Question 1

Which of the following average cost functions suggests the presence of a natural monopoly?

Accepted Answer

A) AC = 2 
B) AC = 100/Q + 2 
C) TC = 100/Q + 2Q 
D) All of the above. 
A) AC = 2 
B) AC = 100/Q + 2 
C) TC = 100/Q + 2Q 
D) All of the above.

Question 2

The situation in which one firm can produce the total output of the market at lower cost than several firms is called

Accepted Answer

A) natural monopoly. 
B) pure monopoly. 
C) ruling monopoly. 
D) cost monopoly. 
A) natural monopoly. 
B) pure monopoly. 
C) ruling monopoly. 
D) cost monopoly.

Question 3

If the inverse demand function for a monopoly's product is p = 100 - 2Q, then the firm's marginal revenue function is

Accepted Answer

A) -2. 
B) 100 - 4Q. 
C) 200 - 4Q. 
D) 200 - 2Q. 
A) -2. 
B) 100 - 4Q. 
C) 200 - 4Q. 
D) 200 - 2Q.

Question 4

If the demand for a monopoly's output shifts leftward, the change in quantity produced is NOT predictable because the monopoly

Accepted Answer

A) is a profit maximizer. 
B) is a price taker. 
C) has no supply curve. 
D) has a marginal cost curve that might not be upward sloping. 
A) is a profit maximizer. 
B) is a price taker. 
C) has no supply curve. 
D) has a marginal cost curve that might not be upward sloping.

Question 5

Which of the following products benefits from network externalities?

Accepted Answer

A) Microwave ovens 
B) Diamond rings 
C) Twitter 
D) Concert tickets 
A) Microwave ovens 
B) Diamond rings 
C) Twitter 
D) Concert tickets

Question 6

If the inverse demand curve a monopoly faces is p = 100 - 2Q, and MC is constant at 16, then profit maximization

Accepted Answer

A) is achieved when 21 units are produced. 
B) is achieved by setting price equal to 21. 
C) is achieved only by shutting down in the short run. 
D) cannot be determined solely from the information provided. 
A) is achieved when 21 units are produced. 
B) is achieved by setting price equal to 21. 
C) is achieved only by shutting down in the short run. 
D) cannot be determined solely from the information provided.

Question 7

If the inverse demand function for a monopoly's product is p = a - bQ, then the firm's marginal revenue function is

Accepted Answer

A) a. 
B) a - (1/2)bQ. 
C) a - bQ. 
D) a - 2bQ. 
A) a. 
B) a - (1/2)bQ. 
C) a - bQ. 
D) a - 2bQ.

Question 8

Which of the following could create a cost advantage for a monopoly?

Accepted Answer

A) Better technology 
B) Lower friction due to better organization 
C) Standardization 
D) All of the above. 
A) Better technology 
B) Lower friction due to better organization 
C) Standardization 
D) All of the above.

Question 9

The more elastic the demand curve, a monopoly will

Accepted Answer

A) have a larger Lerner Index. 
B) face a lower marginal cost. 
C) earn more profit. 
D) lose more sales as it raises its price. 
A) have a larger Lerner Index. 
B) face a lower marginal cost. 
C) earn more profit. 
D) lose more sales as it raises its price.

Question 10

A market failure occurs when

Accepted Answer

A) price equals marginal cost. 
B) there is a non-optimal allocation that leads to an inefficient market. 
C) deadweight loss is maximized. 
D) a firm shuts down. 
A) price equals marginal cost. 
B) there is a non-optimal allocation that leads to an inefficient market. 
C) deadweight loss is maximized. 
D) a firm shuts down.

Question 11

-The above figure shows the demand and marginal cost curves for a monopoly. The deadweight loss of this monopoly equals

Accepted Answer

A) h. 
B) c. 
C) c + f. 
D) c + d + e + f. 
A) h. 
B) c. 
C) c + f. 
D) c + d + e + f.

Question 12

Limited government licenses that create a monopoly do so because

Accepted Answer

A) the license generates a marginal cost advantage. 
B) the monopoly will become a natural monopoly. 
C) a barrier to enter the market exists. 
D) All of the above. 
A) the license generates a marginal cost advantage. 
B) the monopoly will become a natural monopoly. 
C) a barrier to enter the market exists. 
D) All of the above.

Question 13

A firm that has market power

Accepted Answer

A) can charge whatever it wants for its product. 
B) can charge a price above marginal cost. 
C) has positive economic profits. 
D) does not lose sales when increasing price. 
A) can charge whatever it wants for its product. 
B) can charge a price above marginal cost. 
C) has positive economic profits. 
D) does not lose sales when increasing price.

Question 14

Which of the following total cost functions suggests the presence of a natural monopoly?

Accepted Answer

A) TC = 2Q 
B) TC = 100 + 2Q 
C) TC = 100 + 2Q2 
D) All of the above. 
A) TC = 2Q 
B) TC = 100 + 2Q 
C) TC = 100 + 2Q2 
D) All of the above.

Question 15

If the demand for a monopoly's output shifts rightward, the change in quantity produced is

Accepted Answer

A) positive. 
B) negative. 
C) zero. 
D) not predictable. 
A) positive. 
B) negative. 
C) zero. 
D) not predictable.

Question 16

If a monopoly's demand curve shifts to the right, the monopoly

Accepted Answer

A) will charge a higher price. 
B) will charge a lower price. 
C) will sell more. 
D) decision cannot be determined. 
A) will charge a higher price. 
B) will charge a lower price. 
C) will sell more. 
D) decision cannot be determined.

Question 17

If a monopoly can produce a good at zero marginal cost, then its Lerner Index is

Accepted Answer

A) zero. 
B) one. 
C) infinity. 
D) undetermined. 
A) zero. 
B) one. 
C) infinity. 
D) undetermined.

Question 18

The situation in which a person places greater value on a good as more and more people possess it is called the

Accepted Answer

A) Bandwagon Effect. 
B) Greater Value Effect. 
C) Snob Effect. 
D) Behavioral Effect. 
A) Bandwagon Effect. 
B) Greater Value Effect. 
C) Snob Effect. 
D) Behavioral Effect.

Question 19

A profit-maximizing monopolist will never operate in the portion of the demand curve with price elasticity equal to

Accepted Answer

A) -3. 
B) -1. 
C) -1/3. 
D) None of the above-the price elasticity does not matter. 
A) -3. 
B) -1. 
C) -1/3. 
D) None of the above-the price elasticity does not matter.

Question 20

The situation where one person's demand for a good depends on the consumption of the good by others is called a

Accepted Answer

A) network externality. 
B) network internality. 
C) consumption externality. 
D) production externality. 
A) network externality. 
B) network internality. 
C) consumption externality. 
D) production externality.

Which of the following average cost functions suggests the presence of a natural monopoly?

The situation in which one firm can produce the total output of the market at lower cost than several firms is called

If the inverse demand function for a monopoly's product is p = 100 - 2Q, then the firm's marginal revenue function is

If the demand for a monopoly's output shifts leftward, the change in quantity produced is NOT predictable because the monopoly

Which of the following products benefits from network externalities?

If the inverse demand curve a monopoly faces is p = 100 - 2Q, and MC is constant at 16, then profit maximization

If the inverse demand function for a monopoly's product is p = a - bQ, then the firm's marginal revenue function is

Which of the following could create a cost advantage for a monopoly?

The more elastic the demand curve, a monopoly will

A market failure occurs when

-The above figure shows the demand and marginal cost curves for a monopoly. The deadweight loss of this monopoly equals

Limited government licenses that create a monopoly do so because

A firm that has market power

Which of the following total cost functions suggests the presence of a natural monopoly?

If the demand for a monopoly's output shifts rightward, the change in quantity produced is

If a monopoly's demand curve shifts to the right, the monopoly

If a monopoly can produce a good at zero marginal cost, then its Lerner Index is

The situation in which a person places greater value on a good as more and more people possess it is called the

A profit-maximizing monopolist will never operate in the portion of the demand curve with price elasticity equal to

The situation where one person's demand for a good depends on the consumption of the good by others is called a

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Consumer Choice

Production

Costs

Firm Organization and Market Structure

Competitive Firms and Markets

Pricing With Market Power

Oligopoly and Monopolistic Competition

Game Theory and Business Strategy

Strategies Over Time

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Government and Business

Global Business

Filters

Exam 9: Monopoly

Which of the following average cost functions suggests the presence of a natural monopoly?

The situation in which one firm can produce the total output of the market at lower cost than several firms is called

If the inverse demand function for a monopoly's product is p = 100 - 2Q, then the firm's marginal revenue function is

If the demand for a monopoly's output shifts leftward, the change in quantity produced is NOT predictable because the monopoly

Which of the following products benefits from network externalities?

If the inverse demand curve a monopoly faces is p = 100 - 2Q, and MC is constant at 16, then profit maximization

If the inverse demand function for a monopoly's product is p = a - bQ, then the firm's marginal revenue function is

Which of the following could create a cost advantage for a monopoly?

The more elastic the demand curve, a monopoly will

A market failure occurs when

-The above figure shows the demand and marginal cost curves for a monopoly. The deadweight loss of this monopoly equals

Limited government licenses that create a monopoly do so because

A firm that has market power

Which of the following total cost functions suggests the presence of a natural monopoly?

If the demand for a monopoly's output shifts rightward, the change in quantity produced is

If a monopoly's demand curve shifts to the right, the monopoly

If a monopoly can produce a good at zero marginal cost, then its Lerner Index is

The situation in which a person places greater value on a good as more and more people possess it is called the

A profit-maximizing monopolist will never operate in the portion of the demand curve with price elasticity equal to

The situation where one person's demand for a good depends on the consumption of the good by others is called a

Introduction

Supply and Demand

Empirical Methods for Demand Analysis

Consumer Choice

Production

Costs

Firm Organization and Market Structure

Competitive Firms and Markets

Pricing With Market Power

Oligopoly and Monopolistic Competition

Game Theory and Business Strategy

Strategies Over Time

Managerial Decision-Making Under Uncertainty

Asymmetric Information

Government and Business

Global Business

Filters