Question 1

At the socially optimum quantity of production, price equals:

Accepted Answer

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

Question 2

As network externalities broaden the use of a product, the:

Accepted Answer

A)  need for a single standard becomes more important and eventually one standard wins out. 
B)  need for a single standard becomes less important, so many different standards are likely to coexist. 
C)  benefits of that product to everyone are diminished. 
D)  incentive to replace that product with something new grows stronger. 
A)  need for a single standard becomes more important and eventually one standard wins out. 
B)  need for a single standard becomes less important, so many different standards are likely to coexist. 
C)  benefits of that product to everyone are diminished. 
D)  incentive to replace that product with something new grows stronger.

Question 3

Refer to the graph shown. According to the graph, this monopolistically competitive industry is currently:

Accepted Answer

A)  not in long-run equilibrium, and we would expect more firms to enter this industry. 
B)  not in long-run equilibrium, and we would expect some firms to exit this industry. 
C)  in long-run equilibrium, and so the number of firms will remain unchanged. 
D)  in short-run equilibrium with economic profit equal to zero. 
A)  not in long-run equilibrium, and we would expect more firms to enter this industry. 
B)  not in long-run equilibrium, and we would expect some firms to exit this industry. 
C)  in long-run equilibrium, and so the number of firms will remain unchanged. 
D)  in short-run equilibrium with economic profit equal to zero.

Question 4

The reason a profit-maximizing natural monopolist cannot set price equal to marginal cost is that it would:

Accepted Answer

A)  then be forced to produce more than it could sell. 
B)  then be forced to produce more than the socially optimal level of output. 
C)  earn excessive profits, which would attract new firms into the market. 
D)  suffer losses since price would be less than average cost. 
A)  then be forced to produce more than it could sell. 
B)  then be forced to produce more than the socially optimal level of output. 
C)  earn excessive profits, which would attract new firms into the market. 
D)  suffer losses since price would be less than average cost.

Question 5

Refer to the graph shown. Area B represents:

Accepted Answer

A)  the loss of surplus by consumers resulting from a monopoly. 
B)  the cost to society of increasing output from Qm to Qc. 
C)  consumer surplus redistributed to the monopolist. 
D)  the loss of surplus by producers resulting from a monopoly. 
A)  the loss of surplus by consumers resulting from a monopoly. 
B)  the cost to society of increasing output from Qm to Qc. 
C)  consumer surplus redistributed to the monopolist. 
D)  the loss of surplus by producers resulting from a monopoly.

Question 6

Refer to the graph shown of average costs for a typical firm. The per-unit cost of the industry would be $8 if:

Accepted Answer

A)  two firms produced 250 units of output each. 
B)  one firm produced 500 units of output. 
C)  two firms produced 1,000 units of output each. 
D)  one firm produced 667 units of output. 
A)  two firms produced 250 units of output each. 
B)  one firm produced 500 units of output. 
C)  two firms produced 1,000 units of output each. 
D)  one firm produced 667 units of output.

Question 7

In long-run equilibrium, monopolistically competitive firms produce where:

Accepted Answer

A)  marginal cost is equal to price. 
B)  marginal revenue is equal to price. 
C)  average total cost is equal to price. 
D)  marginal revenue is greater than marginal cost. 
A)  marginal cost is equal to price. 
B)  marginal revenue is equal to price. 
C)  average total cost is equal to price. 
D)  marginal revenue is greater than marginal cost.

Question 8

In a monopolistically competitive market:

Accepted Answer

A)  firms produce differentiated products. 
B)  there are barriers to entry. 
C)  firms produce homogeneous products. 
D)  the demand for any firm's product is perfectly elastic. 
A)  firms produce differentiated products. 
B)  there are barriers to entry. 
C)  firms produce homogeneous products. 
D)  the demand for any firm's product is perfectly elastic.

Question 9

Suppose the market demand curve for a monopolist is given by P = 50 - 10Q. Then the marginal revenue curve is given by:

Accepted Answer

A)  MR = 25 - 10Q. 
B)  MR = 25 - 20Q. 
C)  MR = 50 - 5Q. 
D)  MR = 50 - 20Q 
A)  MR = 25 - 10Q. 
B)  MR = 25 - 20Q. 
C)  MR = 50 - 5Q. 
D)  MR = 50 - 20Q

Question 10

Refer to the graph shown. The loss of surplus to consumers resulting from monopoly is:

Accepted Answer

A)  11.25. 
B)  20. 
C)  31.25 
D)  42.5. 
A)  11.25. 
B)  20. 
C)  31.25 
D)  42.5.

Question 11

iTunes charges British customers 20 percent more than customers in France and Germany. Apple defended the price difference, saying that the "underlying economic model in each country has an impact on how we price our track downloads." An economist would say that Apple is engaged in:

Accepted Answer

A)  collusion. 
B)  monopolistic competition. 
C)  price discrimination. 
D)  reverse engineering. 
A)  collusion. 
B)  monopolistic competition. 
C)  price discrimination. 
D)  reverse engineering.

Question 12

Price exceeds marginal cost for a monopolistically competitive firm in long-run equilibrium because:

Accepted Answer

A)  economic profits are positive. 
B)  economic profits are negative. 
C)  demand is perfectly elastic. 
D)  demand is not perfectly elastic. 
A)  economic profits are positive. 
B)  economic profits are negative. 
C)  demand is perfectly elastic. 
D)  demand is not perfectly elastic.

Question 13

Refer to the graph shown of a monopolistically competitive firm. In the long run:

Accepted Answer

A)  marginal cost will fall for firms that remain as other firms exit the industry. 
B)  average total cost will rise for firms that remain as other firms enter the industry. 
C)  demand will fall for firms that remain as other firms enter the industry. 
D)  demand will rise for firms that remain as other firms exit the industry. 
A)  marginal cost will fall for firms that remain as other firms exit the industry. 
B)  average total cost will rise for firms that remain as other firms enter the industry. 
C)  demand will fall for firms that remain as other firms enter the industry. 
D)  demand will rise for firms that remain as other firms exit the industry.

Question 14

If P = Q/15 represents marginal cost for a monopolist and market supply for a competitive industry and market demand is given by Qd = 500 - 10P, the difference between the monopoly equilibrium and the competitive equilibrium is that a monopolist would produce:

Accepted Answer

A)  187.5 units of output at a price of $31.25 each, whereas competitive output would be 300 units at a price of $20. 
B)  300 units of output at a price of $20, whereas competitive output would be 187.5 units at a price of $31.25. 
C)  250 units of output at a price of $25, whereas competitive output would be 300 units at a price of $20. 
D)  187.5 units of output at a price of $31.25, whereas competitive output would be 250 units at a price of $25. 
A)  187.5 units of output at a price of $31.25 each, whereas competitive output would be 300 units at a price of $20. 
B)  300 units of output at a price of $20, whereas competitive output would be 187.5 units at a price of $31.25. 
C)  250 units of output at a price of $25, whereas competitive output would be 300 units at a price of $20. 
D)  187.5 units of output at a price of $31.25, whereas competitive output would be 250 units at a price of $25.

Question 15

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

Accepted Answer

A)  Qd= 1,000 - 20P. 
B)  Qd= 1,000 - 50P. 
C)  Qd= 20 - 1,000P. 
D)  Qd= 50 - 1,000P. 
A)  Qd= 1,000 - 20P. 
B)  Qd= 1,000 - 50P. 
C)  Qd= 20 - 1,000P. 
D)  Qd= 50 - 1,000P.

Question 16

Refer to the graph shown. The maximum possible total profit this monopolist that charges only one price can earn is:

Accepted Answer

A)  $0. 
B)  $60. 
C)  $120. 
D)  $240. 
A)  $0. 
B)  $60. 
C)  $120. 
D)  $240.

Question 17

Refer to the graph shown. If the monopoly firm maximizes profit, it will produce:

Accepted Answer

A)  15 units of output and producer surplus will be $28.125. 
B)  15 units of output and producer surplus will be $16.875. 
C)  25 units of output and producer surplus will be $15.625. 
D)  30 units of output and producer surplus will be $60. 
A)  15 units of output and producer surplus will be $28.125. 
B)  15 units of output and producer surplus will be $16.875. 
C)  25 units of output and producer surplus will be $15.625. 
D)  30 units of output and producer surplus will be $60.

Question 18

In the absence of economies of scale, advertising:

Accepted Answer

A)  is not used by monopolistic competitors. 
B)  cannot influence demand. 
C)  increases the average total cost of producing a given amount of output. 
D)  is used by perfectly competitive firms. 
A)  is not used by monopolistic competitors. 
B)  cannot influence demand. 
C)  increases the average total cost of producing a given amount of output. 
D)  is used by perfectly competitive firms.

Question 19

Suppose that the men's suit business is monopolistically competitive. It follows that in equilibrium, the marginal revenue of any firm in the industry:

Accepted Answer

A)  is greater than the price. 
B)  is equal to the price. 
C)  is less than the price. 
D)  has no relation to price. 
A)  is greater than the price. 
B)  is equal to the price. 
C)  is less than the price. 
D)  has no relation to price.

Question 20

Refer to the graph shown. The monopolistically competitive firm represented is in:

Accepted Answer

A)  both short-run and long-run equilibrium because price equals marginal cost at the profit-maximizing output level. 
B)  both short-run and long-run equilibrium because price exceeds average total cost at the profit-maximizing output level. 
C)  short-run equilibrium because price exceeds average total cost at the profit-maximizing output level. 
D)  long-run equilibrium because economic profits are zero at the profit-maximizing output level. 
A)  both short-run and long-run equilibrium because price equals marginal cost at the profit-maximizing output level. 
B)  both short-run and long-run equilibrium because price exceeds average total cost at the profit-maximizing output level. 
C)  short-run equilibrium because price exceeds average total cost at the profit-maximizing output level. 
D)  long-run equilibrium because economic profits are zero at the profit-maximizing output level.

Exam 14: Monopoly and Monopolistic Competition

At the socially optimum quantity of production, price equals:

As network externalities broaden the use of a product, the:

Refer to the graph shown. According to the graph, this monopolistically competitive industry is currently:

The reason a profit-maximizing natural monopolist cannot set price equal to marginal cost is that it would:

Refer to the graph shown. Area B represents:

Refer to the graph shown of average costs for a typical firm. The per-unit cost of the industry would be $8 if:

In long-run equilibrium, monopolistically competitive firms produce where:

In a monopolistically competitive market:

Suppose the market demand curve for a monopolist is given by P = 50 - 10Q. Then the marginal revenue curve is given by:

Refer to the graph shown. The loss of surplus to consumers resulting from monopoly is:

iTunes charges British customers 20 percent more than customers in France and Germany. Apple defended the price difference, saying that the "underlying economic model in each country has an impact on how we price our track downloads." An economist would say that Apple is engaged in:

Price exceeds marginal cost for a monopolistically competitive firm in long-run equilibrium because:

Refer to the graph shown of a monopolistically competitive firm. In the long run:

If P = Q/15 represents marginal cost for a monopolist and market supply for a competitive industry and market demand is given by Qd = 500 - 10P, the difference between the monopoly equilibrium and the competitive equilibrium is that a monopolist would produce:

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

Refer to the graph shown. The maximum possible total profit this monopolist that charges only one price can earn is:

Refer to the graph shown. If the monopoly firm maximizes profit, it will produce:

In the absence of economies of scale, advertising:

Suppose that the men's suit business is monopolistically competitive. It follows that in equilibrium, the marginal revenue of any firm in the industry:

Refer to the graph shown. The monopolistically competitive firm represented is in:

Economics and Economic Reasoning

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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

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Production and Cost Analysis I

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Perfect Competition

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

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If P = Q/15 represents marginal cost for a monopolist and market supply for a competitive industry and market demand is given by Q_d = 500 - 10P, the difference between the monopoly equilibrium and the competitive equilibrium is that a monopolist would produce: