Question 1

An unregulated pure monopolist will maximize profits by producing that output at which

Accepted Answer

A) P = MC. 
B) P = ATC. 
C) MR = MC. 
D) MC = AC. 
A) P = MC. 
B) P = ATC. 
C) MR = MC. 
D) MC = AC.

Question 2

In the long run, a pure monopolist will maximize profits by producing that output at which marginal cost is equal to

Accepted Answer

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

Question 3

What is the meaning of the phrase "dilemma of regulation"?

Accepted Answer

A) Natural monopolies achieve economies of scale but charge high prices when there is no government regulation; government regulation reduces prices but results in diseconomies of scale. 
B) Natural monopolies are profitable, but only if the government permits price discrimination; government regulation to restrict price discrimination reduces monopoly prices, but the regulation also reduces monopoly output. 
C) The fair-return price achieves allocative efficiency but may produce economic losses; the socially optimal price yields a normal profit but may not be allocatively efficient. 
D) The socially optimal price achieves allocative efficiency but may produce economic losses; the fair-return price yields a normal profit but may not be allocatively efficient. 
A) Natural monopolies achieve economies of scale but charge high prices when there is no government regulation; government regulation reduces prices but results in diseconomies of scale. 
B) Natural monopolies are profitable, but only if the government permits price discrimination; government regulation to restrict price discrimination reduces monopoly prices, but the regulation also reduces monopoly output. 
C) The fair-return price achieves allocative efficiency but may produce economic losses; the socially optimal price yields a normal profit but may not be allocatively efficient. 
D) The socially optimal price achieves allocative efficiency but may produce economic losses; the fair-return price yields a normal profit but may not be allocatively efficient.

Question 4

Which of the following statements is correct?

Accepted Answer

A) The pure monopolist will maximize profit by producing at that point on the demand curve where elasticity is zero. 
B) In seeking the profit-maximizing output, the pure monopolist underallocates resources to its production. 
C) The pure monopolist maximizes profits by producing that output at which the differential between price and average cost is the greatest. 
D) Purely monopolistic sellers earn only normal profits in the long run. 
A) The pure monopolist will maximize profit by producing at that point on the demand curve where elasticity is zero. 
B) In seeking the profit-maximizing output, the pure monopolist underallocates resources to its production. 
C) The pure monopolist maximizes profits by producing that output at which the differential between price and average cost is the greatest. 
D) Purely monopolistic sellers earn only normal profits in the long run.

Question 5

X-inefficiency refers to a situation in which a firm

Accepted Answer

A) is not as technologically progressive as it might be. 
B) encounters diseconomies of scale. 
C) fails to realize all existing economies of scale. 
D) fails to achieve the minimum average total costs attainable at each level of output. 
A) is not as technologically progressive as it might be. 
B) encounters diseconomies of scale. 
C) fails to realize all existing economies of scale. 
D) fails to achieve the minimum average total costs attainable at each level of output.

Question 6

Even though many ballparks practice price discrimination between adults and children in selling tickets, such discrimination is not applied at the concession stands because

Accepted Answer

A) children's demand for food is elastic and adults' demand for food is inelastic. 
B) adults' demand for food is elastic and children's demand for food is inelastic. 
C) there can be exchange of the product from children, whoâ€™d buy it at a lower price, to adults. 
D) there can be exchange of the product from adults, whoâ€™d buy it at a higher price, to children. 
A) children's demand for food is elastic and adults' demand for food is inelastic. 
B) adults' demand for food is elastic and children's demand for food is inelastic. 
C) there can be exchange of the product from children, whoâ€™d buy it at a lower price, to adults. 
D) there can be exchange of the product from adults, whoâ€™d buy it at a higher price, to children.

Question 7

Suppose that a pure monopolist can sell 4 units of output at $2 per unit and 5 units at $1.75 per unit.The monopolist will produce and sell the fifth unit if its marginal cost is

Accepted Answer

A) $1 or less. 
B) $.75 or less. 
C) $1.75 or less. 
D) $2 or less. 
A) $1 or less. 
B) $.75 or less. 
C) $1.75 or less. 
D) $2 or less.

Question 8

Which of the following does not necessarily apply to a pure monopoly?

Accepted Answer

A) The product the firm produces must have no close substitutes. 
B) The firm must be the sole producer of a product. 
C) The firm will charge the highest price possible. 
D) Entry must be blocked. 
A) The product the firm produces must have no close substitutes. 
B) The firm must be the sole producer of a product. 
C) The firm will charge the highest price possible. 
D) Entry must be blocked.

Question 9

A pure monopolist should never produce in the

Accepted Answer

A) elastic segment of its demand curve, because it can increase total revenue and reduce total cost by lowering price. 
B) inelastic segment of its demand curve, because it can increase total revenue and reduce total cost by increasing price. 
C) inelastic segment of its demand curve, because it can always increase total revenue by more than it increases total cost by reducing price. 
D) segment of its demand curve, where the price elasticity coefficient is greater than one. 
A) elastic segment of its demand curve, because it can increase total revenue and reduce total cost by lowering price. 
B) inelastic segment of its demand curve, because it can increase total revenue and reduce total cost by increasing price. 
C) inelastic segment of its demand curve, because it can always increase total revenue by more than it increases total cost by reducing price. 
D) segment of its demand curve, where the price elasticity coefficient is greater than one.

Question 10

Which of the following best approximates a pure monopoly?

Accepted Answer

A) the foreign exchange market 
B) the Kansas City wheat market 
C) the only grocery store in a small isolated town 
D) the soft drink market 
A) the foreign exchange market 
B) the Kansas City wheat market 
C) the only grocery store in a small isolated town 
D) the soft drink market

Question 11

Marginal costs of a producer may be very small due to its product's ability to satisfy a large number of consumers at the same time.This characteristic of a product is called

Accepted Answer

A) economies of scale. 
B) rent-seeking. 
C) simultaneous consumption. 
D) consumer sovereignty. 
A) economies of scale. 
B) rent-seeking. 
C) simultaneous consumption. 
D) consumer sovereignty.

Question 12

In the short run a pure monopolist will maximize profits by producing at that level of output where the difference between price and average total cost is at a maximum.

Accepted Answer

A) True 
 B)False

Question 13

Electric companies generally practice price discrimination and charge higher prices for electricity used for illumination and lower prices for electricity used for heat.These lower prices for electric heating result primarily from

Accepted Answer

A) the existence of good heating substitutes. 
B) economies of scale in electric heat generation. 
C) prices for electric heat being set at the socially optimal level. 
D) strict government regulation of the price charged for electric heat. 
A) the existence of good heating substitutes. 
B) economies of scale in electric heat generation. 
C) prices for electric heat being set at the socially optimal level. 
D) strict government regulation of the price charged for electric heat.

Question 14

Which is the best example of price discrimination?

Accepted Answer

A) an airline company charging lower fares per pound for air freight than for passengers 
B) a telephone company charging lower rates to weekend users than weekday users 
C) a supermarket charging lower prices in its city stores than its out-of-the-way rural store 
D) a private doctor charging higher fees to patients receiving special services than patients receiving regular services 
A) an airline company charging lower fares per pound for air freight than for passengers 
B) a telephone company charging lower rates to weekend users than weekday users 
C) a supermarket charging lower prices in its city stores than its out-of-the-way rural store 
D) a private doctor charging higher fees to patients receiving special services than patients receiving regular services

Question 15

If a price-discriminating monopolist sells the same product in two markets but charges a higher price in market X and a lower price in market Y, the pricing difference indicates that demand is

Accepted Answer

A) more elastic in market X than in market Y. 
B) less elastic in market X than in market Y. 
C) less elastic in market Y than in market X. 
D) the same in both markets X and Y. 
A) more elastic in market X than in market Y. 
B) less elastic in market X than in market Y. 
C) less elastic in market Y than in market X. 
D) the same in both markets X and Y.

Question 16

The pure monopolist's demand curve is relatively elastic

Accepted Answer

A) in the price range where total revenue is declining. 
B) at all points where the demand curve lies above the horizontal axis. 
C) in the price range where marginal revenue is negative. 
D) in the price range where marginal revenue is positive. 
A) in the price range where total revenue is declining. 
B) at all points where the demand curve lies above the horizontal axis. 
C) in the price range where marginal revenue is negative. 
D) in the price range where marginal revenue is positive.

Question 17

A monopolist can use its pricing strategy as a barrier to entry by other firms.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following is a barrier to entry?

Accepted Answer

A) patents and licenses 
B) buyers' incomes 
C) close substitutes 
D) diminishing marginal returns 
A) patents and licenses 
B) buyers' incomes 
C) close substitutes 
D) diminishing marginal returns

Question 19

Assuming no change in product demand, a pure monopolist

Accepted Answer

A) can increase price and increase sales simultaneously because it dominates the market. 
B) adds an amount to total revenue that is equal to the price of incremental sales. 
C) should produce in the range where marginal revenue is negative. 
D) must lower price to increase sales. 
A) can increase price and increase sales simultaneously because it dominates the market. 
B) adds an amount to total revenue that is equal to the price of incremental sales. 
C) should produce in the range where marginal revenue is negative. 
D) must lower price to increase sales.

Question 20

With nonrivalrous consumption, such as in the case of online music and movies, as more consumers buy the product,

Accepted Answer

A) the average cost of the output declines because the marginal cost is very small. 
B) marginal cost is low, but the average cost of the output will be rising. 
C) the average cost of the output will be rising because marginal cost is quite high. 
D) marginal cost is quite high, but the average cost of the output will be declining. 
A) the average cost of the output declines because the marginal cost is very small. 
B) marginal cost is low, but the average cost of the output will be rising. 
C) the average cost of the output will be rising because marginal cost is quite high. 
D) marginal cost is quite high, but the average cost of the output will be declining.

Exam 12: Pure Monopoly

An unregulated pure monopolist will maximize profits by producing that output at which

In the long run, a pure monopolist will maximize profits by producing that output at which marginal cost is equal to

What is the meaning of the phrase "dilemma of regulation"?

Which of the following statements is correct?

X-inefficiency refers to a situation in which a firm

Even though many ballparks practice price discrimination between adults and children in selling tickets, such discrimination is not applied at the concession stands because

Suppose that a pure monopolist can sell 4 units of output at $2 per unit and 5 units at $1.75 per unit.The monopolist will produce and sell the fifth unit if its marginal cost is

Which of the following does not necessarily apply to a pure monopoly?

A pure monopolist should never produce in the

Which of the following best approximates a pure monopoly?

Marginal costs of a producer may be very small due to its product's ability to satisfy a large number of consumers at the same time.This characteristic of a product is called

In the short run a pure monopolist will maximize profits by producing at that level of output where the difference between price and average total cost is at a maximum.

Electric companies generally practice price discrimination and charge higher prices for electricity used for illumination and lower prices for electricity used for heat.These lower prices for electric heating result primarily from

Which is the best example of price discrimination?

If a price-discriminating monopolist sells the same product in two markets but charges a higher price in market X and a lower price in market Y, the pricing difference indicates that demand is

The pure monopolist's demand curve is relatively elastic

A monopolist can use its pricing strategy as a barrier to entry by other firms.

Which of the following is a barrier to entry?

Assuming no change in product demand, a pure monopolist

With nonrivalrous consumption, such as in the case of online music and movies, as more consumers buy the product,

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

An Introduction to Macroeconomics

Measuring Domestic Output and National Income

Economic Growth

Business Cycles, Unemployment, and Inflation

Basic Macroeconomic Relationships

The Aggregate Expenditures Model

Aggregate Demand and Aggregate Supply

Fiscal Policy, Deficits, and Debt

Money, Banking, and Financial Institutions

Money Creation

Interest Rates and Monetary Policy

Financial Economics

Extending the Analysis of Aggregate Supply

Current Issues in Macro Theory and Policy

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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