Question 1

If government regulators want a natural monopolist to earn only zero economic profit, they will set price equal to:

Accepted Answer

A) marginal cost (M
C) . 
B) average variable cost (AV
C) . 
C) average fixed cost (AF
C) . 
D) average total cost (AT
C) . 
A) marginal cost (M
C) . 
B) average variable cost (AV
C) . 
C) average fixed cost (AF
C) . 
D) average total cost (AT
C) .

Question 2

What is the key difference between a perfectly competitive firm and a monopolist with respect to the relationship between price and marginal revenue?

Accepted Answer

The key difference has to do with the re

Question 3

In the long-run equilibrium for a monopolistically competitive firm, price:

Accepted Answer

A) exceeds marginal cost. 
B) exceeds average total cost. 
C) is equal to marginal revenue. 
D) is equal to marginal cost. 
A) exceeds marginal cost. 
B) exceeds average total cost. 
C) is equal to marginal revenue. 
D) is equal to marginal cost.

Question 4

Compare how P,ATC,MC,and MR are related to each other in the long-run equilibrium setting for a perfectly competitive firm and a monopolistically competitive firm.

Accepted Answer

In perfect competition we know the firm

Question 5

If a natural monopoly faces a relatively inelastic consumer demand over the range of the production, it will have an incentive to:

Accepted Answer

A) charge a low price. 
B) charge a high price. 
C) sell more. 
D) advertise more. 
A) charge a low price. 
B) charge a high price. 
C) sell more. 
D) advertise more.

Question 6

A natural monopoly occurs when a monopoly:

Accepted Answer

A) exists because significant economies of scale are present. 
B) exists because the monopolist can produce a good at a lower cost than anyone else. 
C) is created by the federal government. 
D) achieves a naturally efficient allocation of resources. 
A) exists because significant economies of scale are present. 
B) exists because the monopolist can produce a good at a lower cost than anyone else. 
C) is created by the federal government. 
D) achieves a naturally efficient allocation of resources.

Question 7

Refer to the graph shown. Assuming that the monopoly maximizes profit, it will earn profits of:

Accepted Answer

A) $8,000 per day. 
B) $20,000 per day. 
C) $40,000 per day. 
D) $160,000 per day. 
A) $8,000 per day. 
B) $20,000 per day. 
C) $40,000 per day. 
D) $160,000 per day.

Question 8

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 9

Refer to the graph shown. If this monopolist sets the price to maximize profit, it will earn economic profit of:

Accepted Answer

A) $1,600 per day. 
B) $2,400 per day. 
C) $4,800 per day. 
D) $7,200 per day. 
A) $1,600 per day. 
B) $2,400 per day. 
C) $4,800 per day. 
D) $7,200 per day.

Question 10

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 11

Refer to the graph shown. Area C represents:

Accepted Answer

A) the total 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 total 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 12

Refer to the table shown, which shows the demand schedule for a firm that has a monopoly on the sale of computers in the country of Oz. If the firm were to set the price of computers at $2,000: $\begin{array}{|c|c|}
\hline \text { Price of computers }(\$)& \text { Quantity demanded per year }\
\hline 5,000 & 100 \
\hline 4,000 & 200 \
\hline 3,000 & 300 \
\hline 2,000 & 400 \
\hline 1,000 & 500 \
\hline
\end{array}$

Accepted Answer

A) it would maximize profits. 
B) marginal revenue would be negative. 
C) the demand for computers would be elastic. 
D) marginal revenue would be positive. 
A) it would maximize profits. 
B) marginal revenue would be negative. 
C) the demand for computers would be elastic. 
D) marginal revenue would be positive.

Question 13

Refer to the graph shown. In a perfectly competitive industry, price would:

Accepted Answer

A) equal $16. 
B) be greater than $16. 
C) equal $12. 
D) be less than $12. 
A) equal $16. 
B) be greater than $16. 
C) equal $12. 
D) be less than $12.

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) 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 15

Refer to the graph shown depicting a monopolistically competitive firm. The marginal 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 16

Suppose quantity demanded is 2,000 when price is $10 and 3,000 when price is $5. If a monopolist who was initially charging a price of $10 discovers a way to price-discriminate, it will be able to increase revenue from $20,000 to:

Accepted Answer

A) $25,000 by charging consumers with less elastic demands only $5 and keeping the price for consumers with more elastic demands at $10. 
B) $35,000 by charging consumers with less elastic demands only $5 and keeping the price for consumers with more elastic demands at $10. 
C) $25,000 by charging consumers with more elastic demands only $5 and keeping the price for consumers with less elastic demands at $10. 
D) $35,000 by charging consumers with more elastic demands only $5 and keeping the price for consumers with less elastic demands at $10. 
A) $25,000 by charging consumers with less elastic demands only $5 and keeping the price for consumers with more elastic demands at $10. 
B) $35,000 by charging consumers with less elastic demands only $5 and keeping the price for consumers with more elastic demands at $10. 
C) $25,000 by charging consumers with more elastic demands only $5 and keeping the price for consumers with less elastic demands at $10. 
D) $35,000 by charging consumers with more elastic demands only $5 and keeping the price for consumers with less elastic demands at $10.

Question 17

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 18

Refer to the graph shown. If hamburgers are produced by a pure monopoly firm that maximizes profit, the social cost of monopoly will be represented by the area:

Accepted Answer

A) BFC. 
B) GFHJ. 
C) ABFG. 
D) ABCG. 
A) BFC. 
B) GFHJ. 
C) ABFG. 
D) ABCG.

Question 19

Why does a price-discriminating monopolist earn more profit than a monopolist who does not price-discriminate? What must a monopolist do in order to successfully price discriminate? Give three real world examples of price discrimination practices

Accepted Answer

A price-discriminating monopolist can ea

Question 20

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.

Exam 14: Monopoly and Monopolistic Competition

If government regulators want a natural monopolist to earn only zero economic profit, they will set price equal to:

What is the key difference between a perfectly competitive firm and a monopolist with respect to the relationship between price and marginal revenue?

In the long-run equilibrium for a monopolistically competitive firm, price:

Compare how P,ATC,MC,and MR are related to each other in the long-run equilibrium setting for a perfectly competitive firm and a monopolistically competitive firm.

If a natural monopoly faces a relatively inelastic consumer demand over the range of the production, it will have an incentive to:

A natural monopoly occurs when a monopoly:

Refer to the graph shown. Assuming that the monopoly maximizes profit, it will earn profits of:

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 this monopolist sets the price to maximize profit, it will earn economic profit of:

Refer to the graph shown. Area C represents:

Refer to the graph shown. In a perfectly competitive industry, price would:

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 depicting a monopolistically competitive firm. The marginal cost curve is represented by curve:

Suppose quantity demanded is 2,000 when price is $10 and 3,000 when price is $5. If a monopolist who was initially charging a price of $10 discovers a way to price-discriminate, it will be able to increase revenue from $20,000 to:

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

Refer to the graph shown. If hamburgers are produced by a pure monopoly firm that maximizes profit, the social cost of monopoly will be represented by the area:

Why does a price-discriminating monopolist earn more profit than a monopolist who does not price-discriminate? What must a monopolist do in order to successfully price discriminate? Give three real world examples of price discrimination practices

In a monopolistically competitive market:

Economics and Economic Reasoning

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