Question 1

Successful price discrimination requires that buyers charged the different prices be physically separated.

Accepted Answer

A) True 
 B)False

Question 2

A pure monopolist will maximize profits by producing at that output where price and marginal cost are equal.

Accepted Answer

A) True 
 B)False

Question 3

Price discrimination is

Accepted Answer

A) always legal. 
B) always illegal. 
C) only illegal if it hurts consumers more than nondiscrimination. 
D) only illegal if used to lessen or eliminate competition. 
A) always legal. 
B) always illegal. 
C) only illegal if it hurts consumers more than nondiscrimination. 
D) only illegal if used to lessen or eliminate competition.

Question 4

One feature of pure monopoly is that the firm is

Accepted Answer

A) a producer of products with close substitutes. 
B) one of several producers of a product. 
C) a price taker. 
D) a price maker. 
A) a producer of products with close substitutes. 
B) one of several producers of a product. 
C) a price taker. 
D) a price maker.

Question 5

Possible reasons for X-inefficiency include the following, except

Accepted Answer

A) managers having other goals besides maximizing profits. 
B) workers being poorly motivated or poorly supervised. 
C) costs of materials rising due to tight supply conditions. 
D) the firm being lethargic due to the absence of competition. 
A) managers having other goals besides maximizing profits. 
B) workers being poorly motivated or poorly supervised. 
C) costs of materials rising due to tight supply conditions. 
D) the firm being lethargic due to the absence of competition.

Question 6

The nondiscriminating pure monopolist's demand curve

Accepted Answer

A) is the industry demand curve. 
B) shows a direct or positive relationship between price and quantity demanded. 
C) tends to be inelastic at high prices and elastic at low prices. 
D) is identical to its marginal revenue curve. 
A) is the industry demand curve. 
B) shows a direct or positive relationship between price and quantity demanded. 
C) tends to be inelastic at high prices and elastic at low prices. 
D) is identical to its marginal revenue curve.

Question 7

Network effects and simultaneous consumption tend to foster the development of

Accepted Answer

A) pure competition. 
B) monopoly power. 
C) net social benefits. 
D) allocative efficiency. 
A) pure competition. 
B) monopoly power. 
C) net social benefits. 
D) allocative efficiency.

Question 8

Suppose that a monopolist calculates that at its present output level, marginal revenue is $1.00 and marginal cost is $2.00.It could maximize profits or minimize losses by

Accepted Answer

A) decreasing price and increasing output. 
B) increasing price and decreasing output. 
C) decreasing price and leaving output unchanged. 
D) decreasing output and leaving price unchanged. 
A) decreasing price and increasing output. 
B) increasing price and decreasing output. 
C) decreasing price and leaving output unchanged. 
D) decreasing output and leaving price unchanged.

Question 9

Which of the following is not a possible source of natural monopoly?

Accepted Answer

A) large-scale network effects 
B) simultaneous consumption 
C) greater use of specialized inputs 
D) rent-seeking behavior 
A) large-scale network effects 
B) simultaneous consumption 
C) greater use of specialized inputs 
D) rent-seeking behavior

Question 10

In many large U.S.cities, taxicab companies operate as near monopolies because of

Accepted Answer

A) patents. 
B) licenses. 
C) economies of scale. 
D) strategic pricing. 
A) patents. 
B) licenses. 
C) economies of scale. 
D) strategic pricing.

Question 11

If a regulatory commission imposes upon a nondiscriminating natural monopoly a price that is equal to marginal cost and below average total cost at the resulting output, then

Accepted Answer

A) the firm will realize an economic profit. 
B) the firm will earn only a normal profit. 
C) allocative efficiency will be worsened. 
D) the firm must be subsidized or it will go bankrupt. 
A) the firm will realize an economic profit. 
B) the firm will earn only a normal profit. 
C) allocative efficiency will be worsened. 
D) the firm must be subsidized or it will go bankrupt.

Question 12

Pure monopolists may obtain economic profits in the long run because

Accepted Answer

A) of advertising. 
B) marginal revenue is constant as sales increase. 
C) of barriers to entry. 
D) of rising average fixed costs. 
A) of advertising. 
B) marginal revenue is constant as sales increase. 
C) of barriers to entry. 
D) of rising average fixed costs.

Question 13

(Consider This) Children are charged less than adults for admission to professional baseball games but are charged the same prices as adults at the concession stands.This pricing system occurs because

Accepted Answer

A) children have an elastic demand for game tickets but an inelastic demand for concession items. 
B) children have an inelastic demand for game tickets but an elastic demand for concession items. 
C) the seller can prevent children from buying game tickets for adults but cannot prevent children from buying concession items for adults. 
D) children can personally "consume" only a single game ticket but can personally consume more than one concession item. 
A) children have an elastic demand for game tickets but an inelastic demand for concession items. 
B) children have an inelastic demand for game tickets but an elastic demand for concession items. 
C) the seller can prevent children from buying game tickets for adults but cannot prevent children from buying concession items for adults. 
D) children can personally "consume" only a single game ticket but can personally consume more than one concession item.

Question 14

The nondiscriminating monopolist's demand curve

Accepted Answer

A) is less elastic than a purely competitive firm's demand curve. 
B) is perfectly elastic. 
C) coincides with its marginal revenue curve. 
D) is perfectly inelastic. 
A) is less elastic than a purely competitive firm's demand curve. 
B) is perfectly elastic. 
C) coincides with its marginal revenue curve. 
D) is perfectly inelastic.

Question 15

A monopoly results in productive inefficiency because at the profit-maximizing output level,

Accepted Answer

A) P > MC. 
B) ATC is not at its minimum level. 
C) MC is not at its minimum level. 
D) P > AVC. 
A) P > MC. 
B) ATC is not at its minimum level. 
C) MC is not at its minimum level. 
D) P > AVC.

Question 16

Barriers to entry

Accepted Answer

A) usually result in pure competition. 
B) can result from government regulation. 
C) exist in economic theory but not in the real world. 
D) are typically the result of wrongdoing on the part of a firm. 
A) usually result in pure competition. 
B) can result from government regulation. 
C) exist in economic theory but not in the real world. 
D) are typically the result of wrongdoing on the part of a firm.

Question 17

Price discrimination is more common in service industries because

Accepted Answer

A) low-price buyers will find it virtually impossible to resell the products of such industries to high-price buyers. 
B) the costs of providing such industries' products to different groups of buyers vary dramatically. 
C) the price elasticity of demand is the same for all groups of buyers in these industries. 
D) all firms in these industries have significant monopoly power over price. 
A) low-price buyers will find it virtually impossible to resell the products of such industries to high-price buyers. 
B) the costs of providing such industries' products to different groups of buyers vary dramatically. 
C) the price elasticity of demand is the same for all groups of buyers in these industries. 
D) all firms in these industries have significant monopoly power over price.

Question 18

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

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 19

When a firm is on the inelastic segment of its demand curve, it can

Accepted Answer

A) increase total revenue by reducing price. 
B) decrease total costs by decreasing price. 
C) increase profits by increasing price. 
D) increase total revenue by more than the increase in total cost by increasing price. 
A) increase total revenue by reducing price. 
B) decrease total costs by decreasing price. 
C) increase profits by increasing price. 
D) increase total revenue by more than the increase in total cost by increasing price.

Question 20

A price-discriminating monopolist will set a higher price where demand is more elastic and a lower price where demand is less elastic.

Accepted Answer

A) True 
 B)False

Exam 12: Pure Monopoly

Successful price discrimination requires that buyers charged the different prices be physically separated.

A pure monopolist will maximize profits by producing at that output where price and marginal cost are equal.

Price discrimination is

One feature of pure monopoly is that the firm is

Possible reasons for X-inefficiency include the following, except

The nondiscriminating pure monopolist's demand curve

Network effects and simultaneous consumption tend to foster the development of

Suppose that a monopolist calculates that at its present output level, marginal revenue is $1.00 and marginal cost is $2.00.It could maximize profits or minimize losses by

Which of the following is not a possible source of natural monopoly?

In many large U.S.cities, taxicab companies operate as near monopolies because of

If a regulatory commission imposes upon a nondiscriminating natural monopoly a price that is equal to marginal cost and below average total cost at the resulting output, then

Pure monopolists may obtain economic profits in the long run because

(Consider This) Children are charged less than adults for admission to professional baseball games but are charged the same prices as adults at the concession stands.This pricing system occurs because

The nondiscriminating monopolist's demand curve

A monopoly results in productive inefficiency because at the profit-maximizing output level,

Barriers to entry

Price discrimination is more common in service industries because

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

When a firm is on the inelastic segment of its demand curve, it can

A price-discriminating monopolist will set a higher price where demand is more elastic and a lower price where demand is less elastic.

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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