Question 1

If a market with monopolistic competition became a monopoly market, output would:

Accepted Answer

A) rise. 
B) fall. 
C) not change. 
D) be incomparable. 
A) rise. 
B) fall. 
C) not change. 
D) be incomparable.

Question 2

Refer to the graph shown. The welfare cost of monopoly is given by:

Accepted Answer

A) area A. 
B) area B. 
C) areas A and B. 
D) areas C and D. 
A) area A. 
B) area B. 
C) areas A and B. 
D) areas C and D.

Question 3

Refer to the graph shown. If the monopoly firm maximizes profit, consumers will pay:

Accepted Answer

A) $2.00 per unit and consumer surplus will be 45. 
B) $2.50 per unit and consumer surplus will be 18.75. 
C) $3.50 per unit and consumer surplus will be 11.25. 
D) $3.50 per unit and consumer surplus will be 22.5. 
A) $2.00 per unit and consumer surplus will be 45. 
B) $2.50 per unit and consumer surplus will be 18.75. 
C) $3.50 per unit and consumer surplus will be 11.25. 
D) $3.50 per unit and consumer surplus will be 22.5.

Question 4

Refer to the graph shown. An unregulated, profit-maximizing monopolist will charge a price of:

Accepted Answer

A) P1 and produce Q1 units of output. 
B) P2 and produce Q2 units of output. 
C) P3 and produce Q3 units of output. 
D) P3 and produce Q1 units of output. 
A) P1 and produce Q1 units of output. 
B) P2 and produce Q2 units of output. 
C) P3 and produce Q3 units of output. 
D) P3 and produce Q1 units of output.

Question 5

Refer to the table shown, which shows the demand schedule for a product sold by a monopolist. Marginal revenue is negative: $$\begin{array} { | c | c | } 
\hline\text { Price d product(\$)}&\text { Quantity demanded per year }\

\hline \$ 14 & 3 \
\hline \$ 12 & 4 \
\hline \$ 10 & 5 \
\hline \$ 8 & 6 \
\hline \$ 6 & 7 \
\hline

\end{array}$$

Accepted Answer

A) when price is $10. 
B) when price is above $10. 
C) when price is below $10. 
D) for every price. 
A) when price is $10. 
B) when price is above $10. 
C) when price is below $10. 
D) for every price.

Question 6

Consider the following table,which represents demand and cost conditions for a monopoly firm.
(a)Fill in the missing values.
(b)What output level should the firm produce? Explain. $$\begin{array} { | c | c | c | c | c | c | c | c | } 
\hline \text { Quantity } & \text { Price } & \begin{array} { c } 
\text { Total } \
\text { Revenue }
\end{array} & \begin{array} { c } 
\text { Marginal } \
\text { Revenue }
\end{array} & \begin{array} { c } 
\text { Total } \
\text { Cost }
\end{array} & \begin{array} { c } 
\text { Marginal } \
\text { Cost }
\end{array} & \begin{array} { c } 
\text { Average } \
\text { Total } \
\text { Cost }
\end{array} & \text { Profit } \
\hline 0 & \$ 50 & & & & & & \$ - 60 \
\hline 1 & 45 & & & & \$ 3 & & \
\hline 2 & 40 & & & & 5 & & \
\hline 3 & 35 & & & & 11 & & \
\hline 4 & 30 & & & & 13 & & \
\hline 5 & 25 & & & & 21 & & \
\hline 6 & 20 & & & & 39 & & \
\hline 7 & 15 & & & & 45 & & \
\hline 8 & 10 & & & & 60 & & \
\hline
\end{array}$$ (NOTE: Marginal values should be interpreted as values between levels of output. )

Accepted Answer

(a)The completed table:
 \[\begin{array}

Question 7

For a natural monopoly:

Accepted Answer

A) ATC > MC. B) ATC < MC. C) ATC = MC. D) there is no relationship between ATC and MC. A) ATC > MC. B) ATC < MC. C) ATC = MC. D) there is no relationship between ATC and MC.

Question 8

Why is marginal revenue always less than price for a monopolist? Construct an example to illustrate your answer.

Accepted Answer

Marginal revenue is always less than pri

Question 9

How would we show graphically the welfare loss resulting from converting a perfectly competitive industry into a monopoly?

Accepted Answer

Construct a demand curve,a marginal reve

Question 10

The demand curve for a monopolist differs from the demand curve faced by a competitive firm because the demand curve for:

Accepted Answer

A) a competitive firm lies above its marginal revenue curve. 
B) a competitive firm is inelastic. 
C) a monopolist is the market demand curve. 
D) a monopolist lies below its marginal revenue curve. 
A) a competitive firm lies above its marginal revenue curve. 
B) a competitive firm is inelastic. 
C) a monopolist is the market demand curve. 
D) a monopolist lies below its marginal revenue curve.

Question 11

All of the following can be barriers to entry except:

Accepted Answer

A) economies of scale. 
B) a firm's superior production ability. 
C) price discrimination. 
D) patents. 
A) economies of scale. 
B) a firm's superior production ability. 
C) price discrimination. 
D) patents.

Question 12

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

Accepted Answer

A) $12.50. 
B) $20.00. 
C) $31.25. 
D) $50.00. 
A) $12.50. 
B) $20.00. 
C) $31.25. 
D) $50.00.

Question 13

Why are patents important to those who hold them?

Accepted Answer

A) Without patents, there will no longer be economies of scale in production. 
B) Patents act as a barrier to entry, allowing monopoly profits. 
C) Without patents, there would be considerably more price discrimination in the market. 
D) Patents actually do not matter because they do not guarantee that a firm will make a profit. 
A) Without patents, there will no longer be economies of scale in production. 
B) Patents act as a barrier to entry, allowing monopoly profits. 
C) Without patents, there would be considerably more price discrimination in the market. 
D) Patents actually do not matter because they do not guarantee that a firm will make a profit.

Question 14

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.

Question 15

Refer to the graph shown of average costs for a firm. This firm exhibits:

Accepted Answer

A) economies of scale. 
B) diseconomies of scale. 
C) profits. 
D) X-inefficiency. 
A) economies of scale. 
B) diseconomies of scale. 
C) profits. 
D) X-inefficiency.

Question 16

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.

Question 17

Monopolies that exist because economies of scale create a barrier to entry are called natural monopolies.

Accepted Answer

A) True 
 B)False

Question 18

If the quantity demanded at a price of $10 is 2,000 and the quantity demanded at a price of $8 is 2,400, a price-discriminating monopolist would want to:

Accepted Answer

A) charge all consumers the higher price of $10 and sell 2,000 units. 
B) charge all consumers $8 in order to increase quantity sold to 2,400. 
C) sell 2,000 units for $8 each and then sell an additional 400 units for $10 each. 
D) sell 2,000 units for $10 each and then sell an additional 400 units for $8 each. 
A) charge all consumers the higher price of $10 and sell 2,000 units. 
B) charge all consumers $8 in order to increase quantity sold to 2,400. 
C) sell 2,000 units for $8 each and then sell an additional 400 units for $10 each. 
D) sell 2,000 units for $10 each and then sell an additional 400 units for $8 each.

Question 19

Under monopolistic competition:

Accepted Answer

A) firms can sell all the output they wish without affecting the price. 
B) firms face a downward-sloping demand curve. 
C) firms have no monopoly power. 
D) a single seller serves the market. 
A) firms can sell all the output they wish without affecting the price. 
B) firms face a downward-sloping demand curve. 
C) firms have no monopoly power. 
D) a single seller serves the market.

Question 20

A price-discriminating monopolist will charge a higher price to individuals whose demand is:

Accepted Answer

A) more inelastic. 
B) more elastic. 
C) unit elastic. 
D) unit inelastic. 
A) more inelastic. 
B) more elastic. 
C) unit elastic. 
D) unit inelastic.

Exam 14: Monopoly and Monopolistic Competition

If a market with monopolistic competition became a monopoly market, output would:

Refer to the graph shown. The welfare cost of monopoly is given by:

Refer to the graph shown. If the monopoly firm maximizes profit, consumers will pay:

Refer to the graph shown. An unregulated, profit-maximizing monopolist will charge a price of:

For a natural monopoly:

Why is marginal revenue always less than price for a monopolist? Construct an example to illustrate your answer.

How would we show graphically the welfare loss resulting from converting a perfectly competitive industry into a monopoly?

The demand curve for a monopolist differs from the demand curve faced by a competitive firm because the demand curve for:

All of the following can be barriers to entry except:

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

Why are patents important to those who hold them?

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

Refer to the graph shown of average costs for a firm. This firm exhibits:

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

Monopolies that exist because economies of scale create a barrier to entry are called natural monopolies.

If the quantity demanded at a price of $10 is 2,000 and the quantity demanded at a price of $8 is 2,400, a price-discriminating monopolist would want to:

Under monopolistic competition:

A price-discriminating monopolist will charge a higher price to individuals whose demand 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

Economic Growth, Business Cycles, and Unemployment

Measuring and Describing the Aggregate Economy

The Keynesian Short-Run Policy Model: Demand-Side Policies

The Classical Long-Run Policy Model: Growth and Supply-Side Policies

The Financial Sector and the Economy

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Financial Crises, Panics, and Unconventional Monetary Policy

Deficits and Debt: the Austerity Debate

The Fiscal Policy Dilemma

Jobs and Unemployment

Inflation, Deflation, and Macro Policy

International Financial Policy

Macro Policy in a Global Setting

Structural Stagnation and Globalization

Macro Policy in Developing Countries

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