by producing more than Qc. 
D)  the firm will incur losses by producing the quantity demanded at that price. 
A)  there will be a surplus of the product. 
B)  the firm will earn economic profit by satisfying the market quantity demanded at that price. 
C)  the firm can earn profit by producing more than Qc. 
D)  the firm will incur losses by producing the quantity demanded at that price.

Question 11

Often, gas stations only a few miles apart differ in price by as much as $0.10 per gallon. The most likely explanation for this kind of price discrimination is that:

Accepted Answer

A)  consumers in some communities have a more elastic demand for gasoline than do consumers in nearby communities. 
B)  gasoline purchased at one station is a perfect substitute for gasoline purchased at a station a few miles away. 
C)  the elasticity of demand is the same in each community. 
D)  the cost of providing gasoline is the same in each community. 
A)  consumers in some communities have a more elastic demand for gasoline than do consumers in nearby communities. 
B)  gasoline purchased at one station is a perfect substitute for gasoline purchased at a station a few miles away. 
C)  the elasticity of demand is the same in each community. 
D)  the cost of providing gasoline is the same in each community.

Question 12

Under normal monopoly, P > MC, and so the marginal benefit to society of increasing output exceeds the marginal cost. This means that an increase in output will increase welfare.

Accepted Answer

A) True 
 B)False

Question 13

A movie theater is a price-discriminating monopolist and charges a higher ticket price for late-evening showings. From this we know that:

Accepted Answer

A)  late-evening moviegoers have perfectly inelastic demand schedules. 
B)  late-evening moviegoers have less elastic demands than daytime or early-evening moviegoers. 
C)  late-evening moviegoers have more elastic demands than daytime or early-evening moviegoers. 
D)  daytime and early-evening moviegoers have perfectly elastic demands. 
A)  late-evening moviegoers have perfectly inelastic demand schedules. 
B)  late-evening moviegoers have less elastic demands than daytime or early-evening moviegoers. 
C)  late-evening moviegoers have more elastic demands than daytime or early-evening moviegoers. 
D)  daytime and early-evening moviegoers have perfectly elastic demands.

Question 14

Refer to the graph shown. If this monopolist were allowed to choose the profit-maximizing level of output, it would produce:

Accepted Answer

A)  125 units of output. 
B)  200 units of output. 
C)  400 units of output. 
D)  450 units of output. 
A)  125 units of output. 
B)  200 units of output. 
C)  400 units of output. 
D)  450 units of output.

Question 15

Refer to the graph shown. If this graph represents a monopoly 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 16

You are shown a graph of a monopolist in long-run equilibrium and a graph of a monopolistically competitive firm in short-run equilibrium. How could you tell which is which?

Accepted Answer

A)  You probably could not. 
B)  In the graph of monopolistic competition, the MR curve could be closer to the demand curve. 
C)  In the graph of monopoly, the MR curve would be closer to the demand curve. 
D)  In the graph of monopoly, the MC would slope upward. 
A)  You probably could not. 
B)  In the graph of monopolistic competition, the MR curve could be closer to the demand curve. 
C)  In the graph of monopoly, the MR curve would be closer to the demand curve. 
D)  In the graph of monopoly, the MC would slope upward.

Question 17

The DeBeers Company is a profit-maximizing monopolist that exercises monopoly power in the distribution of diamonds. If the company earns positive economic profits this year, the price of diamonds will:

Accepted Answer

A)  be equal to the marginal cost of diamonds. 
B)  be equal to the average total cost of diamonds. 
C)  exceed the marginal cost of diamonds but be equal to the average total cost of diamonds. 
D)  exceed both the marginal cost and the average total cost of diamonds. 
A)  be equal to the marginal cost of diamonds. 
B)  be equal to the average total cost of diamonds. 
C)  exceed the marginal cost of diamonds but be equal to the average total cost of diamonds. 
D)  exceed both the marginal cost and the average total cost of diamonds.

Question 18

If a college student's demand for newspaper subscriptions is more price-elastic than a business executive's demand for newspaper subscriptions, which of the following pricing strategies would a price-discriminating newspaper publisher follow?

Accepted Answer

A)  Charge the same rate to college students and business executives 
B)  Set price according to the marginal cost of printing the newspaper 
C)  Charge a higher price to college students 
D)  Charge a higher price to business executives 
A)  Charge the same rate to college students and business executives 
B)  Set price according to the marginal cost of printing the newspaper 
C)  Charge a higher price to college students 
D)  Charge a higher price to business executives

Question 19

A perfectly price-discriminating monopolist:

Accepted Answer

A)  creates more consumer surplus for the consumer. 
B)  increases both consumer surplus and producer surplus. 
C)  reduces or eliminates the welfare loss from monopoly. 
D)  increases the welfare loss from monopoly. 
A)  creates more consumer surplus for the consumer. 
B)  increases both consumer surplus and producer surplus. 
C)  reduces or eliminates the welfare loss from monopoly. 
D)  increases the welfare loss from monopoly.

Question 20

If P = Q/15 represents market supply for a competitive industry and market demand is given by Qd = 500 - 10P, the equilibrium quantity is:

Accepted Answer

A)  150. 
B)  187.5. 
C)  250. 
D)  300. 
A)  150. 
B)  187.5. 
C)  250. 
D)  300.

Exam 14: Monopoly and Monopolistic Competition

Refer to the graph shown. If this firm is maximizing profit, it will:

If P = 3Qs + 3 represents market supply for a competitive industry and market demand is given by Qd = 31 - 1/3 P, the equilibrium quantity is:

Refer to the graph shown of a monopolistically competitive firm. You can conclude that:

In the absence of economies of scale, advertising and product differentiation:

A market structure in which one firm makes up the entire market is:

Refer to the graph shown. If hamburgers are produced by a pure monopoly that maximizes profit, the price of hamburger dinners will be:

Refer to the graph shown. If this monopolist were allowed to choose the profit-maximizing level of output, it would produce:

Since marginal revenue is less than price for a monopolist, a monopolist maximizes profits by equating marginal revenue and marginal cost, not price and marginal cost.

If there were no barriers to entry:

Refer to the graph shown. If the price of the product is $1 and the firm is a natural monopoly:

Often, gas stations only a few miles apart differ in price by as much as $0.10 per gallon. The most likely explanation for this kind of price discrimination is that:

Under normal monopoly, P > MC, and so the marginal benefit to society of increasing output exceeds the marginal cost. This means that an increase in output will increase welfare.

A movie theater is a price-discriminating monopolist and charges a higher ticket price for late-evening showings. From this we know that:

Refer to the graph shown. If this monopolist were allowed to choose the profit-maximizing level of output, it would produce:

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

You are shown a graph of a monopolist in long-run equilibrium and a graph of a monopolistically competitive firm in short-run equilibrium. How could you tell which is which?

The DeBeers Company is a profit-maximizing monopolist that exercises monopoly power in the distribution of diamonds. If the company earns positive economic profits this year, the price of diamonds will:

If a college student's demand for newspaper subscriptions is more price-elastic than a business executive's demand for newspaper subscriptions, which of the following pricing strategies would a price-discriminating newspaper publisher follow?

A perfectly price-discriminating monopolist:

If P = Q/15 represents market supply for a competitive industry and market demand is given by Qd = 500 - 10P, the equilibrium quantity is:

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

If P = 3Q_s + 3 represents market supply for a competitive industry and market demand is given by Q_d = 31 - 1/3 P, the equilibrium quantity is:

If P = Q/15 represents market supply for a competitive industry and market demand is given by Q_d = 500 - 10P, the equilibrium quantity is: