Question 1

Because natural monopolies have a declining average cost curve, regulating natural monopolies by setting price equal to marginal cost would

Accepted Answer

A) cause the monopolist to operate at a loss. 
B) result in a less than optimal total surplus. 
C) maximize producer surplus. 
D) result in higher profits for the monopoly. 
A) cause the monopolist to operate at a loss. 
B) result in a less than optimal total surplus. 
C) maximize producer surplus. 
D) result in higher profits for the monopoly.

Question 2

Amanda inherited the only local cable TV/Internet company in town after her father passed away. The company has a local monopoly on the delivery of high-speed Internet service. The company is completely unregulated by the government and is therefore free to operate as it wishes. Assume that Amanda understands the true power of her new monopoly. Which of the following statements is (are) correct? (i)
She will be able to set the price of high-speed Internet service at whatever level she wishes.
(ii)
The customers will be forced to purchase high-speed Internet service at whatever price she wants to set.
(iii)
She will be able to achieve any profit level that she desires.

Accepted Answer

A) (i) only 
B) (ii) only 
C) (i) and (iii) only 
D) (i), (ii), and (iii) 
A) (i) only 
B) (ii) only 
C) (i) and (iii) only 
D) (i), (ii), and (iii)

Question 3

Sizable economic profits can persist over time under monopoly if the monopolist

Accepted Answer

A) produces that output where average total cost is at a maximum. 
B) is protected by barriers to entry. 
C) operates as a price taker rather than a price maker. 
D) earns revenues that exceed variable costs. 
A) produces that output where average total cost is at a maximum. 
B) is protected by barriers to entry. 
C) operates as a price taker rather than a price maker. 
D) earns revenues that exceed variable costs.

Question 4

When a single firm can supply a good or service to an entire market at a lower cost than could two or more firms, the industry is known as a

Accepted Answer

The answer of When a single firm can supply a...

Question 5

Figure 15-1  
-Refer to Figure 15-1. If the monopolist uses perfect price discrimination, how much deadweight loss results?

Accepted Answer

The answer of Figure 15-1  
-Refer to Figure 15-1....

Question 6

Table 15-1  
-Refer to Table 15-1. The average revenue of the 50th unit of output is

Accepted Answer

The answer of Table 15-1  
-Refer to Table 15-1....

Question 7

Suppose a firm has a monopoly on the sale of a computer game and faces a downward-sloping demand curve. When selling the 50th game, the firm will always receive

Accepted Answer

A) less marginal revenue on the 50th game than it received on the 49th game. 
B) more average revenue on the 50th game than it received on the 49th game. 
C) more total revenue on the 50 games than it received on the first 49 games. 
D) Both b and c are correct. 
A) less marginal revenue on the 50th game than it received on the 49th game. 
B) more average revenue on the 50th game than it received on the 49th game. 
C) more total revenue on the 50 games than it received on the first 49 games. 
D) Both b and c are correct.

Question 8

A firm that is a natural monopoly

Accepted Answer

A) is not likely to be concerned about new entrants eroding its monopoly power. 
B) is taking advantage of economies of scale. 
C) would experience a higher average total cost if more firms entered the market. 
D) All of the above are correct. 
A) is not likely to be concerned about new entrants eroding its monopoly power. 
B) is taking advantage of economies of scale. 
C) would experience a higher average total cost if more firms entered the market. 
D) All of the above are correct.

Question 9

State two examples of government-created monopolies.

Accepted Answer

patents
co

Question 10

The defining characteristic of a natural monopoly is

Accepted Answer

A) constant marginal cost over the relevant range of output. 
B) economies of scale over the relevant range of output. 
C) constant returns to scale over the relevant range of output. 
D) diseconomies of scale over the relevant range of output. 
A) constant marginal cost over the relevant range of output. 
B) economies of scale over the relevant range of output. 
C) constant returns to scale over the relevant range of output. 
D) diseconomies of scale over the relevant range of output.

Question 11

A monopolist produces

Accepted Answer

A) more than the socially efficient quantity of output but at a higher price than in a competitive market. 
B) less than the socially efficient quantity of output but at a higher price than in a competitive market. 
C) the socially efficient quantity of output but at a higher price than in a competitive market. 
D) possibly more or possibly less than the socially efficient quantity of output, but definitely at a higher price than in a competitive market. 
A) more than the socially efficient quantity of output but at a higher price than in a competitive market. 
B) less than the socially efficient quantity of output but at a higher price than in a competitive market. 
C) the socially efficient quantity of output but at a higher price than in a competitive market. 
D) possibly more or possibly less than the socially efficient quantity of output, but definitely at a higher price than in a competitive market.

Question 12

Antitrust laws give the Justice Department the authority to challenge potential mergers between companies in an effort to safeguard society from monopoly power.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following statements is correct?

Accepted Answer

A) Firms with some degree of monopoly power are common, but firms with substantial monopoly power are rare. 
B) Firms with some degree of monopoly power are rare, as are firms with substantial monopoly power. 
C) Firms with some degree of monopoly power are common, as are firms with substantial monopoly power. 
D) Firms with some degree of monopoly power are rare, but firms with substantial monopoly power are common. 
A) Firms with some degree of monopoly power are common, but firms with substantial monopoly power are rare. 
B) Firms with some degree of monopoly power are rare, as are firms with substantial monopoly power. 
C) Firms with some degree of monopoly power are common, as are firms with substantial monopoly power. 
D) Firms with some degree of monopoly power are rare, but firms with substantial monopoly power are common.

Question 14

Table 15-14
The following table gives information on the price, quantity, and total cost of production for a monopolist.  
-Refer to Table 15-14. At what price does marginal revenue equal marginal cost?

Accepted Answer

A) $5 
B) $4 
C) $3 
D) $2 
A) $5 
B) $4 
C) $3 
D) $2

Question 15

If a monopoly lowers its price, its

Accepted Answer

A) total revenue must increase. 
B) total revenue must decrease. 
C) marginal revenue must increase. 
D) marginal revenue must decrease. 
A) total revenue must increase. 
B) total revenue must decrease. 
C) marginal revenue must increase. 
D) marginal revenue must decrease.

Question 16

In reality, perfect price discrimination is

Accepted Answer

A) used by about 75 percent of all monopolies. 
B) used by about 50 percent of all monopolies. 
C) seldom used by monopolies because it leads to lower profits. 
D) rarely possible. 
A) used by about 75 percent of all monopolies. 
B) used by about 50 percent of all monopolies. 
C) seldom used by monopolies because it leads to lower profits. 
D) rarely possible.

Question 17

For a monopolist, when the price effect is greater than the output effect, marginal revenue is

Accepted Answer

A) positive. 
B) negative. 
C) zero. 
D) maximized. 
A) positive. 
B) negative. 
C) zero. 
D) maximized.

Question 18

Which of the following statements is correct? Monopolies are socially inefficient because they (i)
Charge a price above marginal cost.
(ii)
Produce too little output.
(iii)
Earn profits at the expense of consumers.
(iv)
Maximize the market's total surplus.

Accepted Answer

A) (iii) only 
B) (iii) and (iv) only 
C) (i) and (ii) only 
D) (i), (ii), (iii), and (iv) 
A) (iii) only 
B) (iii) and (iv) only 
C) (i) and (ii) only 
D) (i), (ii), (iii), and (iv)

Question 19

Figure 15-3  
-Refer to Figure 15-3. Use the letters in the figure to identify the profit area for the single price monopolist.

Accepted Answer

The answer of Figure 15-3  
-Refer to Figure 15-3....

Question 20

Table 15-4
A monopolist faces the following demand curve:  
-Refer to Table 15-4. If the monopolist increases production from 7.5 to 10 units, what is its marginal revenue?

Accepted Answer

A) $12.50 
B) $5 
C) -$5 
D) -$12.50 
A) $12.50 
B) $5 
C) -$5 
D) -$12.50

Exam 15: Monopoly

Because natural monopolies have a declining average cost curve, regulating natural monopolies by setting price equal to marginal cost would

Sizable economic profits can persist over time under monopoly if the monopolist

When a single firm can supply a good or service to an entire market at a lower cost than could two or more firms, the industry is known as a

Figure 15-1 -Refer to Figure 15-1. If the monopolist uses perfect price discrimination, how much deadweight loss results?

Table 15-1 -Refer to Table 15-1. The average revenue of the 50th unit of output is

Suppose a firm has a monopoly on the sale of a computer game and faces a downward-sloping demand curve. When selling the 50th game, the firm will always receive

A firm that is a natural monopoly

State two examples of government-created monopolies.

The defining characteristic of a natural monopoly is

A monopolist produces

Antitrust laws give the Justice Department the authority to challenge potential mergers between companies in an effort to safeguard society from monopoly power.

Which of the following statements is correct?

Table 15-14 The following table gives information on the price, quantity, and total cost of production for a monopolist. -Refer to Table 15-14. At what price does marginal revenue equal marginal cost?

If a monopoly lowers its price, its

In reality, perfect price discrimination is

For a monopolist, when the price effect is greater than the output effect, marginal revenue is

Which of the following statements is correct? Monopolies are socially inefficient because they (i) Charge a price above marginal cost. (ii) Produce too little output. (iii) Earn profits at the expense of consumers. (iv) Maximize the market's total surplus.

Figure 15-3 -Refer to Figure 15-3. Use the letters in the figure to identify the profit area for the single price monopolist.

Table 15-4 A monopolist faces the following demand curve: -Refer to Table 15-4. If the monopolist increases production from 7.5 to 10 units, what is its marginal revenue?

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

Suppose a firm has a monopoly on the sale of a computer game and faces a downward-sloping demand curve. When selling the 50^th game, the firm will always receive