Question 1

At the profit-maximizing quantity of output for a monopolist, average revenue, marginal revenue, and price are all equal.

Accepted Answer

A) True 
 B)False

Question 2

The amount of power that a monopoly has depends on whether there are close substitutes for its product.

Accepted Answer

A) True 
 B)False

Question 3

Scenario 15-1
A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $40, its average revenue is $80, and its average total cost is $44.
-Refer to Scenario 15-1. At Q = 500, the firm's profit is

Accepted Answer

A) $18,000. 
B) $20,000. 
C) $22,000. 
D) $40,000. 
A) $18,000. 
B) $20,000. 
C) $22,000. 
D) $40,000.

Question 4

If the government regulates the price a natural monopolist can charge to be equal to the firm's marginal cost, the government will likely need to subsidize the firm.

Accepted Answer

A) True 
 B)False

Question 5

Arbitrage is

Accepted Answer

A) a secret or illegal cooperation between rivals in order to gain an unfair market advantage. 
B) a deliberate action aimed at weakening a policy effort or organization through subversion, obstruction, disruption, or destruction. 
C) the process of buying a good in one market at a low price and selling the good in another market for a higher price in order to profit from the price difference. 
D) a plan formulated in secret by two or more firms to commit a wrongful act. 
A) a secret or illegal cooperation between rivals in order to gain an unfair market advantage. 
B) a deliberate action aimed at weakening a policy effort or organization through subversion, obstruction, disruption, or destruction. 
C) the process of buying a good in one market at a low price and selling the good in another market for a higher price in order to profit from the price difference. 
D) a plan formulated in secret by two or more firms to commit a wrongful act.

Question 6

Table 15-4
 $$\begin{array} { | l | l | } 
\hline \text { Quantity } & \text { Price } \
\hline 10 & \$ 46 \
\hline 20 & \$ 42 \
\hline 30 & \$ 38 \
\hline 40 & \$ 34 \
\hline 50 & \$ 30 \
\hline 60 & \$ 26 \
\hline 70 & \$ 22 \
\hline 80 & \$ 18 \
\hline 90 & \$ 14 \
\hline 100 & \$ 10 \
\hline
\end{array}$$
-Refer to Table 15-4. The marginal revenue becomes negative with the production of which unit of output?

Accepted Answer

The answer of Table 15-4
 \[\begin{array} { | l |...

Question 7

A patent gives a single person or firm the exclusive right to sell some good or service forever.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is an example of public ownership of a monopoly?

Accepted Answer

A) DeBeers 
B) Microsoft 
C) U.S.Postal Service 
D) AT&T 
A) DeBeers 
B) Microsoft 
C) U.S.Postal Service 
D) AT&T

Question 9

A monopolist produces where P > MC = MR.

Accepted Answer

A) True 
 B)False

Question 10

The De Beers Diamond company advertises heavily to promote the sale of all diamonds, not just its own. This is evidence that it has a monopoly position to some degree.

Accepted Answer

A) True 
 B)False

Question 11

Figure 15-12
​   ​
-Refer to Figure 15-12. If a regulator requires this firm to charge a socially optimal price, how much deadweight loss results?

Accepted Answer

The answer of Figure 15-12
​   ​
-Refer to Figure...

Question 12

A monopoly creates a deadweight loss to society because it earns both short-run and long-run positive economic profits.

Accepted Answer

A) True 
 B)False

Question 13

University financial aid can be viewed as a type of price discrimination.

Accepted Answer

A) True 
 B)False

Question 14

Scenario 15-3
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:
 $$\begin{array} { | l | l | l | } 
\hline \text { Passen ger Type } & \text { Willingness to Pay } & \text { Demand per day } \
\hline \text { Adults } & \$ 18 & 70 \
\hline \text { Children } & \$ 10 & 25 \
\hline \text { Senior Citizens } & \$ 12 & 55 \
\hline
\end{array}$$ 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 15-3. What is Vincent's cost of serving all passengers demanding a tour on a typical day?

Accepted Answer

The answer of Scenario 15-3
Vincent operates a scenic tour business...

Question 15

When a monopolist increases the quantity that it sells, price decreases, which, all else equal, decreases total revenue; this is called the price effect.

Accepted Answer

A) True 
 B)False

Question 16

Suppose most people regard emeralds, rubies, and sapphires as close substitutes for diamonds. Then DeBeers, a large diamond company, has

Accepted Answer

A) less incentive to advertise than it would otherwise have. 
B) less market power than it would otherwise have. 
C) more control over the price of diamonds than it would otherwise have. 
D) higher profits than it would otherwise have. 
A) less incentive to advertise than it would otherwise have. 
B) less market power than it would otherwise have. 
C) more control over the price of diamonds than it would otherwise have. 
D) higher profits than it would otherwise have.

Question 17

For a long while, electricity producers were thought to be a classic example of a natural monopoly. People held this view because

Accepted Answer

A) the average cost of producing units of electricity by one producer in a specific region was lower than if the same quantity were produced by two or more producers in the same region. 
B) the average cost of producing units of electricity by one producer in a specific region was higher than if the same quantity were produced by two or more produced in the same region. 
C) the marginal cost of producing units of electricity by one producer in a specific region was higher than if the same quantity were produced by two or more producers in the same region. 
D) electricity producers have sharply increasing costs as production rises. 
A) the average cost of producing units of electricity by one producer in a specific region was lower than if the same quantity were produced by two or more producers in the same region. 
B) the average cost of producing units of electricity by one producer in a specific region was higher than if the same quantity were produced by two or more produced in the same region. 
C) the marginal cost of producing units of electricity by one producer in a specific region was higher than if the same quantity were produced by two or more producers in the same region. 
D) electricity producers have sharply increasing costs as production rises.

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

Figure 15-10
​   ​
-Refer to Figure 15-10. If the firm profit-maximizes, how much profit will it earn?

Accepted Answer

The answer of Figure 15-10
​   ​
-Refer to Figure...

Question 20

It is difficult in a natural monopoly market for the firm to achieve both efficiency and zero economic profit simultaneously, even with regulation.
​

Accepted Answer

A) True 
 B)False

Exam 15: Monopoly

At the profit-maximizing quantity of output for a monopolist, average revenue, marginal revenue, and price are all equal.

The amount of power that a monopoly has depends on whether there are close substitutes for its product.

Scenario 15-1 A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $40, its average revenue is $80, and its average total cost is $44. -Refer to Scenario 15-1. At Q = 500, the firm's profit is

If the government regulates the price a natural monopolist can charge to be equal to the firm's marginal cost, the government will likely need to subsidize the firm.

Arbitrage is

Table 15-4 Quantity Price 10 \ 46 20 \ 42 30 \ 38 40 \ 34 50 \ 30 60 \ 26 70 \ 22 80 \ 18 90 \ 14 100 \ 10 -Refer to Table 15-4. The marginal revenue becomes negative with the production of which unit of output?

A patent gives a single person or firm the exclusive right to sell some good or service forever.

Which of the following is an example of public ownership of a monopoly?

A monopolist produces where P > MC = MR.

The De Beers Diamond company advertises heavily to promote the sale of all diamonds, not just its own. This is evidence that it has a monopoly position to some degree.

Figure 15-12 ​ ​ -Refer to Figure 15-12. If a regulator requires this firm to charge a socially optimal price, how much deadweight loss results?

A monopoly creates a deadweight loss to society because it earns both short-run and long-run positive economic profits.

University financial aid can be viewed as a type of price discrimination.

When a monopolist increases the quantity that it sells, price decreases, which, all else equal, decreases total revenue; this is called the price effect.

Suppose most people regard emeralds, rubies, and sapphires as close substitutes for diamonds. Then DeBeers, a large diamond company, has

For a long while, electricity producers were thought to be a classic example of a natural monopoly. People held this view because

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

Figure 15-10 ​ ​ -Refer to Figure 15-10. If the firm profit-maximizes, how much profit will it earn?

It is difficult in a natural monopoly market for the firm to achieve both efficiency and zero economic profit simultaneously, even with regulation. ​

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 Nations 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

Filters

Figure 15-12 -Refer to Figure 15-12. If a regulator requires this firm to charge a socially optimal price, how much deadweight loss results?

Figure 15-10 -Refer to Figure 15-10. If the firm profit-maximizes, how much profit will it earn?

It is difficult in a natural monopoly market for the firm to achieve both efficiency and zero economic profit simultaneously, even with regulation.