Question 1

A monopoly chooses to supply the market with a quantity of a product that is determined by the intersection of the

Accepted Answer

A) marginal cost and demand curves. 
B) average total cost and demand curves. 
C) marginal revenue and average total cost curves. 
D) marginal revenue and marginal cost curves. 
A) marginal cost and demand curves. 
B) average total cost and demand curves. 
C) marginal revenue and average total cost curves. 
D) marginal revenue and marginal cost curves.

Question 2

Price discrimination requires the firm to

Accepted Answer

A) separate customers according to their willingnesses to pay. 
B) differentiate between different units of its product. 
C) engage in arbitrage. 
D) use coupons. 
A) separate customers according to their willingnesses to pay. 
B) differentiate between different units of its product. 
C) engage in arbitrage. 
D) use coupons.

Question 3

After the patent runs out on a brand name drug, generic drugs enter the market. What happens next in the market?

Accepted Answer

A) Price increases, and total surplus decreases. 
B) Price decreases, and total surplus decreases. 
C) Price decreases, and total surplus increases. 
D) Price increases, and total surplus increases. 
A) Price increases, and total surplus decreases. 
B) Price decreases, and total surplus decreases. 
C) Price decreases, and total surplus increases. 
D) Price increases, and total surplus increases.

Question 4

The George Stigler quote, "...the degree of 'market failure' for the American economy is much smaller than the 'political failure' arising from the imperfections of economic policies ..." illustrates the advantage of which type of public policy toward monopolies?

Accepted Answer

A) antitrust laws 
B) regulation 
C) public ownership 
D) "do nothing" 
A) antitrust laws 
B) regulation 
C) public ownership 
D) "do nothing"

Question 5

Which of the following statements is true?
(i)When a competitive firm sells an additional unit of output, its revenue increases by an amount less than the price.
(ii)When a monopoly firm sells an additional unit of output, its revenue increases by an amount less than the price.
(iii)Average revenue is the same as price for both competitive and monopoly firms.

Accepted Answer

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

Question 6

Which of the following strategies is not an effective strategy to reduce monopoly inefficiency?

Accepted Answer

A) antitrust laws 
B) price discrimination 
C) doing nothing 
D) breaking up a natural monopoly into more than one firm 
A) antitrust laws 
B) price discrimination 
C) doing nothing 
D) breaking up a natural monopoly into more than one firm

Question 7

Economic welfare is generally measured by
(i)profit.
(ii)total surplus.
(iii)the price consumers pay for the product.

Accepted Answer

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

Question 8

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 9

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 10

Scenario 15-9
Suppose executives at an art museum know that 100 adults are willing to pay $12 for admission to the museum on a weekday. Suppose the executives also know that 200 students are willing to pay $8 for admission on a weekday. The cost of operating the museum on a weekday is $2,000.
-Refer to Scenario 15-9. How much profit will the museum earn if it engages in price discrimination?

Accepted Answer

A) $800 
B) $1,200 
C) $1,600 
D) $2,800 
A) $800 
B) $1,200 
C) $1,600 
D) $2,800

Question 11

A monopoly can earn positive profits because it

Accepted Answer

A) can sell unlimited quantities at any price it chooses. 
B) takes the market price as given and can sell unlimited quantities. 
C) can set the price it charges for its output but faces a horizontal demand curve. 
D) can maintain a price such that total revenues will exceed total costs. 
A) can sell unlimited quantities at any price it chooses. 
B) takes the market price as given and can sell unlimited quantities. 
C) can set the price it charges for its output but faces a horizontal demand curve. 
D) can maintain a price such that total revenues will exceed total costs.

Question 12

Granting a pharmaceutical company a patent for a new medicine will lead to
(i)a product that is priced higher than it would be without the exclusive rights.
(ii)incentives for pharmaceutical companies to invest in research and development.
(iii)higher quantities of output than without the patent.

Accepted Answer

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

Question 13

Figure 15-1  
-Refer to Figure 15-1. Considering the relationship between average total cost and marginal cost, the marginal cost curve for this firm

Accepted Answer

A) must lie entirely above the average total cost curve. 
B) must lie entirely below the average total cost curve. 
C) must be upward sloping. 
D) does not exist. 
A) must lie entirely above the average total cost curve. 
B) must lie entirely below the average total cost curve. 
C) must be upward sloping. 
D) does not exist.

Question 14

Additional firms often do not try to compete with a natural monopoly because

Accepted Answer

A) they fear retaliation in the form of pricing wars from the natural monopolist. 
B) they are unsure of the size of the market in general. 
C) they know they cannot achieve the same low costs that the natural monopolist enjoys. 
D) the natural monopoly does not make a large profit. 
A) they fear retaliation in the form of pricing wars from the natural monopolist. 
B) they are unsure of the size of the market in general. 
C) they know they cannot achieve the same low costs that the natural monopolist enjoys. 
D) the natural monopoly does not make a large profit.

Question 15

Scenario 15-6
The concert promoters of a heavy-metal band, WeR2Loud, know that there are two types of concert-goers: die-hard fans and casual fans. For a particular WeR2Loud concert, there are 1,000 die-hard fans who will pay $150 for a ticket and 500 casual fans who will pay $50 for a ticket. There are 1,500 seats available at the concert venue. Suppose the cost of putting on the concert is $50,000, which includes the cost of the band, lighting, security, etc.
-Refer to Scenario 15-6. How much additional profit can the concert promoters earn by charging each customer their willingness to pay relative to charging a flat price of $150 per ticket?

Accepted Answer

A) $25,000 
B) $50,000 
C) $75,000 
D) $100,000 
A) $25,000 
B) $50,000 
C) $75,000 
D) $100,000

Question 16

If the ABC company owns the exclusive rights to mine land in Afghanistan for Lapis Lazuli, a rare stone used in jewelry which is found only in Afghanistan, the company benefits from a barrier to entry.

Accepted Answer

A) True 
 B)False

Question 17

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 18

A monopolist's supply curve is horizontal.

Accepted Answer

A) True 
 B)False

Question 19

During the life of a drug patent, the monopoly pharmaceutical firm maximizes profit by producing the quantity at which marginal revenue equals marginal cost.

Accepted Answer

A) True 
 B)False

Question 20

A monopoly

Accepted Answer

A) can set the price it charges for its output and earn unlimited profits. 
B) takes the market price as given and earns small but positive profits. 
C) can set the price it charges for its output but faces a downward-sloping demand curve so it cannot earn unlimited profits. 
D) can set the price it charges for its output but faces a horizontal demand curve so it can earn unlimited profits. 
A) can set the price it charges for its output and earn unlimited profits. 
B) takes the market price as given and earns small but positive profits. 
C) can set the price it charges for its output but faces a downward-sloping demand curve so it cannot earn unlimited profits. 
D) can set the price it charges for its output but faces a horizontal demand curve so it can earn unlimited profits.

Exam 15: Monopoly

A monopoly chooses to supply the market with a quantity of a product that is determined by the intersection of the

Price discrimination requires the firm to

After the patent runs out on a brand name drug, generic drugs enter the market. What happens next in the market?

The George Stigler quote, "...the degree of 'market failure' for the American economy is much smaller than the 'political failure' arising from the imperfections of economic policies ..." illustrates the advantage of which type of public policy toward monopolies?

Which of the following strategies is not an effective strategy to reduce monopoly inefficiency?

Economic welfare is generally measured by (i)profit. (ii)total surplus. (iii)the price consumers pay for the product.

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

A monopoly can earn positive profits because it

Granting a pharmaceutical company a patent for a new medicine will lead to (i)a product that is priced higher than it would be without the exclusive rights. (ii)incentives for pharmaceutical companies to invest in research and development. (iii)higher quantities of output than without the patent.

Figure 15-1 -Refer to Figure 15-1. Considering the relationship between average total cost and marginal cost, the marginal cost curve for this firm

Additional firms often do not try to compete with a natural monopoly because

If the ABC company owns the exclusive rights to mine land in Afghanistan for Lapis Lazuli, a rare stone used in jewelry which is found only in Afghanistan, the company benefits from a barrier to entry.

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

A monopolist's supply curve is horizontal.

During the life of a drug patent, the monopoly pharmaceutical firm maximizes profit by producing the quantity at which marginal revenue equals marginal cost.

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

Applications: 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

Measuring a Nation S Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

Tools of Finance

Unemployment and Its Natural Rate

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Tradeoff Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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