Question 1

One defining characteristic of pure monopoly is that

Accepted Answer

A) the monopolist is a price taker. 
B) the monopolist uses advertising. 
C) the monopolist produces a product with no close substitutes. 
D) there is relatively easy entry into the industry, but exit is difficult. 
A) the monopolist is a price taker. 
B) the monopolist uses advertising. 
C) the monopolist produces a product with no close substitutes. 
D) there is relatively easy entry into the industry, but exit is difficult.

Question 2

For a monopolist, maximum profits will occur when the gap between average revenue (or price) and average cost is biggest.

Accepted Answer

A) True 
 B)False

Question 3

A pure monopolist is selling six units at a price of $12.If the marginal revenue of the seventh unit is $5, then the

Accepted Answer

A) price of the seventh unit is $10. 
B) price of the seventh unit is $11. 
C) price of the seventh unit is greater than $12. 
D) firm's demand curve is perfectly elastic. 
A) price of the seventh unit is $10. 
B) price of the seventh unit is $11. 
C) price of the seventh unit is greater than $12. 
D) firm's demand curve is perfectly elastic.

Question 4

Because the monopolist's demand curve is downsloping,

Accepted Answer

A) MR will equal price. 
B) price must be lowered to sell more output. 
C) the elasticity coefficient will increase as price is lowered. 
D) its supply curve will also be downsloping. 
A) MR will equal price. 
B) price must be lowered to sell more output. 
C) the elasticity coefficient will increase as price is lowered. 
D) its supply curve will also be downsloping.

Question 5

A purely monopolistic firm

Accepted Answer

A) has no entry barriers. 
B) faces a downsloping demand curve. 
C) produces a product or service for which there are many close substitutes. 
D) earns only a normal profit in the long run. 
A) has no entry barriers. 
B) faces a downsloping demand curve. 
C) produces a product or service for which there are many close substitutes. 
D) earns only a normal profit in the long run.

Question 6

Which is not true of price discrimination?

Accepted Answer

A) Successful price discrimination requires that different segments of the market have different demand elasticities. 
B) Successful price discrimination will provide the firm with more profit than if it does not discriminate. 
C) Successful price discrimination implies that the producer can separate customers into easily identifiable groups. 
D) Successful price discrimination will generally result in a lower level of output than would be the case under a single-price monopoly. 
A) Successful price discrimination requires that different segments of the market have different demand elasticities. 
B) Successful price discrimination will provide the firm with more profit than if it does not discriminate. 
C) Successful price discrimination implies that the producer can separate customers into easily identifiable groups. 
D) Successful price discrimination will generally result in a lower level of output than would be the case under a single-price monopoly.

Question 7

A price discriminating pure monopolist will attempt to charge each buyer (or group of buyers)

Accepted Answer

A) different prices to compensate for differences in the characteristics of the product. 
B) the same price if per unit cost is constant for each unit of the product. 
C) that price that equals the buyer's marginal cost. 
D) the maximum price each would be willing to pay. 
A) different prices to compensate for differences in the characteristics of the product. 
B) the same price if per unit cost is constant for each unit of the product. 
C) that price that equals the buyer's marginal cost. 
D) the maximum price each would be willing to pay.

Question 8

(Last Word): Alex owns a luxury automobile and regularly purchases high-end fashion items online.Kara drives an old sedan and does most online shopping on eBay and Amazon.Suppose both Alex and Kara search the same online retailer for a nice watch to give on Fathers Day.Based on Big Data and personalized pricing, we would expect

Accepted Answer

A) Alex to see a higher price than Kara for the same watch. 
B) Alex and Kara to see the same price for a given watch. 
C) Alex to see a lower price than Kara for the same watch. 
D) that either Alex or Kara might see a higher price for the same watch, as algorithms randomly determine what price each consumer sees. 
A) Alex to see a higher price than Kara for the same watch. 
B) Alex and Kara to see the same price for a given watch. 
C) Alex to see a lower price than Kara for the same watch. 
D) that either Alex or Kara might see a higher price for the same watch, as algorithms randomly determine what price each consumer sees.

Question 9

If a regulatory commission wants to provide a natural monopoly with a fair return, it should establish a price that is equal to

Accepted Answer

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

Question 10

Which phrase would be most characteristic of pure monopoly?

Accepted Answer

A) close substitutes 
B) efficient advertiser 
C) price taker 
D) sole seller 
A) close substitutes 
B) efficient advertiser 
C) price taker 
D) sole seller

Question 11

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 many units will the firm produce?

Accepted Answer

A) 2. 
B) 3. 
C) 4. 
D) 5. 
A) 2. 
B) 3. 
C) 4. 
D) 5.

Question 12

Natural monopoly may result where products produce substantial network effects and can be simultaneously consumed by a large number of consumers.

Accepted Answer

A) True 
 B)False

Question 13

A monopolist is free to charge whatever price it wishes, to sell a certain level of output.

Accepted Answer

A) True 
 B)False

Question 14

When the value of a product to each user, including existing users, increases due to an increase in the total number of users-as in the case of Facebook-we refer to this as

Accepted Answer

A) income transfer. 
B) price discrimination. 
C) simultaneous consumption. 
D) network effects. 
A) income transfer. 
B) price discrimination. 
C) simultaneous consumption. 
D) network effects.

Question 15

If the variable costs of a profit-maximizing pure monopolist decline, the firm should

Accepted Answer

A) produce more output and charge a higher price. 
B) produce more output and charge a lower price. 
C) reduce both output and price. 
D) raise both output and price. 
A) produce more output and charge a higher price. 
B) produce more output and charge a lower price. 
C) reduce both output and price. 
D) raise both output and price.

Question 16

The higher prices charged by monopolists

Accepted Answer

A) are like a private tax that redistributes income from consumers to monopoly sellers. 
B) are socially optimal because they better reflect how much society values the good relative to the resources used to produce it. 
C) return to consumers through the public goods provided by monopolies. 
D) have no effect on the distribution of income. 
A) are like a private tax that redistributes income from consumers to monopoly sellers. 
B) are socially optimal because they better reflect how much society values the good relative to the resources used to produce it. 
C) return to consumers through the public goods provided by monopolies. 
D) have no effect on the distribution of income.

Question 17

A pure monopolist is producing an output such that ATC = $4, P = $5, MC = $2, and MR = $3.This firm is realizing

Accepted Answer

A) a loss that could be reduced by producing more output. 
B) a loss that could be reduced by producing less output. 
C) an economic profit that could be increased by producing more output. 
D) an economic profit that could be increased by producing less output. 
A) a loss that could be reduced by producing more output. 
B) a loss that could be reduced by producing less output. 
C) an economic profit that could be increased by producing more output. 
D) an economic profit that could be increased by producing less output.

Question 18

In a monopoly at equilibrium, price is greater than marginal cost.

Accepted Answer

A) True 
 B)False

Question 19

A single-price pure monopoly is economically inefficient

Accepted Answer

A) only because it produces beyond the point of minimum average total cost. 
B) only because it produces short of the point of minimum average total cost. 
C) because it produces short of minimum average total cost and price is greater than marginal cost. 
D) because it produces beyond minimum average total cost and marginal cost is greater than price. 
A) only because it produces beyond the point of minimum average total cost. 
B) only because it produces short of the point of minimum average total cost. 
C) because it produces short of minimum average total cost and price is greater than marginal cost. 
D) because it produces beyond minimum average total cost and marginal cost is greater than price.

Question 20

Assume that a monopolist faces a linear demand curve.If the firm is operating at an output level where marginal revenue is positive, the firm

Accepted Answer

A) has maximized total revenues. 
B) could raise revenues by raising prices. 
C) can always increase profits by lowering its price. 
D) is operating on the elastic portion of its demand curve. 
A) has maximized total revenues. 
B) could raise revenues by raising prices. 
C) can always increase profits by lowering its price. 
D) is operating on the elastic portion of its demand curve.

Exam 12: Pure Monopoly

One defining characteristic of pure monopoly is that

For a monopolist, maximum profits will occur when the gap between average revenue (or price) and average cost is biggest.

A pure monopolist is selling six units at a price of $12.If the marginal revenue of the seventh unit is $5, then the

Because the monopolist's demand curve is downsloping,

A purely monopolistic firm

Which is not true of price discrimination?

A price discriminating pure monopolist will attempt to charge each buyer (or group of buyers)

If a regulatory commission wants to provide a natural monopoly with a fair return, it should establish a price that is equal to

Which phrase would be most characteristic of pure monopoly?

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 many units will the firm produce?

Natural monopoly may result where products produce substantial network effects and can be simultaneously consumed by a large number of consumers.

A monopolist is free to charge whatever price it wishes, to sell a certain level of output.

When the value of a product to each user, including existing users, increases due to an increase in the total number of users-as in the case of Facebook-we refer to this as

If the variable costs of a profit-maximizing pure monopolist decline, the firm should

The higher prices charged by monopolists

A pure monopolist is producing an output such that ATC = $4, P = $5, MC = $2, and MR = $3.This firm is realizing

In a monopoly at equilibrium, price is greater than marginal cost.

A single-price pure monopoly is economically inefficient

Assume that a monopolist faces a linear demand curve.If the firm is operating at an output level where marginal revenue is positive, the firm

Limits, Alternatives, and Choices

The Market System and the Circular Flow

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