Question 1

Microsoft faces very little competition from other firms for its Windows software. Why isn't the price of the software $1,000 per copy?

Accepted Answer

A) because the government would not allow such a high price 
B) because stockholders would not allow such a high price 
C) because the company would sell so few copies that they would earn higher profits by selling at a lower price 
D) All of the above are correct. 
A) because the government would not allow such a high price 
B) because stockholders would not allow such a high price 
C) because the company would sell so few copies that they would earn higher profits by selling at a lower price 
D) All of the above are correct.

Question 2

Antitrust laws have economic benefits that outweigh the costs if they

Accepted Answer

A) prevent mergers that would decrease competition and lower the costs of production. 
B) prevent mergers that would decrease competition and raise the costs of production. 
C) allow mergers that would decrease competition and raise the costs of production. 
D) None of the above is correct because antitrust laws never have economic benefits that outweigh the costs. 
A) prevent mergers that would decrease competition and lower the costs of production. 
B) prevent mergers that would decrease competition and raise the costs of production. 
C) allow mergers that would decrease competition and raise the costs of production. 
D) None of the above is correct because antitrust laws never have economic benefits that outweigh the costs.

Question 3

Scenario 15-8
Mega Media Cable TV is able to purchase an exclusive right to sell a premium sports channel in its market area. Let's assume that Mega Media pays $100,000 a year for the exclusive marketing rights to the sports channel. Since Mega Media has already installed cable to all of the homes in its market area, the marginal cost of delivering the sports channel to subscribers is zero. The manager of Mega Media needs to know what price to charge for the sports channel service to maximize her profit. Before setting price, she hires an economist to estimate demand for the sports channel. The economist discovers that there are two types of subscribers who value premium sporting channels. First are the 3,000 die-hard sports fans who will pay as much as $150 a year for the new channel. Second, the premium sports channel will appeal to 20,000 occasional sports viewers who will pay as much as $25 a year for a subscription to it.
-Refer to Scenario 15-8. How much profit will Mega Media Cable TV earn if it sets the price at $150?

Accepted Answer

A) $350,000 
B) $450,000 
C) $475,000 
D) $575,000 
A) $350,000 
B) $450,000 
C) $475,000 
D) $575,000

Question 4

Figure 15-4  
-Refer to Figure 15-4. If the monopoly firm wants to maximize its profit, it should operate at a level of output equal to

Accepted Answer

A) Q1. 
B) Q2. 
C) Q3. 
D) Q4. 
A) Q1. 
B) Q2. 
C) Q3. 
D) Q4.

Question 5

Which of the following is not a characteristic of a monopoly?

Accepted Answer

A) the seller has market power 
B) one seller 
C) free entry and exit 
D) a product without close substitutes 
A) the seller has market power 
B) one seller 
C) free entry and exit 
D) a product without close substitutes

Question 6

Splitting up a monopoly is often justified on the grounds that

Accepted Answer

A) consumers prefer dealing with small firms. 
B) small firms have lower costs. 
C) competition is inherently efficient. 
D) small firms produce higher quality products. 
A) consumers prefer dealing with small firms. 
B) small firms have lower costs. 
C) competition is inherently efficient. 
D) small firms produce higher quality products.

Question 7

Reduced competition through merging of companies will raise social welfare

Accepted Answer

A) if the social cost from the synergies exceeds the benefit of increased market power. 
B) if the benefit from the synergies exceeds the social cost of increased market power. 
C) always. 
D) never. 
A) if the social cost from the synergies exceeds the benefit of increased market power. 
B) if the benefit from the synergies exceeds the social cost of increased market power. 
C) always. 
D) never.

Question 8

A market force that can prevent firms from price discriminating is

Accepted Answer

A) fluctuating resource prices. 
B) arbitrage. 
C) high fixed costs. 
D) marginal-cost pricing. 
A) fluctuating resource prices. 
B) arbitrage. 
C) high fixed costs. 
D) marginal-cost pricing.

Question 9

Figure 15-15  
-Refer to Figure 15-15. To maximize total surplus, a benevolent social planner would choose which of the following outcomes?

Accepted Answer

A) Q = 30 and P = 30 
B) Q = 30 and P = 60 
C) Q = 45 and P = 45 
D) Q = 60 and P = 30 
A) Q = 30 and P = 30 
B) Q = 30 and P = 60 
C) Q = 45 and P = 45 
D) Q = 60 and P = 30

Question 10

Figure 15-2  
-Refer to Figure 15-2. What type of monopoly is shown in the figure?

Accepted Answer

The answer of Figure 15-2  
-Refer to Figure 15-2....

Question 11

Figure 15-4  
-Refer to Figure 15-4. If a regulator requires this firm to charge a fair return price, which letter represents the amount of output it will produce?

Accepted Answer

The answer of Figure 15-4  
-Refer to Figure 15-4....

Question 12

Table 15-21
Tommy's Tie Company, a monopolist, has the following cost and revenue information. Assume that Tommy's is able to engage in perfect price discrimination.  
-Refer to Table 15-21. If the monopolist can engage in perfect price discrimination, what is the quantity that maximizes economic profit?

Accepted Answer

A) 5 ties 
B) 6 ties 
C) 7 ties 
D) 8 ties 
A) 5 ties 
B) 6 ties 
C) 7 ties 
D) 8 ties

Question 13

A monopolist faces the following demand curve:   The monopolist has fixed costs of $1,000 and has a constant marginal cost of $2 per unit. If the monopolist were able to perfectly price discriminate, how many units would it sell?

Accepted Answer

A) 400 
B) 500 
C) 900 
D) 4,200 
A) 400 
B) 500 
C) 900 
D) 4,200

Question 14

The profit-maximization problem for a monopolist differs from that of a competitive firm in which of the following ways?

Accepted Answer

A) A competitive firm maximizes profit at the point where marginal revenue equals marginal cost; a monopolist maximizes profit at the point where marginal revenue exceeds marginal cost. 
B) A competitive firm maximizes profit at the point where average revenue equals marginal cost; a monopolist maximizes profit at the point where average revenue exceeds marginal cost. 
C) For a competitive firm, marginal revenue at the profit-maximizing level of output is equal to marginal revenue at all other levels of output; for a monopolist, marginal revenue at the profit-maximizing level of output is smaller than it is for larger levels of output. 
D) For a profit-maximizing competitive firm, thinking at the margin is much more important than it is for a profit-maximizing monopolist. 
A) A competitive firm maximizes profit at the point where marginal revenue equals marginal cost; a monopolist maximizes profit at the point where marginal revenue exceeds marginal cost. 
B) A competitive firm maximizes profit at the point where average revenue equals marginal cost; a monopolist maximizes profit at the point where average revenue exceeds marginal cost. 
C) For a competitive firm, marginal revenue at the profit-maximizing level of output is equal to marginal revenue at all other levels of output; for a monopolist, marginal revenue at the profit-maximizing level of output is smaller than it is for larger levels of output. 
D) For a profit-maximizing competitive firm, thinking at the margin is much more important than it is for a profit-maximizing monopolist.

Question 15

Monopoly profit is not a social problem because

Accepted Answer

A) the size of the economic pie grows when monopoly profits increase. 
B) producers are more efficient than consumers. 
C) the profit represents a transfer from the consumer to the producer with no loss in total surplus. 
D) None of the above are correct. 
A) the size of the economic pie grows when monopoly profits increase. 
B) producers are more efficient than consumers. 
C) the profit represents a transfer from the consumer to the producer with no loss in total surplus. 
D) None of the above are correct.

Question 16

Bob's Butcher Shop is the only place within 100 miles that sells bison burgers. Assuming that Bob is maximizing his profit, which of the following statements is true?

Accepted Answer

A) The price of Bob's bison burgers will be less than Bob's marginal cost. 
B) The price of Bob's bison burgers will exceed Bob's marginal cost. 
C) The price of Bob's bison burgers will equal Bob's marginal cost. 
D) Costs are irrelevant to Bob because he is a monopolist. 
A) The price of Bob's bison burgers will be less than Bob's marginal cost. 
B) The price of Bob's bison burgers will exceed Bob's marginal cost. 
C) The price of Bob's bison burgers will equal Bob's marginal cost. 
D) Costs are irrelevant to Bob because he is a monopolist.

Question 17

The government may choose to do nothing to reduce monopoly inefficiency because the "fix" may be worse than the problem.

Accepted Answer

A) True 
 B)False

Question 18

A monopoly market

Accepted Answer

A) always maximizes total economic well-being. 
B) always minimizes consumer surplus. 
C) generally fails to maximize total economic well-being. 
D) generally fails to maximize producer surplus. 
A) always maximizes total economic well-being. 
B) always minimizes consumer surplus. 
C) generally fails to maximize total economic well-being. 
D) generally fails to maximize producer surplus.

Question 19

Explain how a profit-maximizing monopolist chooses its level of output and the price of its goods.

Accepted Answer

A profit-maximizing monopolist produces

Question 20

Because monopoly firms do not have to compete with other firms, the outcome in a market with a monopoly

Accepted Answer

A) is often not in the best interest of society. 
B) maximizes total economic well-being. 
C) is efficient. 
D) benefits consumers more so than the producer. 
A) is often not in the best interest of society. 
B) maximizes total economic well-being. 
C) is efficient. 
D) benefits consumers more so than the producer.

Microsoft faces very little competition from other firms for its Windows software. Why isn't the price of the software $1,000 per copy?

Antitrust laws have economic benefits that outweigh the costs if they

Figure 15-4 -Refer to Figure 15-4. If the monopoly firm wants to maximize its profit, it should operate at a level of output equal to

Which of the following is not a characteristic of a monopoly?

Splitting up a monopoly is often justified on the grounds that

Reduced competition through merging of companies will raise social welfare

A market force that can prevent firms from price discriminating is

Figure 15-15 -Refer to Figure 15-15. To maximize total surplus, a benevolent social planner would choose which of the following outcomes?

Figure 15-2 -Refer to Figure 15-2. What type of monopoly is shown in the figure?

Figure 15-4 -Refer to Figure 15-4. If a regulator requires this firm to charge a fair return price, which letter represents the amount of output it will produce?

A monopolist faces the following demand curve: The monopolist has fixed costs of $1,000 and has a constant marginal cost of $2 per unit. If the monopolist were able to perfectly price discriminate, how many units would it sell?

The profit-maximization problem for a monopolist differs from that of a competitive firm in which of the following ways?

Monopoly profit is not a social problem because

Bob's Butcher Shop is the only place within 100 miles that sells bison burgers. Assuming that Bob is maximizing his profit, which of the following statements is true?

The government may choose to do nothing to reduce monopoly inefficiency because the "fix" may be worse than the problem.

A monopoly market

Explain how a profit-maximizing monopolist chooses its level of output and the price of its goods.

Because monopoly firms do not have to compete with other firms, the outcome in a market with a monopoly

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

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Exam 15: Monopoly

Microsoft faces very little competition from other firms for its Windows software. Why isn't the price of the software $1,000 per copy?

Antitrust laws have economic benefits that outweigh the costs if they

Figure 15-4 -Refer to Figure 15-4. If the monopoly firm wants to maximize its profit, it should operate at a level of output equal to

Which of the following is not a characteristic of a monopoly?

Splitting up a monopoly is often justified on the grounds that

Reduced competition through merging of companies will raise social welfare

A market force that can prevent firms from price discriminating is

Figure 15-15 -Refer to Figure 15-15. To maximize total surplus, a benevolent social planner would choose which of the following outcomes?

Figure 15-2 -Refer to Figure 15-2. What type of monopoly is shown in the figure?

Figure 15-4 -Refer to Figure 15-4. If a regulator requires this firm to charge a fair return price, which letter represents the amount of output it will produce?

A monopolist faces the following demand curve: The monopolist has fixed costs of $1,000 and has a constant marginal cost of $2 per unit. If the monopolist were able to perfectly price discriminate, how many units would it sell?

The profit-maximization problem for a monopolist differs from that of a competitive firm in which of the following ways?

Monopoly profit is not a social problem because

Bob's Butcher Shop is the only place within 100 miles that sells bison burgers. Assuming that Bob is maximizing his profit, which of the following statements is true?

The government may choose to do nothing to reduce monopoly inefficiency because the "fix" may be worse than the problem.

A monopoly market

Explain how a profit-maximizing monopolist chooses its level of output and the price of its goods.

Because monopoly firms do not have to compete with other firms, the outcome in a market with a monopoly

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