Question 1

In which one of the following market models is X-inefficiency most likely to be the greatest?

Accepted Answer

A) pure competition 
B) oligopoly 
C) monopolistic competition 
D) pure monopoly 
A) pure competition 
B) oligopoly 
C) monopolistic competition 
D) pure monopoly

Question 2

If the profit-maximizing pure monopolist whose information is in the accompanying table is able to price discriminate, charging each customer the price associated with each given level of output, how much profit will the firm earn?

Accepted Answer

A) $120. 
B) $250. 
C) $300. 
D) $420. 
A) $120. 
B) $250. 
C) $300. 
D) $420.

Question 3

A nondiscriminating pure monopolist is generally viewed as

Accepted Answer

A) productively efficient but allocatively inefficient. 
B) productively inefficient but allocatively efficient. 
C) both productively and allocatively inefficient. 
D) both productively and allocatively efficient. 
A) productively efficient but allocatively inefficient. 
B) productively inefficient but allocatively efficient. 
C) both productively and allocatively inefficient. 
D) both productively and allocatively efficient.

Question 4

As a monopolist lowers the price of its product from a high level, it finds that its total revenue may at first increase and then, below a certain price, its total revenue begins to decrease.

Accepted Answer

A) True 
 B)False

Question 5

The supply curve of a pure monopolist

Accepted Answer

A) is that portion of its marginal cost curve that lies above average variable cost. 
B) is the same as that of a purely competitive industry. 
C) is its average variable cost curve. 
D) does not exist because prices are not "given" to a monopolist. 
A) is that portion of its marginal cost curve that lies above average variable cost. 
B) is the same as that of a purely competitive industry. 
C) is its average variable cost curve. 
D) does not exist because prices are not "given" to a monopolist.

Question 6

A pure monopolist

Accepted Answer

A) will realize an economic profit if price exceeds ATC at the profit-maximizing/loss-minimizing level of output. 
B) will realize an economic profit if ATC exceeds MR at the profit-maximizing/loss-minimizing level of output. 
C) will realize an economic loss if MC intersects the downsloping portion of MR. 
D) always realizes an economic profit. 
A) will realize an economic profit if price exceeds ATC at the profit-maximizing/loss-minimizing level of output. 
B) will realize an economic profit if ATC exceeds MR at the profit-maximizing/loss-minimizing level of output. 
C) will realize an economic loss if MC intersects the downsloping portion of MR. 
D) always realizes an economic profit.

Question 7

The demand curve confronting a nondiscriminating pure monopolist is

Accepted Answer

A) horizontal. 
B) the same as the industry's demand curve. 
C) more elastic than the demand curve confronting a competitive firm. 
D) derived by vertically summing the individual demand curves for the buyers. 
A) horizontal. 
B) the same as the industry's demand curve. 
C) more elastic than the demand curve confronting a competitive firm. 
D) derived by vertically summing the individual demand curves for the buyers.

Question 8

In the inelastic portion of a monopolist's demand curve, an increase in price will

Accepted Answer

A) reduce output quantity, increase total revenue, and increase total cost. 
B) reduce output quantity, increase total revenue, and decrease total cost. 
C) raise output quantity, decrease total revenue, and increase total cost. 
D) reduce output quantity, decrease total revenue, and decrease total cost. 
A) reduce output quantity, increase total revenue, and increase total cost. 
B) reduce output quantity, increase total revenue, and decrease total cost. 
C) raise output quantity, decrease total revenue, and increase total cost. 
D) reduce output quantity, decrease total revenue, and decrease total cost.

Question 9

The region of demand in which the monopolist will choose a price-output combination will be

Accepted Answer

A) inelastic because, as price declines and output increases, total revenue will increase. 
B) inelastic because, as price declines and output increases, total revenue will decrease. 
C) elastic because, as price declines and output increases, total revenue will decrease. 
D) elastic because, as price declines and output increases, total revenue will increase. 
A) inelastic because, as price declines and output increases, total revenue will increase. 
B) inelastic because, as price declines and output increases, total revenue will decrease. 
C) elastic because, as price declines and output increases, total revenue will decrease. 
D) elastic because, as price declines and output increases, total revenue will increase.

Question 10

"Price maker" means that a monopoly can decide whatever price it wants to, in order to sell a specific given quantity of its product.

Accepted Answer

A) True 
 B)False

Question 11

A patent for a new product or a new business process is typically granted for a hundred years.

Accepted Answer

A) True 
 B)False

Question 12

Large minimum efficient scale of plant combined with limited market demand may lead to

Accepted Answer

A) natural monopoly. 
B) patent monopoly. 
C) government franchise monopoly. 
D) shared monopoly. 
A) natural monopoly. 
B) patent monopoly. 
C) government franchise monopoly. 
D) shared monopoly.

Question 13

A dilemma of regulation is that

Accepted Answer

A) the regulated price that achieves allocative efficiency is also likely to result in persistent economic profits. 
B) the regulated price that results in a "fair return" restricts output by more than would unregulated monopoly. 
C) regulated pricing always conflicts with the "due process" provision of the Constitution. 
D) the regulated price that achieves allocative efficiency is also likely to result in losses. 
A) the regulated price that achieves allocative efficiency is also likely to result in persistent economic profits. 
B) the regulated price that results in a "fair return" restricts output by more than would unregulated monopoly. 
C) regulated pricing always conflicts with the "due process" provision of the Constitution. 
D) the regulated price that achieves allocative efficiency is also likely to result in losses.

Question 14

If a nondiscriminating imperfectly competitive firm is selling its 100th unit of output for $35, its marginal revenue

Accepted Answer

A) may be either greater or less than $35. 
B) will also be $35. 
C) will be less than $35. 
D) will be greater than $35. 
A) may be either greater or less than $35. 
B) will also be $35. 
C) will be less than $35. 
D) will be greater than $35.

Question 15

Price discrimination is not viable if consumers can resell the products they purchase to other consumers.

Accepted Answer

A) True 
 B)False

Question 16

The profit-maximizing output of a pure monopoly is not socially optimal, because in equilibrium

Accepted Answer

A) price equals minimum average total cost. 
B) marginal revenue equals marginal cost. 
C) marginal cost exceeds price. 
D) price exceeds marginal cost. 
A) price equals minimum average total cost. 
B) marginal revenue equals marginal cost. 
C) marginal cost exceeds price. 
D) price exceeds marginal cost.

Question 17

Suppose a pure monopolist is charging a price of $12 and the associated marginal revenue is $9.We thus know that

Accepted Answer

A) demand is inelastic at this price. 
B) the firm is maximizing profits. 
C) total revenue is increasing. 
D) total revenue is at a maximum. 
A) demand is inelastic at this price. 
B) the firm is maximizing profits. 
C) total revenue is increasing. 
D) total revenue is at a maximum.

Question 18

With a natural monopoly, the fair-return price

Accepted Answer

A) is allocatively efficient; the socially optimal price is allocatively inefficient. 
B) is allocatively inefficient; the socially optimal price is allocatively efficient. 
C) and the socially optimal price are both allocatively inefficient. 
D) and the socially optimal price are both allocatively efficient. 
A) is allocatively efficient; the socially optimal price is allocatively inefficient. 
B) is allocatively inefficient; the socially optimal price is allocatively efficient. 
C) and the socially optimal price are both allocatively inefficient. 
D) and the socially optimal price are both allocatively efficient.

Question 19

Because of the ability to influence price, a pure monopolist can increase price and increase volume of sales simultaneously.

Accepted Answer

A) True 
 B)False

Question 20

In the short run a pure monopolist will charge the highest price the market will bear for its product.

Accepted Answer

A) True 
 B)False

Exam 12: Pure Monopoly

In which one of the following market models is X-inefficiency most likely to be the greatest?

If the profit-maximizing pure monopolist whose information is in the accompanying table is able to price discriminate, charging each customer the price associated with each given level of output, how much profit will the firm earn?

A nondiscriminating pure monopolist is generally viewed as

As a monopolist lowers the price of its product from a high level, it finds that its total revenue may at first increase and then, below a certain price, its total revenue begins to decrease.

The supply curve of a pure monopolist

A pure monopolist

The demand curve confronting a nondiscriminating pure monopolist is

In the inelastic portion of a monopolist's demand curve, an increase in price will

The region of demand in which the monopolist will choose a price-output combination will be

"Price maker" means that a monopoly can decide whatever price it wants to, in order to sell a specific given quantity of its product.

A patent for a new product or a new business process is typically granted for a hundred years.

Large minimum efficient scale of plant combined with limited market demand may lead to

A dilemma of regulation is that

If a nondiscriminating imperfectly competitive firm is selling its 100th unit of output for $35, its marginal revenue

Price discrimination is not viable if consumers can resell the products they purchase to other consumers.

The profit-maximizing output of a pure monopoly is not socially optimal, because in equilibrium

Suppose a pure monopolist is charging a price of $12 and the associated marginal revenue is $9.We thus know that

With a natural monopoly, the fair-return price

Because of the ability to influence price, a pure monopolist can increase price and increase volume of sales simultaneously.

In the short run a pure monopolist will charge the highest price the market will bear for its 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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