Question 1

"Monopolists do not worry about efficient production and minimizing costs since they can just pass along any increase in costs to their consumers." This statement is

Accepted Answer

A) false; price increases will mean fewer sales, which may lower profits. 
B) true; this is the primary reason why economists believe that monopolies result in economic inefficiency. 
C) false; the monopolist is a price taker. 
D) true; consumers in a monopoly market have no substitutes to turn to when the monopolist raises prices. 
A) false; price increases will mean fewer sales, which may lower profits. 
B) true; this is the primary reason why economists believe that monopolies result in economic inefficiency. 
C) false; the monopolist is a price taker. 
D) true; consumers in a monopoly market have no substitutes to turn to when the monopolist raises prices.

Question 2

Price discrimination is the business practice of

Accepted Answer

A) bundling related products to increase total sales. 
B) selling the same good at different prices to different customers. 
C) pricing above marginal cost. 
D) hiring marketing experts to increase consumers' brand loyalty. 
A) bundling related products to increase total sales. 
B) selling the same good at different prices to different customers. 
C) pricing above marginal cost. 
D) hiring marketing experts to increase consumers' brand loyalty.

Question 3

A benefit to society of the patent and copyright laws is that those laws

Accepted Answer

A) help to keep prices down. 
B) help to prevent a single firm from acquiring ownership of a key resource. 
C) encourage creative activity. 
D) discourage the production of inefficient products. 
A) help to keep prices down. 
B) help to prevent a single firm from acquiring ownership of a key resource. 
C) encourage creative activity. 
D) discourage the production of inefficient products.

Question 4

Figure 15-4  
-Refer to Figure 15-4. The average total cost curve for a monopoly firm is depicted by curve

Accepted Answer

A) A. 
B) B. 
C) C. 
D) D. 
A) A. 
B) B. 
C) C. 
D) D.

Question 5

The deadweight loss that arises from a monopoly is a consequence of the fact that the monopoly

Accepted Answer

A) quantity is lower than the socially-optimal quantity. 
B) price equals marginal revenue. 
C) price is the same as average revenue. 
D) earns positive profits. 
A) quantity is lower than the socially-optimal quantity. 
B) price equals marginal revenue. 
C) price is the same as average revenue. 
D) earns positive profits.

Question 6

Table 15-17
A monopolist faces the following demand curve:  
-Refer to Table 15-17. Which of the following statements best describes the relationship between the price and the marginal revenue associated with values in the table?

Accepted Answer

A) The price and marginal revenue are the same. 
B) The price is greater than or equal to the marginal revenue. 
C) The price is less than or equal to the marginal revenue. 
D) The relationship cannot be determined from the information given. 
A) The price and marginal revenue are the same. 
B) The price is greater than or equal to the marginal revenue. 
C) The price is less than or equal to the marginal revenue. 
D) The relationship cannot be determined from the information given.

Question 7

A monopolist produces where P = MC = MR.

Accepted Answer

A) True 
 B)False

Question 8

Figure 15-5  
-Refer to Figure 15-5. At the profit-maximizing level of output,

Accepted Answer

A) marginal revenue is equal to P3. 
B) marginal cost is equal to P3. 
C) average revenue is equal to P2. 
D) average total cost is equal to P6. 
A) marginal revenue is equal to P3. 
B) marginal cost is equal to P3. 
C) average revenue is equal to P2. 
D) average total cost is equal to P6.

Question 9

Figure 15-9  
-Refer to Figure 15-9. The monopolist's maximum profit

Accepted Answer

A) is $1,600. 
B) is $2,000. 
C) is $2,500. 
D) cannot be determined from the diagram. 
A) is $1,600. 
B) is $2,000. 
C) is $2,500. 
D) cannot be determined from the diagram.

Question 10

Figure 15-4  
-Refer to Figure 15-4. If the monopoly firm is currently producing Q4 units of output, then a decrease in output will necessarily cause profit to

Accepted Answer

A) remain unchanged. 
B) decrease. 
C) increase as long as the new level of output is at least Q2. 
D) None of the above is correct. The monopolist currently maximizing profits at Q4. 
A) remain unchanged. 
B) decrease. 
C) increase as long as the new level of output is at least Q2. 
D) None of the above is correct. The monopolist currently maximizing profits at Q4.

Question 11

A perfectly price-discriminating monopolist is able to

Accepted Answer

A) maximize profit and produce a socially-optimal level of output. 
B) maximize profit, but not produce a socially-optimal level of output. 
C) produce a socially-optimal level of output, but not maximize profit. 
D) exercise illegal preferences regarding the race and/or gender of its employees. 
A) maximize profit and produce a socially-optimal level of output. 
B) maximize profit, but not produce a socially-optimal level of output. 
C) produce a socially-optimal level of output, but not maximize profit. 
D) exercise illegal preferences regarding the race and/or gender of its employees.

Question 12

The profit that a monopolist earns represents a loss to society that is measured through deadweight loss.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following statements is correct?

Accepted Answer

A) Two examples of early antitrust laws are the Clinton and Stigler Antitrust Acts. 
B) Antitrust laws automatically prevent mergers between companies that produce similar products. 
C) Antitrust laws reduce the government's power to regulate private companies. 
D) Antitrust laws can reduce social welfare if they prevent mergers that would lower costs through more efficient joint production. 
A) Two examples of early antitrust laws are the Clinton and Stigler Antitrust Acts. 
B) Antitrust laws automatically prevent mergers between companies that produce similar products. 
C) Antitrust laws reduce the government's power to regulate private companies. 
D) Antitrust laws can reduce social welfare if they prevent mergers that would lower costs through more efficient joint production.

Question 14

Antitrust laws may

Accepted Answer

A) enhance the ability of firms to capture profits from a concentration of market power. 
B) enhance the ability of firms to reduce economic losses. 
C) restrict the ability of firms to operate at the socially efficient level of production. 
D) restrict the ability of firms to merge. 
A) enhance the ability of firms to capture profits from a concentration of market power. 
B) enhance the ability of firms to reduce economic losses. 
C) restrict the ability of firms to operate at the socially efficient level of production. 
D) restrict the ability of firms to merge.

Question 15

For a monopoly firm, which of the following equalities is always true?

Accepted Answer

A) price = marginal revenue 
B) price = average revenue 
C) price = total revenue 
D) marginal revenue = marginal cost 
A) price = marginal revenue 
B) price = average revenue 
C) price = total revenue 
D) marginal revenue = marginal cost

Question 16

There has been much discussion of deregulating electricity and natural gas delivery companies in the United States. Discuss the likely effect of deregulation on prices in these two industries.

Accepted Answer

If deregulation leads to increased compe

Question 17

Monopolists can achieve any level of profit they desire because they have unlimited market power.

Accepted Answer

A) True 
 B)False

Question 18

A natural monopoly arises when

Accepted Answer

A) there are constant returns to scale over the relevant range of output. 
B) there are economies of scale over the relevant range of output. 
C) one firm owns a key natural resource. 
D) the government gives a single firm the exclusive right to produce a particular good or service. 
A) there are constant returns to scale over the relevant range of output. 
B) there are economies of scale over the relevant range of output. 
C) one firm owns a key natural resource. 
D) the government gives a single firm the exclusive right to produce a particular good or service.

Question 19

Suppose that a professional photographer takes a prize-winning digital photo. She can sell a 5"x7" color print of the photo for $10. She can also sell the digital file for $20. There are 500 people willing to buy the color print and 2,000 people willing to buy the digital file. Assume the costs to the photographer are zero and that the people who purchase the digital file cannot resell the file itself or any prints made from it. What should she do in order to maximize her profits?

Accepted Answer

A) earn $5,000 by selling only the color prints 
B) earn $40,000 by selling only the digital files 
C) earn $45,000 by selling both the color prints and the digital files at their respective prices 
D) We do not have enough information with which to answer this question. 
A) earn $5,000 by selling only the color prints 
B) earn $40,000 by selling only the digital files 
C) earn $45,000 by selling both the color prints and the digital files at their respective prices 
D) We do not have enough information with which to answer this question.

Question 20

In theory, perfect price discrimination

Accepted Answer

A) decreases the monopolist's profits. 
B) decreases consumer surplus. 
C) increases deadweight loss. 
D) reduces the number of consumers who purchase the monopoly's product. 
A) decreases the monopolist's profits. 
B) decreases consumer surplus. 
C) increases deadweight loss. 
D) reduces the number of consumers who purchase the monopoly's product.

Exam 15: Monopoly

"Monopolists do not worry about efficient production and minimizing costs since they can just pass along any increase in costs to their consumers." This statement is

Price discrimination is the business practice of

A benefit to society of the patent and copyright laws is that those laws

Figure 15-4 -Refer to Figure 15-4. The average total cost curve for a monopoly firm is depicted by curve

The deadweight loss that arises from a monopoly is a consequence of the fact that the monopoly

Table 15-17 A monopolist faces the following demand curve: -Refer to Table 15-17. Which of the following statements best describes the relationship between the price and the marginal revenue associated with values in the table?

A monopolist produces where P = MC = MR.

Figure 15-5 -Refer to Figure 15-5. At the profit-maximizing level of output,

Figure 15-9 -Refer to Figure 15-9. The monopolist's maximum profit

Figure 15-4 -Refer to Figure 15-4. If the monopoly firm is currently producing Q4 units of output, then a decrease in output will necessarily cause profit to

A perfectly price-discriminating monopolist is able to

The profit that a monopolist earns represents a loss to society that is measured through deadweight loss.

Which of the following statements is correct?

Antitrust laws may

For a monopoly firm, which of the following equalities is always true?

There has been much discussion of deregulating electricity and natural gas delivery companies in the United States. Discuss the likely effect of deregulation on prices in these two industries.

Monopolists can achieve any level of profit they desire because they have unlimited market power.

A natural monopoly arises when

In theory, perfect price discrimination

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers in Microeconomics

Filters