Question 1

Exhibit 23-9
  
-Refer to Exhibit 23-9. Assuming that the firm is maximizing profits, the marginal revenue of the last unit produced equals

Accepted Answer

A) $4. 
B) $40. 
C) $5. 
D) $50. 
E) $6. 
A) $4. 
B) $40. 
C) $5. 
D) $50. 
E) $6.

Question 2

Exhibit 23-9
  
-Refer to Exhibit 23-9. The reason we know the firm represented in the exhibit is a price searcher and not a price taker is because

Accepted Answer

A) its total costs rise as more output is produced and sold. 
B) it has to lower price to sell additional units of its good. 
C) marginal revenue is not constant for all given levels of output. 
D) at some levels of output it earns negative profit. 
E) b and c 
A) its total costs rise as more output is produced and sold. 
B) it has to lower price to sell additional units of its good. 
C) marginal revenue is not constant for all given levels of output. 
D) at some levels of output it earns negative profit. 
E) b and c

Question 3

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

Accepted Answer

A) a public franchise 
B) economies of scale 
C) a government license 
D) a patent 
A) a public franchise 
B) economies of scale 
C) a government license 
D) a patent

Question 4

"Rent seeking" is socially wasteful because

Accepted Answer

A) resources devoted to transferring rents are not used to produce goods. 
B) wage income is converted into profit income. 
C) it results in higher prices than would exist without monopoly. 
D) it discourages innovation and risk taking. 
A) resources devoted to transferring rents are not used to produce goods. 
B) wage income is converted into profit income. 
C) it results in higher prices than would exist without monopoly. 
D) it discourages innovation and risk taking.

Question 5

Exhibit 23-2
  
-Refer to Exhibit 23-2. Total revenue at the profit-maximizing quantity of output is the

Accepted Answer

A) area 0P0AQ0. 
B) area 0P3FQ0. 
C) distance from Q0 to A. 
D) distance from Q0 to D. 
E) none of the above 
A) area 0P0AQ0. 
B) area 0P3FQ0. 
C) distance from Q0 to A. 
D) distance from Q0 to D. 
E) none of the above

Question 6

If a perfectly competitive firm and a perfectly price-discriminating monopolist face the same demand and cost curves, then

Accepted Answer

A) the competitive firm will attain resource-allocative efficiency, but the monopolist will not. 
B) the competitive firm will attain resource-allocative efficiency, but the monopolist may or may not, depending upon the demand for its product. 
C) the competitive firm will not attain resource-allocative efficiency, but the monopolist will. 
D) both the competitive firm and the monopolist will attain resource-allocative efficiency. 
E) neither the competitive firm nor the monopolist will attain resource-allocative efficiency. 
A) the competitive firm will attain resource-allocative efficiency, but the monopolist will not. 
B) the competitive firm will attain resource-allocative efficiency, but the monopolist may or may not, depending upon the demand for its product. 
C) the competitive firm will not attain resource-allocative efficiency, but the monopolist will. 
D) both the competitive firm and the monopolist will attain resource-allocative efficiency. 
E) neither the competitive firm nor the monopolist will attain resource-allocative efficiency.

Question 7

The demand curve facing a monopolist is always

Accepted Answer

A) the same as the industry demand curve. 
B) perfectly inelastic. 
C) perfectly elastic. 
D) unit elastic. 
A) the same as the industry demand curve. 
B) perfectly inelastic. 
C) perfectly elastic. 
D) unit elastic.

Question 8

Which of the following is descriptive of rent-seeking?

Accepted Answer

A) A domestic company hires a lobbyist to go to Washington, D.C.and try to influence legislators to impose tariffs on Brazilian (imported) goods that compete with the good it produces. 
B) Company X hires an accountant to work for it. 
C) Jill pays her apartment rent a few days late each month and usually ends up having to pay a late fee. 
D) This year Bob earned a large profit from the small business he owns and operates. 
E) b and d 
A) A domestic company hires a lobbyist to go to Washington, D.C.and try to influence legislators to impose tariffs on Brazilian (imported) goods that compete with the good it produces. 
B) Company X hires an accountant to work for it. 
C) Jill pays her apartment rent a few days late each month and usually ends up having to pay a late fee. 
D) This year Bob earned a large profit from the small business he owns and operates. 
E) b and d

Question 9

For a single-price monopoly, marginal revenue is

Accepted Answer

A) equal to price for the first unit of output. 
B) less than price for all units of output after the first unit. 
C) greater than price. 
D) horizontal. 
E) a and b 
A) equal to price for the first unit of output. 
B) less than price for all units of output after the first unit. 
C) greater than price. 
D) horizontal. 
E) a and b

Question 10

Exhibit 23-9
  
-Refer to Exhibit 23-9. Assuming that the firm is maximizing profits, the marginal cost of the last unit produced equals

Accepted Answer

A) $4. 
B) $40. 
C) $5. 
D) $50. 
E) $6. 
A) $4. 
B) $40. 
C) $5. 
D) $50. 
E) $6.

Question 11

For a monopolist, if price is above average total cost, the monopolist is

Accepted Answer

A) earning an economic profit. 
B) taking an economic loss. 
C) minimizing total fixed costs. 
D) minimizing total variable costs. 
A) earning an economic profit. 
B) taking an economic loss. 
C) minimizing total fixed costs. 
D) minimizing total variable costs.

Question 12

A price searcher is

Accepted Answer

A) a person who actively seeks out the best price for a product that he or she wishes to buy. 
B) a firm that seeks out buyers who are willing to pay the price that the seller is asking for the product. 
C) a firm that has the ability to control to some degree the price of the product it sells. 
D) actually any firm or consumer, because each market "player" searches for the best price at which it can sell or buy. 
A) a person who actively seeks out the best price for a product that he or she wishes to buy. 
B) a firm that seeks out buyers who are willing to pay the price that the seller is asking for the product. 
C) a firm that has the ability to control to some degree the price of the product it sells. 
D) actually any firm or consumer, because each market "player" searches for the best price at which it can sell or buy.

Question 13

Exhibit 23-2
  
-Refer to Exhibit 23-2. This monopolist is earning

Accepted Answer

A) an economic loss of area P0P3FA. 
B) an economic loss of area P0P2CA. 
C) an economic profit of area P2P3FC. 
D) an economic profit of area P0P2CA. 
A) an economic loss of area P0P3FA. 
B) an economic loss of area P0P2CA. 
C) an economic profit of area P2P3FC. 
D) an economic profit of area P0P2CA.

Question 14

In general, electric, gas, and water companies are examples of __________ monopolies.

Accepted Answer

A) unregulated 
B) patent 
C) natural 
D) government 
A) unregulated 
B) patent 
C) natural 
D) government

Question 15

Rent-seeking is said to be socially wasteful because

Accepted Answer

A) the rent seekers compete too fiercely with each other. 
B) resources that are used to seek rents don't end up helping anyone in society. 
C) the rent seekers usually end up spending too much to get what they want. 
D) resources that are used to seek rents can't be used to produce goods and services. 
E) none of the above 
A) the rent seekers compete too fiercely with each other. 
B) resources that are used to seek rents don't end up helping anyone in society. 
C) the rent seekers usually end up spending too much to get what they want. 
D) resources that are used to seek rents can't be used to produce goods and services. 
E) none of the above

Question 16

Third-degree price discrimination is discrimination among

Accepted Answer

A) units. 
B) quantities. 
C) buyers. 
D) prices. 
A) units. 
B) quantities. 
C) buyers. 
D) prices.

Question 17

One of the assumptions of the theory of monopoly is that the single seller sells a product for which there are no close substitutes.

Accepted Answer

A) True 
 B)False

Question 18

A monopoly may exist because

Accepted Answer

A) government has refused to grant a public franchise. 
B) one firm has the exclusive ownership of a necessary resource. 
C) the firm is so large and is currently experiencing such vast diseconomies of scale that it can out-compete all newcomers. 
D) a and b 
E) a, b, and c 
A) government has refused to grant a public franchise. 
B) one firm has the exclusive ownership of a necessary resource. 
C) the firm is so large and is currently experiencing such vast diseconomies of scale that it can out-compete all newcomers. 
D) a and b 
E) a, b, and c

Question 19

Which of the following is true of price and marginal revenue for the first unit of output sold by a monopolist?

Accepted Answer

A) Price is greater than marginal revenue. 
B) Price is less than marginal revenue. 
C) Price is equal to marginal revenue. 
D) This answer could be a or b, depending on whether it is a single-price or a price discriminating monopolist. 
A) Price is greater than marginal revenue. 
B) Price is less than marginal revenue. 
C) Price is equal to marginal revenue. 
D) This answer could be a or b, depending on whether it is a single-price or a price discriminating monopolist.

Question 20

In order for a monopolist to be earning a profit, price must be greater than

Accepted Answer

A) average total cost. 
B) marginal revenue. 
C) total cost. 
D) marginal cost. 
A) average total cost. 
B) marginal revenue. 
C) total cost. 
D) marginal cost.

Exam 23: Monopoly

Exhibit 23-9 -Refer to Exhibit 23-9. Assuming that the firm is maximizing profits, the marginal revenue of the last unit produced equals

Exhibit 23-9 -Refer to Exhibit 23-9. The reason we know the firm represented in the exhibit is a price searcher and not a price taker is because

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

"Rent seeking" is socially wasteful because

Exhibit 23-2 -Refer to Exhibit 23-2. Total revenue at the profit-maximizing quantity of output is the

If a perfectly competitive firm and a perfectly price-discriminating monopolist face the same demand and cost curves, then

The demand curve facing a monopolist is always

Which of the following is descriptive of rent-seeking?

For a single-price monopoly, marginal revenue is

Exhibit 23-9 -Refer to Exhibit 23-9. Assuming that the firm is maximizing profits, the marginal cost of the last unit produced equals

For a monopolist, if price is above average total cost, the monopolist is

A price searcher is

Exhibit 23-2 -Refer to Exhibit 23-2. This monopolist is earning

In general, electric, gas, and water companies are examples of __________ monopolies.

Rent-seeking is said to be socially wasteful because

Third-degree price discrimination is discrimination among

One of the assumptions of the theory of monopoly is that the single seller sells a product for which there are no close substitutes.

A monopoly may exist because

Which of the following is true of price and marginal revenue for the first unit of output sold by a monopolist?

In order for a monopolist to be earning a profit, price must be greater than

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