Question 1

Figure 15-14  
-Refer to Figure 15-14. A benevolent social planner would have the monopoly operate at an output level

Accepted Answer

A) less than Q0. 
B) greater than Q0. 
C) equal to Q0. 
D) equal to zero. 
A) less than Q0. 
B) greater than Q0. 
C) equal to Q0. 
D) equal to zero.

Question 2

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 total revenue when 3 ties are sold?

Accepted Answer

A) $140 
B) $420 
C) $450 
D) $620 
A) $140 
B) $420 
C) $450 
D) $620

Question 3

Figure 15-10  
-Refer to Figure 15-10. What area measures the deadweight loss?

Accepted Answer

A) (B-F)*K 
B) 0.5[(P-O)*(L-O)] 
C) 0.5[(A-H)*(L-J)] 
D) 0.5[(B-F)*(L-K)] 
A) (B-F)*K 
B) 0.5[(P-O)*(L-O)] 
C) 0.5[(A-H)*(L-J)] 
D) 0.5[(B-F)*(L-K)]

Question 4

The collection of statutes aimed at curbing monopoly power is called

Accepted Answer

A) the 14th amendment. 
B) the Clayton Act. 
C) the Sherman Act. 
D) antitrust law. 
A) the 14th amendment. 
B) the Clayton Act. 
C) the Sherman Act. 
D) antitrust law.

Question 5

Consumers' willingness to pay for a good minus the amount they actually pay for it equals

Accepted Answer

A) consumer surplus. 
B) consumer benefit. 
C) price discriminant. 
D) deadweight loss. 
A) consumer surplus. 
B) consumer benefit. 
C) price discriminant. 
D) deadweight loss.

Question 6

Figure 15-6  
-Refer to Figure 15-6. How much output will the monopolist produce?

Accepted Answer

A) O 
B) T 
C) W 
D) Z 
A) O 
B) T 
C) W 
D) Z

Question 7

The practice of selling the same goods to different customers at different prices, but with the same marginal cost, is known as

Accepted Answer

A) price segregation. 
B) price discrimination. 
C) arbitrage. 
D) monopoly pricing. 
A) price segregation. 
B) price discrimination. 
C) arbitrage. 
D) monopoly pricing.

Question 8

If the government deems a newly-invented drug to be truly original, the pharmaceutical company is given the exclusive right to manufacture and sell the drug for 50 years.

Accepted Answer

A) True 
 B)False

Question 9

A monopolist produces where P > MC = MR.

Accepted Answer

A) True 
 B)False

Question 10

For a monopoly, the level of output at which marginal revenue equals zero is also the level of output at which

Accepted Answer

A) average revenue is zero. 
B) profit is maximized. 
C) total revenue is maximized. 
D) marginal cost is zero. 
A) average revenue is zero. 
B) profit is maximized. 
C) total revenue is maximized. 
D) marginal cost is zero.

Question 11

Patent and copyright laws

Accepted Answer

A) encourage creative activity. 
B) promote competition among firms. 
C) discourage creative activity. 
D) Both a and b are correct. 
A) encourage creative activity. 
B) promote competition among firms. 
C) discourage creative activity. 
D) Both a and b are correct.

Question 12

A rational pricing strategy for a profit-maximizing monopolist is

Accepted Answer

A) price discrimination. 
B) price segregation. 
C) synergy pricing. 
D) average cost pricing. 
A) price discrimination. 
B) price segregation. 
C) synergy pricing. 
D) average cost pricing.

Question 13

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 diseconomies of scale. 
C) would experience a lower 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 diseconomies of scale. 
C) would experience a lower average total cost if more firms entered the market. 
D) All of the above are correct.

Question 14

Table 15-20
A monopolist faces the following demand curve:  
-Refer to Table 15-20. If a monopolist faces a constant marginal cost of $10, 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 15

Table 15-1  
-Refer to Table 15-1. Assume this monopolist's marginal cost is constant at $12. What quantity of output (Q) will it produce and what price (P) will it charge?

Accepted Answer

A) Q = 4, P = $29 
B) Q = 4, P = $26 
C) Q = 5, P = $23 
D) Q = 7, P = $17 
A) Q = 4, P = $29 
B) Q = 4, P = $26 
C) Q = 5, P = $23 
D) Q = 7, P = $17

Question 16

Monopolies use their market power to

Accepted Answer

A) charge prices that equal minimum average total cost. 
B) increase the quantity sold as they increase price. 
C) charge a price that is higher than marginal cost. 
D) dump excess supplies of their product on the market. 
A) charge prices that equal minimum average total cost. 
B) increase the quantity sold as they increase price. 
C) charge a price that is higher than marginal cost. 
D) dump excess supplies of their product on the market.

Question 17

Scenario 15-1
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:
Passenger Type
Willingness to Pay
Demand per day
Adults
$18
70
Children
$10
25
Senior Citizens
$12
55
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 15-1. What is Vincent's cost of serving all passengers demanding a tour on a typical day?

Accepted Answer

The answer of Scenario 15-1
Vincent operates a scenic tour business...

Question 18

Movie theatres charge different prices to different groups of people based on the differing marginal costs that exist from group to group.

Accepted Answer

A) True 
 B)False

Question 19

One solution to the problems of marginal-cost pricing of a regulated natural monopolist is average cost pricing. In this model, the monopolist is allowed to price its production at average total cost. How does average-cost pricing differ from marginal-cost pricing? Does this solution maximize social well-being?

Accepted Answer

Under average-cost pricing, the monopoli

Question 20

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. What is the deadweight loss associated with the nondiscriminating pricing policy compared to the price discriminating policy?

Accepted Answer

A) $375,000 
B) $400,000 
C) $475,000 
D) It cannot be determined from the information provided. 
A) $375,000 
B) $400,000 
C) $475,000 
D) It cannot be determined from the information provided.

Exam 15: Monopoly

Figure 15-14 -Refer to Figure 15-14. A benevolent social planner would have the monopoly operate at an output level

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 total revenue when 3 ties are sold?

Figure 15-10 -Refer to Figure 15-10. What area measures the deadweight loss?

The collection of statutes aimed at curbing monopoly power is called

Consumers' willingness to pay for a good minus the amount they actually pay for it equals

Figure 15-6 -Refer to Figure 15-6. How much output will the monopolist produce?

The practice of selling the same goods to different customers at different prices, but with the same marginal cost, is known as

If the government deems a newly-invented drug to be truly original, the pharmaceutical company is given the exclusive right to manufacture and sell the drug for 50 years.

A monopolist produces where P > MC = MR.

For a monopoly, the level of output at which marginal revenue equals zero is also the level of output at which

Patent and copyright laws

A rational pricing strategy for a profit-maximizing monopolist is

A firm that is a natural monopoly

Table 15-20 A monopolist faces the following demand curve: -Refer to Table 15-20. If a monopolist faces a constant marginal cost of $10, how much output should the firm produce in order to maximize profit?

Table 15-1 -Refer to Table 15-1. Assume this monopolist's marginal cost is constant at $12. What quantity of output (Q) will it produce and what price (P) will it charge?

Monopolies use their market power to

Movie theatres charge different prices to different groups of people based on the differing marginal costs that exist from group to group.

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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