Question 1

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 2

Consider the following diagram:   Explain why producing output level Q0 is not the monopolist's profit-maximizing output level.How much output should the firm produce? Illustrate as Q1 in the diagram below.

Accepted Answer

At Q₀ we see that MR < MC.This means that

Question 3

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 4

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 5

Demonstrate graphically and explain verbally the case of a monopolistically competitive firm earning a positive economic profit.Is this firm in a short run or a long-run equilibrium? In the short run,how does this case differ from the monopoly market outcome?

Accepted Answer

The monopolistically competitive firm de

Question 6

If the market for tires is monopolistically competitive:

Accepted Answer

A) the demand curve for each seller's product is perfectly elastic. 
B) no seller can control the price of the product. 
C) sellers can influence the market price of the product. 
D) no firm has any monopoly power. 
A) the demand curve for each seller's product is perfectly elastic. 
B) no seller can control the price of the product. 
C) sellers can influence the market price of the product. 
D) no firm has any monopoly power.

Question 7

Refer to the graph shown depicting a monopolistically competitive firm. The average total 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 8

Briefly discuss three possible barriers to entry for an industry and assess whether these barriers are good or bad for consumers or society as a whole.

Accepted Answer

(1)Natural ability represents a barrier

Question 9

Refer to the graph shown. If regulators wanted this monopolist to earn only a normal profit, they would set price equal to:

Accepted Answer

A) $2. 
B) $3. 
C) $8. 
D) $12.00. 
A) $2. 
B) $3. 
C) $8. 
D) $12.00.

Question 10

Under normal monopoly, price exceeds marginal cost, which implies that the:

Accepted Answer

A) total cost to society of producing output is less than the total benefit. 
B) total benefit to society of producing output is less than the total cost. 
C) marginal cost to society of increasing output is lower than the marginal benefit. 
D) marginal cost to society of increasing output is greater than the marginal benefit. 
A) total cost to society of producing output is less than the total benefit. 
B) total benefit to society of producing output is less than the total cost. 
C) marginal cost to society of increasing output is lower than the marginal benefit. 
D) marginal cost to society of increasing output is greater than the marginal benefit.

Question 11

What is a natural monopoly?

Accepted Answer

A natural monopoly is an indus

Question 12

Refer to the table shown, which shows the demand schedule for a product sold by a monopolist. Marginal revenue is closest to zero: $$\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 13

Charging different prices to different individuals or groups for the same product is called:

Accepted Answer

A) market segmentation. 
B) price differentiation. 
C) quantity discrimination. 
D) price discrimination. 
A) market segmentation. 
B) price differentiation. 
C) quantity discrimination. 
D) price discrimination.

Question 14

Refer to the graph shown of average costs for a typical firm. The lowest per-unit costs for the industry could be achieved if:

Accepted Answer

A) one firm produced 333 units of output. 
B) two firms each produced 500 units of output. 
C) one firm produced 1,000 units of output. 
D) three firms each produced 333 units of output. 
A) one firm produced 333 units of output. 
B) two firms each produced 500 units of output. 
C) one firm produced 1,000 units of output. 
D) three firms each produced 333 units of output.

Question 15

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 16

(a)Complete the following table: $$\begin{array} { | c | c | c | c | } 
\hline \text { P } & \text { Q } & \text { TR } & \text { MR } \
\hline \$ 10 & 1 & & \
\hline 9 & 2 & & \
\hline 8 & 3 & & \
\hline 7 & 4 & & \
\hline 6 & 5 & & \
\hline 5 & 6 & & \
\hline 4 & 7 & & \
\hline 3 & 8 & & \
\hline 2 & 9 & & \
\hline 1 & 10 & & \
\hline
\end{array}$$ Note: Marginal values are values between levels of output.
(b)Suppose the firm's variable costs are as given in the accompanying table.What is the firm's profit-maximizing level of output? $$\begin{array} { | c | c | } 
\hline Q & V C \
\hline 1 & 5 \
\hline 2 & 9 \
\hline 3 & 12 \
\hline 4 & 16 \
\hline 5 & 21 \
\hline 6 & 27 \
\hline 7 & 34 \
\hline 8 & 42 \
\hline 9 & 51 \
\hline 10 & 61 \
\hline
\end{array}$$ (c)What would the profit-maximizing output be if the government offered to pay the firm's variable costs of production?
(d)What would profit-maximizing output be if instead the government decided to levy a tax of $100 on the firm,independent of its output decision?
(e)Do we know whether the firm will exit the industry in the short run? How about in the long run? Why or why not?

Accepted Answer

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

Question 17

The best-selling mystery To the Nines by Janet Evanovich was sold in hardcover for $25.95 when it was released. One year later, the publisher issued a softcover edition for $7.99. If the marginal cost of printing a softcover book is not much less than the marginal cost of printing a hardcover, the pricing difference:

Accepted Answer

A) cannot be explained by economic theory. 
B) is probably due to price discrimination in which the seller charges a higher price to consumers with a more elastic demand. 
C) is probably due to price discrimination in which the seller charges a higher price to consumers with less elastic demand. 
D) must be due to a difference in fixed costs. 
A) cannot be explained by economic theory. 
B) is probably due to price discrimination in which the seller charges a higher price to consumers with a more elastic demand. 
C) is probably due to price discrimination in which the seller charges a higher price to consumers with less elastic demand. 
D) must be due to a difference in fixed costs.

Question 18

A perfectly price-discriminating monopolist:

Accepted Answer

A) shifts the demand curve for its product to the right by producing where MC = MR. 
B) will cause a greater welfare loss than will a monopolist that is not price-discriminating. 
C) captures some or all of the consumer surplus. 
D) increases both consumer surplus and producer surplus. 
A) shifts the demand curve for its product to the right by producing where MC = MR. 
B) will cause a greater welfare loss than will a monopolist that is not price-discriminating. 
C) captures some or all of the consumer surplus. 
D) increases both consumer surplus and producer surplus.

Question 19

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

Accepted Answer

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

Question 20

Natural monopoly exists when:

Accepted Answer

A) one firm can supply the entire quantity demanded at higher cost than two or more firms. 
B) one firm can supply the entire quantity demanded at lower cost than two or more firms. 
C) one firm can supply the entire quantity demanded at the same cost as two or more firms. 
D) the long-run average cost curve exhibits constant returns to scale. 
A) one firm can supply the entire quantity demanded at higher cost than two or more firms. 
B) one firm can supply the entire quantity demanded at lower cost than two or more firms. 
C) one firm can supply the entire quantity demanded at the same cost as two or more firms. 
D) the long-run average cost curve exhibits constant returns to scale.

Exam 14: Monopoly and Monopolistic Competition

The deadweight loss from monopoly exists because:

Consider the following diagram: Explain why producing output level Q0 is not the monopolist's profit-maximizing output level.How much output should the firm produce? Illustrate as Q1 in the diagram below.

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

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

Demonstrate graphically and explain verbally the case of a monopolistically competitive firm earning a positive economic profit.Is this firm in a short run or a long-run equilibrium? In the short run,how does this case differ from the monopoly market outcome?

If the market for tires is monopolistically competitive:

Refer to the graph shown depicting a monopolistically competitive firm. The average total cost curve is represented by curve:

Briefly discuss three possible barriers to entry for an industry and assess whether these barriers are good or bad for consumers or society as a whole.

Refer to the graph shown. If regulators wanted this monopolist to earn only a normal profit, they would set price equal to:

Under normal monopoly, price exceeds marginal cost, which implies that the:

What is a natural monopoly?

Charging different prices to different individuals or groups for the same product is called:

Refer to the graph shown of average costs for a typical firm. The lowest per-unit costs for the industry could be achieved if:

Refer to the graph shown. Area B represents:

A perfectly price-discriminating monopolist:

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

Natural monopoly exists when:

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

Monetary Policy

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

Filters

Consider the following diagram: Explain why producing output level Q₀ is not the monopolist's profit-maximizing output level.How much output should the firm produce? Illustrate as Q₁ in the diagram below.

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 price is: