Question 1

The practice of price discrimination is associated with pure monopoly because

Accepted Answer

A) it can be practiced whenever a firm's demand curve is downsloping. 
B) monopolists have considerable ability to control output and price. 
C) monopolists usually realize economies of scale. 
D) most monopolists sell differentiated products. 
A) it can be practiced whenever a firm's demand curve is downsloping. 
B) monopolists have considerable ability to control output and price. 
C) monopolists usually realize economies of scale. 
D) most monopolists sell differentiated products.

Question 2

Economic profit in the long run is

Accepted Answer

A) possible for both a pure monopoly and a pure competitor. 
B) possible for a pure monopoly but not for a pure competitor. 
C) impossible for both a pure monopolist and a pure competitor. 
D) only possible when barriers to entry are nonexistent. 
A) possible for both a pure monopoly and a pure competitor. 
B) possible for a pure monopoly but not for a pure competitor. 
C) impossible for both a pure monopolist and a pure competitor. 
D) only possible when barriers to entry are nonexistent.

Question 3

If a pure monopolist is producing more output than the MR = MC output,

Accepted Answer

A) the firm may, or may not, be maximizing profits. 
B) it will be in the interest of the firm, but not necessarily of society, to reduce output. 
C) it will be in the interest of the firm and society to increase output. 
D) it will be in the interest of the firm and society to reduce output. 
A) the firm may, or may not, be maximizing profits. 
B) it will be in the interest of the firm, but not necessarily of society, to reduce output. 
C) it will be in the interest of the firm and society to increase output. 
D) it will be in the interest of the firm and society to reduce output.

Question 4

Any activity designed to transfer income or wealth to a particular individual or firm at society's expense is called

Accepted Answer

A) patent protection. 
B) X-inefficiency. 
C) price discrimination. 
D) rent-seeking. 
A) patent protection. 
B) X-inefficiency. 
C) price discrimination. 
D) rent-seeking.

Question 5

There is some evidence to suggest that X-inefficiency is

Accepted Answer

A) absent whenever two or more producers are competing with one another. 
B) not encountered in either competitive or monopolistic firms. 
C) more likely to occur in monopolistic firms than in competitive firms. 
D) more likely to occur in competitive firms than in monopolistic firms. 
A) absent whenever two or more producers are competing with one another. 
B) not encountered in either competitive or monopolistic firms. 
C) more likely to occur in monopolistic firms than in competitive firms. 
D) more likely to occur in competitive firms than in monopolistic firms.

Question 6

Under which of the following situations would a monopolist increase profits by lowering price (and increasing output)?

Accepted Answer

A) if it discovered that it was producing where MC = MR 
B) if it discovered that it was producing where its MC curve intersects its demand curve 
C) if it discovered that it was producing where MC < MR 
D) under none of these circumstances because a monopolist would never lower price 
A) if it discovered that it was producing where MC = MR 
B) if it discovered that it was producing where its MC curve intersects its demand curve 
C) if it discovered that it was producing where MC < MR 
D) under none of these circumstances because a monopolist would never lower price

Question 7

Comparing a pure monopoly and a purely competitive firm with identical costs, we would find in long-run equilibrium that the pure monopolist's

Accepted Answer

A) price, output, and average total cost would all be higher. 
B) price and average total cost would be higher, but output would be lower. 
C) price, output, and average total cost would all be lower. 
D) price and output would be lower, but average total cost would be higher. 
A) price, output, and average total cost would all be higher. 
B) price and average total cost would be higher, but output would be lower. 
C) price, output, and average total cost would all be lower. 
D) price and output would be lower, but average total cost would be higher.

Question 8

Which of the following is not a precondition for price discrimination?

Accepted Answer

A) The commodity involved must be a durable good. 
B) The good or service cannot be profitably resold by original buyers. 
C) The seller must be able to segment the market, that is, to distinguish buyers with different elasticities of demand. 
D) The seller must possess some degree of monopoly power. 
A) The commodity involved must be a durable good. 
B) The good or service cannot be profitably resold by original buyers. 
C) The seller must be able to segment the market, that is, to distinguish buyers with different elasticities of demand. 
D) The seller must possess some degree of monopoly power.

Question 9

Given a linear demand curve, at which combination of price and marginal revenue (P, MR) is the price elasticity of demand greater than 1?

Accepted Answer

A) P = 15, MR = 8 
B) P = 12, MR = 0 
C) P = 8, MR = −2 
D) P = 4, MR = −4 
A) P = 15, MR = 8 
B) P = 12, MR = 0 
C) P = 8, MR = −2 
D) P = 4, MR = −4

Question 10

Which case best represents a case of price discrimination?

Accepted Answer

A) An insurance company offers discounts to safe drivers. 
B) A major airline sells tickets to senior citizens at lower prices than to other passengers. 
C) A professional baseball team pays two players with identical batting averages different salaries. 
D) A utility company charges less for electricity used during off-peak hours, when it does not have to operate its less-efficient generating plants. 
A) An insurance company offers discounts to safe drivers. 
B) A major airline sells tickets to senior citizens at lower prices than to other passengers. 
C) A professional baseball team pays two players with identical batting averages different salaries. 
D) A utility company charges less for electricity used during off-peak hours, when it does not have to operate its less-efficient generating plants.

Question 11

One feature of pure monopoly is that the demand curve

Accepted Answer

A) is vertical. 
B) is horizontal. 
C) slopes upward. 
D) slopes downward. 
A) is vertical. 
B) is horizontal. 
C) slopes upward. 
D) slopes downward.

Question 12

A monopolist can sell 20 toys per day for $8.00 each.To sell 21 toys per day, the price must be cut to $7.00.The marginal revenue of the 21st toy is

Accepted Answer

A) âˆ'$10. 
B) âˆ'$13. 
C) +$7. 
D) +$21. 
A) âˆ'$10. 
B) âˆ'$13. 
C) +$7. 
D) +$21.

Question 13

A monopoly is most likely to emerge and be sustained when

Accepted Answer

A) output demand is relatively elastic. 
B) firms have U-shaped average-total-cost curves. 
C) fixed capital costs are small relative to total costs. 
D) economies of scale are large relative to market demand. 
A) output demand is relatively elastic. 
B) firms have U-shaped average-total-cost curves. 
C) fixed capital costs are small relative to total costs. 
D) economies of scale are large relative to market demand.

Question 14

What do economies of scale, the ownership of essential raw materials, and patents have in common?

Accepted Answer

A) They must all be present before price discrimination can be practiced. 
B) They are all barriers to entry. 
C) They all help explain why a monopolist's demand and marginal revenue curves coincide. 
D) They all help explain why the long-run average cost curve is U-shaped. 
A) They must all be present before price discrimination can be practiced. 
B) They are all barriers to entry. 
C) They all help explain why a monopolist's demand and marginal revenue curves coincide. 
D) They all help explain why the long-run average cost curve is U-shaped.

Question 15

A pure monopolist's short-run profit-maximizing or loss-minimizing position is such that price

Accepted Answer

A) equals marginal revenue. 
B) will vertically intersect demand where MR = MC. 
C) will always equal ATC. 
D) always exceeds ATC. 
A) equals marginal revenue. 
B) will vertically intersect demand where MR = MC. 
C) will always equal ATC. 
D) always exceeds ATC.

Question 16

The supply curve for a monopoly is

Accepted Answer

A) the portion of the marginal cost curve that lies above the average variable cost curve. 
B) the portion of the marginal cost curve that lies above the average total cost curve. 
C) the portion of the marginal cost curve that lies above the average fixed cost curve. 
D) not clearly defined. 
A) the portion of the marginal cost curve that lies above the average variable cost curve. 
B) the portion of the marginal cost curve that lies above the average total cost curve. 
C) the portion of the marginal cost curve that lies above the average fixed cost curve. 
D) not clearly defined.

Question 17

Which is true of a price-discriminating pure monopolist?

Accepted Answer

A) P > MR for the last unit sold. 
B) Profit will be higher than in the nondiscriminating case. 
C) The average price will be higher than in the nondiscriminating case. 
D) Allocative inefficiency will be greater than in the nondiscriminating case. 
A) P > MR for the last unit sold. 
B) Profit will be higher than in the nondiscriminating case. 
C) The average price will be higher than in the nondiscriminating case. 
D) Allocative inefficiency will be greater than in the nondiscriminating case.

Question 18

The supply curve for a monopolist is

Accepted Answer

A) perfectly elastic. 
B) upsloping. 
C) that portion of the marginal cost curve lying above minimum average variable cost. 
D) nonexistent. 
A) perfectly elastic. 
B) upsloping. 
C) that portion of the marginal cost curve lying above minimum average variable cost. 
D) nonexistent.

Question 19

Assume a pure monopolist is currently operating at a price-quantity combination on the inelastic segment of its demand curve.If the monopolist is seeking maximum profits, it should

Accepted Answer

A) retain its current price-quantity combination. 
B) increase both price and quantity sold. 
C) charge a lower price. 
D) charge a higher price. 
A) retain its current price-quantity combination. 
B) increase both price and quantity sold. 
C) charge a lower price. 
D) charge a higher price.

Question 20

Society suffers a deadweight loss in a pure-monopoly market because

Accepted Answer

A) output is less, while price is more, than is socially optimal. 
B) output is more, while price is less, than is socially optimal. 
C) both output and price are higher than is socially optimal. 
D) both output and price are lower than is socially optimal. 
A) output is less, while price is more, than is socially optimal. 
B) output is more, while price is less, than is socially optimal. 
C) both output and price are higher than is socially optimal. 
D) both output and price are lower than is socially optimal.

Exam 12: Pure Monopoly

The practice of price discrimination is associated with pure monopoly because

Economic profit in the long run is

If a pure monopolist is producing more output than the MR = MC output,

Any activity designed to transfer income or wealth to a particular individual or firm at society's expense is called

There is some evidence to suggest that X-inefficiency is

Under which of the following situations would a monopolist increase profits by lowering price (and increasing output)?

Comparing a pure monopoly and a purely competitive firm with identical costs, we would find in long-run equilibrium that the pure monopolist's

Which of the following is not a precondition for price discrimination?

Given a linear demand curve, at which combination of price and marginal revenue (P, MR) is the price elasticity of demand greater than 1?

Which case best represents a case of price discrimination?

One feature of pure monopoly is that the demand curve

A monopolist can sell 20 toys per day for $8.00 each.To sell 21 toys per day, the price must be cut to $7.00.The marginal revenue of the 21st toy is

A monopoly is most likely to emerge and be sustained when

What do economies of scale, the ownership of essential raw materials, and patents have in common?

A pure monopolist's short-run profit-maximizing or loss-minimizing position is such that price

The supply curve for a monopoly is

Which is true of a price-discriminating pure monopolist?

The supply curve for a monopolist is

Assume a pure monopolist is currently operating at a price-quantity combination on the inelastic segment of its demand curve.If the monopolist is seeking maximum profits, it should

Society suffers a deadweight loss in a pure-monopoly market because

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

Filters