Question 1

The monopolist's profit-maximizing quantity of output is determined by the intersection of which of the following two curves?

Accepted Answer

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

Question 2

Table 15-20
A monopolist faces the following demand curve:  
-Refer to Table 15-20. If a monopolist faces a constant marginal cost of $20, 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 3

Table 15-4
A monopolist faces the following demand curve:  
-Refer to Table 15-4. The monopolist will not produce

Accepted Answer

A) 5 units or fewer under any circumstances. 
B) 7.5 units or fewer under any circumstances. 
C) 7.5 units or more under any circumstances. 
D) 10 units or more under any circumstances. 
A) 5 units or fewer under any circumstances. 
B) 7.5 units or fewer under any circumstances. 
C) 7.5 units or more under any circumstances. 
D) 10 units or more under any circumstances.

Question 4

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 5

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 profit will the concert promoters earn if they engage in price discrimination?

Accepted Answer

A) $100,000 
B) $125,000 
C) $150,000 
D) $175,000 
A) $100,000 
B) $125,000 
C) $150,000 
D) $175,000

Question 6

When an industry is a natural monopoly,

Accepted Answer

A) it is characterized by constant returns to scale. 
B) it is characterized by diseconomies of scale. 
C) a larger number of firms may lead to a lower average cost. 
D) a larger number of firms will lead to a higher average cost. 
A) it is characterized by constant returns to scale. 
B) it is characterized by diseconomies of scale. 
C) a larger number of firms may lead to a lower average cost. 
D) a larger number of firms will lead to a higher average cost.

Question 7

Give some examples of the benefits and costs of antitrust laws.

Accepted Answer

Benefits include promoting com

Question 8

Scenario 15-7
Black Box Cable TV is able to purchase an exclusive right to sell a premium movie channel (PMC) in its market area. Let's assume that Black Box Cable pays $150,000 a year for the exclusive marketing rights to PMC. Since Black Box has already installed cable to all of the homes in its market area, the marginal cost of delivering PMC to subscribers is zero. The manager of Black Box needs to know what price to charge for the PMC service to maximize her profit. Before setting price, she hires an economist to estimate demand for the PMC service. The economist discovers that there are two types of subscribers who value premium movie channels. First are the 4,000 die-hard TV viewers who will pay as much as $150 a year for the new PMC premium channel. Second, the PMC channel will appeal to 20,000 occasional TV viewers who will pay as much as $20 a year for a subscription to PMC.
-Refer to Scenario 15-7. If Black Box 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 = $20; profit = $400,000 
B) price = $20; profit = $330,000 
C) price = $150; profit = $450,000 
D) price = $150; profit = $600,000 
A) price = $20; profit = $400,000 
B) price = $20; profit = $330,000 
C) price = $150; profit = $450,000 
D) price = $150; profit = $600,000

Question 9

Which of the following is not an example of a barrier to entry?

Accepted Answer

A) A soybean farmer is the first in her county to use a new brand of fertilizer. 
B) Microsoft obtains a copyright for its Windows operating system. 
C) A pharmaceutical company obtains a patent for a new medication to treat migraine headaches. 
D) A taxi cab driver in New York City obtains a license to legally provide transportation in New York City. 
A) A soybean farmer is the first in her county to use a new brand of fertilizer. 
B) Microsoft obtains a copyright for its Windows operating system. 
C) A pharmaceutical company obtains a patent for a new medication to treat migraine headaches. 
D) A taxi cab driver in New York City obtains a license to legally provide transportation in New York City.

Question 10

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 11

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

Accepted Answer

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

Question 12

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 13

Table 15-6
A monopolist faces the following demand curve:  
-Refer to Table 15-6. What is the marginal revenue from the sale of the 2nd unit?

Accepted Answer

A) -$3 
B) $3 
C) $9 
D) $24 
A) -$3 
B) $3 
C) $9 
D) $24

Question 14

A monopoly is an inefficient way to produce a product because

Accepted Answer

A) it can earn both short-run and long-run profits. 
B) it faces a downward-sloping demand curve. 
C) the cost to the monopolist of producing one more unit exceeds the value of that unit to potential buyers. 
D) it produces a smaller level of output than would be produced in a competitive market. 
A) it can earn both short-run and long-run profits. 
B) it faces a downward-sloping demand curve. 
C) the cost to the monopolist of producing one more unit exceeds the value of that unit to potential buyers. 
D) it produces a smaller level of output than would be produced in a competitive market.

Question 15

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 16

Table 15-1  
-Refer to Table 15-1. If the monopolist sells 8 units of its product, how much total revenue will it receive from the sale?

Accepted Answer

A) $14 
B) $40 
C) $112 
D) $164 
A) $14 
B) $40 
C) $112 
D) $164

Question 17

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, how much profit can the firm earn at the profit-maximizing level of output?

Accepted Answer

A) $128 
B) $120 
C) $80 
D) $8 
A) $128 
B) $120 
C) $80 
D) $8

Question 18

When a firm experiences continually declining average total costs,

Accepted Answer

A) the firm is a price taker. 
B) society is better served by having one firm supply the product. 
C) the firm will earn higher profits than if average total costs are increasing. 
D) All of the above are correct. 
A) the firm is a price taker. 
B) society is better served by having one firm supply the product. 
C) the firm will earn higher profits than if average total costs are increasing. 
D) All of the above are correct.

Question 19

If the distribution of water is a natural monopoly, then
(i)multiple firms would likely each have to pay large fixed costs to develop their own network of pipes.
(ii)allowing for competition among different firms in the water-distribution industry is efficient.
(iii)a single firm can serve the market at the lowest possible average total cost.

Accepted Answer

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

Question 20

Figure 15-4  
-Refer to Figure 15-4. If this firm profit maximizes, which letter represents the quantity it will produce?

Accepted Answer

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

Exam 15: Monopoly

The monopolist's profit-maximizing quantity of output is determined by the intersection of which of the following two curves?

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

Table 15-4 A monopolist faces the following demand curve: -Refer to Table 15-4. The monopolist will not produce

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?

When an industry is a natural monopoly,

Give some examples of the benefits and costs of antitrust laws.

Which of the following is not an example of a barrier to entry?

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

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

Which of the following is a characteristic of a monopoly?

Table 15-6 A monopolist faces the following demand curve: -Refer to Table 15-6. What is the marginal revenue from the sale of the 2nd unit?

A monopoly is an inefficient way to produce a product because

Table 15-1 -Refer to Table 15-1. If the monopolist sells 8 units of its product, how much total revenue will it receive from the sale?

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, how much profit can the firm earn at the profit-maximizing level of output?

When a firm experiences continually declining average total costs,

Figure 15-4 -Refer to Figure 15-4. If this firm profit maximizes, which letter represents the quantity it will produce?

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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