Question 1

Which of the following is a characteristic of a natural monopoly?

Accepted Answer

A) Fixed costs are typically a small portion of total costs. 
B) Average total cost declines over large regions of output. 
C) The product sold is a natural resource such as diamonds or water. 
D) All of the above are correct. 
A) Fixed costs are typically a small portion of total costs. 
B) Average total cost declines over large regions of output. 
C) The product sold is a natural resource such as diamonds or water. 
D) All of the above are correct.

Question 2

In the market for "home heating" consumers typically have several options (e.g., electricity, heating fuel, natural gas, propane, etc.), yet we often think of firms in this industry as behaving like monopolists. Discuss the context in which your electricity provider is a monopolist. Is this characterization universally applicable? Explain your answer.

Accepted Answer

In this case, the firms are monopolists

Question 3

Table 15-4
A monopolist faces the following demand curve:  
-Refer to Table 15-4. In order to maximize total revenues, the monopolist should produce

Accepted Answer

A) 5 units. 
B) 7.5 units. 
C) 10 units. 
D) 12.5 units. 
A) 5 units. 
B) 7.5 units. 
C) 10 units. 
D) 12.5 units.

Question 4

Some companies merge in order to lower costs through efficient joint production.

Accepted Answer

A) True 
 B)False

Question 5

Comparing firms in perfectly competitive markets to monopoly firms, which can earn economic profits in the long run?

Accepted Answer

The answer of Comparing firms in perfectly competitive markets to...

Question 6

Table 15-10
The monopolist faces the following demand curve:  
-Refer to Table 15-10. If the monopolist has total fixed costs of $40 and a constant marginal cost of $5, what is the profit-maximizing level of output?

Accepted Answer

A) 7 units 
B) 16 units 
C) 23 units 
D) 31 units 
A) 7 units 
B) 16 units 
C) 23 units 
D) 31 units

Question 7

A monopolist

Accepted Answer

A) has a supply curve that is upward-sloping, just like a competitive firm. 
B) does not have a supply curve because the monopolist sets its price at the same time it chooses the quantity to supply. 
C) has a horizontal supply curve, just like a competitive firm. 
D) does not have a supply curve because marginal revenue exceeds the price it charges for its products. 
A) has a supply curve that is upward-sloping, just like a competitive firm. 
B) does not have a supply curve because the monopolist sets its price at the same time it chooses the quantity to supply. 
C) has a horizontal supply curve, just like a competitive firm. 
D) does not have a supply curve because marginal revenue exceeds the price it charges for its products.

Question 8

A reduction in a monopolist's fixed costs would

Accepted Answer

A) decrease the profit-maximizing price and increase the profit-maximizing quantity produced. 
B) increase the profit-maximizing price and decrease the profit-maximizing quantity produced. 
C) not effect the profit-maximizing price or quantity. 
D) possibly increase, decrease or not effect profit-maximizing price and quantity, depending on the elasticity of demand. 
A) decrease the profit-maximizing price and increase the profit-maximizing quantity produced. 
B) increase the profit-maximizing price and decrease the profit-maximizing quantity produced. 
C) not effect the profit-maximizing price or quantity. 
D) possibly increase, decrease or not effect profit-maximizing price and quantity, depending on the elasticity of demand.

Question 9

The best solution to the problem of welfare loss from monopoly is public ownership.

Accepted Answer

A) True 
 B)False

Question 10

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. If Mega Media Cable TV is unable to price discriminate, what price will it choose to maximize its profit, and what is the amount of the profit?

Accepted Answer

A) price = $25; profit = $575,000 
B) price = $25; profit = $475,000 
C) price = $150; profit = $450,000 
D) price = $150; profit = $350,000 
A) price = $25; profit = $575,000 
B) price = $25; profit = $475,000 
C) price = $150; profit = $450,000 
D) price = $150; profit = $350,000

Question 11

The market demand curve for a monopolist is typically

Accepted Answer

A) unit price elastic. 
B) downward sloping. 
C) horizontal. 
D) vertical. 
A) unit price elastic. 
B) downward sloping. 
C) horizontal. 
D) vertical.

Question 12

Figure 15-6  
-Refer to Figure 15-6. What area measures the monopolist's profit?

Accepted Answer

A) (K-
C) *W 
B) (L-
A) *T 
C) (K-
B) *W 
D) 0.5[(K-
C) *(Z-T)] 
A) (K-
C) *W 
B) (L-
A) *T 
C) (K-
B) *W 
D) 0.5[(K-
C) *(Z-T)]

Question 13

Table 15-7
Sally owns the only shoe store in town. She has the following cost and revenue information.  
-Refer to Table 15-7. What is the marginal revenue from selling the 8th pair of shoes?

Accepted Answer

A) $10 
B) $20 
C) $40 
D) $90 
A) $10 
B) $20 
C) $40 
D) $90

Question 14

The task of economic regulation is to

Accepted Answer

A) protect monopoly profits. 
B) approximate the results of the competitive market. 
C) replace competition with government ownership. 
D) increase competition within the market. 
A) protect monopoly profits. 
B) approximate the results of the competitive market. 
C) replace competition with government ownership. 
D) increase competition within the market.

Question 15

Policymakers are discussing various proposals regarding how to deal with natural monopolies. Senator Huff wants to regulate natural monopolies by equating price with average total cost. Huff contends that such a policy will ensure that monopolies make every effort to reduce costs. Senator Puff wants the government to own natural monopolies. Puff argues that government-owned monopolies usually do a better job of holding down costs than privately owned monopolies. Which senator's argument is correct?

Accepted Answer

A) Senator Huff 
B) Senator Puff 
C) both senators 
D) neither senator 
A) Senator Huff 
B) Senator Puff 
C) both senators 
D) neither senator

Question 16

Which of the following is a characteristic of a monopoly?

Accepted Answer

A) low fixed costs as a portion of total costs 
B) free entry and exit 
C) barriers to entry 
D) declining marginal cost 
A) low fixed costs as a portion of total costs 
B) free entry and exit 
C) barriers to entry 
D) declining marginal cost

Question 17

When a firm's average total cost curve continually declines, the firm is a

Accepted Answer

A) government-created monopoly. 
B) natural monopoly. 
C) revenue monopoly. 
D) All of the above are correct. 
A) government-created monopoly. 
B) natural monopoly. 
C) revenue monopoly. 
D) All of the above are correct.

Question 18

The legislation passed by Congress in 1890 to reduce the market power of large and powerful "trusts" was the

Accepted Answer

A) Morgan Act. 
B) Sherman Act. 
C) Clayton Act. 
D) 14th Amendment. 
A) Morgan Act. 
B) Sherman Act. 
C) Clayton Act. 
D) 14th Amendment.

Question 19

Table 15-20
A monopolist faces the following demand curve:  
-Refer to Table 15-20. If a monopolist faces a constant marginal cost of $5, how much output should the firm produce in order to maximize profit?

Accepted Answer

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

Question 20

Scenario 15-10
Vincent operates a scenic tour business in Boston. He has one bus which can fit 50 people per tour and each tour lasts 2 hours. His total cost of operating one tour is fixed at $450. Vincent's cost is not reduced if he runs a tour with a partially full bus. While his cost is the same for all tours, Vincent charges each passenger his/her willingness to pay: adults $18 per trip, children $10 per trip, and senior citizens $12 per trip. At those rates, on a typical day Vincent's demand is:   Assume that Vincent's customers are always available for the tour; therefore, he can fill his bus for each tour as long as there is sufficient total demand for the day.
-Refer to Scenario 15-10. Vincent is considering changing his pricing strategy. Which of the following options results in the highest profit per day?

Accepted Answer

A) Charge a single price of $10 to all passengers. 
B) Charge a single price of $12 to all passengers. 
C) Charge a single price of $18 to all passengers. 
D) Continue charging each buyer his/her willingness to pay. 
A) Charge a single price of $10 to all passengers. 
B) Charge a single price of $12 to all passengers. 
C) Charge a single price of $18 to all passengers. 
D) Continue charging each buyer his/her willingness to pay.

Which of the following is a characteristic of a natural monopoly?

Table 15-4 A monopolist faces the following demand curve: -Refer to Table 15-4. In order to maximize total revenues, the monopolist should produce

Some companies merge in order to lower costs through efficient joint production.

Comparing firms in perfectly competitive markets to monopoly firms, which can earn economic profits in the long run?

Table 15-10 The monopolist faces the following demand curve: -Refer to Table 15-10. If the monopolist has total fixed costs of $40 and a constant marginal cost of $5, what is the profit-maximizing level of output?

A monopolist

A reduction in a monopolist's fixed costs would

The best solution to the problem of welfare loss from monopoly is public ownership.

The market demand curve for a monopolist is typically

Figure 15-6 -Refer to Figure 15-6. What area measures the monopolist's profit?

Table 15-7 Sally owns the only shoe store in town. She has the following cost and revenue information. -Refer to Table 15-7. What is the marginal revenue from selling the 8th pair of shoes?

The task of economic regulation is to

Which of the following is a characteristic of a monopoly?

When a firm's average total cost curve continually declines, the firm is a

The legislation passed by Congress in 1890 to reduce the market power of large and powerful "trusts" was the

Table 15-20 A monopolist faces the following demand curve: -Refer to Table 15-20. If a monopolist faces a constant marginal cost of $5, how much output should the firm produce in order to maximize profit?

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

Which of the following is a characteristic of a natural monopoly?

Table 15-4 A monopolist faces the following demand curve: -Refer to Table 15-4. In order to maximize total revenues, the monopolist should produce

Some companies merge in order to lower costs through efficient joint production.

Comparing firms in perfectly competitive markets to monopoly firms, which can earn economic profits in the long run?

Table 15-10 The monopolist faces the following demand curve: -Refer to Table 15-10. If the monopolist has total fixed costs of $40 and a constant marginal cost of $5, what is the profit-maximizing level of output?

A monopolist

A reduction in a monopolist's fixed costs would

The best solution to the problem of welfare loss from monopoly is public ownership.

The market demand curve for a monopolist is typically

Figure 15-6 -Refer to Figure 15-6. What area measures the monopolist's profit?

Table 15-7 Sally owns the only shoe store in town. She has the following cost and revenue information. -Refer to Table 15-7. What is the marginal revenue from selling the 8th pair of shoes?

The task of economic regulation is to

Which of the following is a characteristic of a monopoly?

When a firm's average total cost curve continually declines, the firm is a

The legislation passed by Congress in 1890 to reduce the market power of large and powerful "trusts" was the

Table 15-20 A monopolist faces the following demand curve: -Refer to Table 15-20. If a monopolist faces a constant marginal cost of $5, how much output should the firm produce in order to maximize profit?

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