Question 1

In the long run under monopoly,

Accepted Answer

A)  the MC curve will lie to the left of the output at which AC and AR meet. 
B)  MC = MR = P. 
C)  MC = MR = AR. 
D)  the MC curve will lie to the right of the output at which AC and AR meet. 
A)  the MC curve will lie to the left of the output at which AC and AR meet. 
B)  MC = MR = P. 
C)  MC = MR = AR. 
D)  the MC curve will lie to the right of the output at which AC and AR meet.

Question 2

At his current level of output, a monopolist has an MR of $10, an MC of $6, and an economic profit of zero.If the market demand curve is downward sloping and his marginal cost curve upward sloping, the monopolist

Accepted Answer

A)  is producing his profit-maximizing level of output. 
B)  could increase his profit by increasing his output. 
C)  could increase his profit by increasing his price. 
D)  should exit the market if he has positive fixed cost. 
A)  is producing his profit-maximizing level of output. 
B)  could increase his profit by increasing his output. 
C)  could increase his profit by increasing his price. 
D)  should exit the market if he has positive fixed cost.

Question 3

A natural monopoly is one that deliberately erects entry barriers.

Accepted Answer

A) True 
 B)False

Question 4

A monopolist maximizes profit by producing the quantity at which MC = MR, just like a perfect competitor.

Accepted Answer

A) True 
 B)False

Question 5

Economists consider price discrimination to always be undesirable.

Accepted Answer

A) True 
 B)False

Question 6

Perfect Competition is an industry in which there is only one supplier of a product that has no close substitutes.

Accepted Answer

A) True 
 B)False

Question 7

Pure monopoly is defined as a

Accepted Answer

A)  one-firm industry. 
B)  market structure in which there are many substitute products. 
C)  market structure maintained by entry of many rival firms. 
D)  market structure created by special government sanctions. 
A)  one-firm industry. 
B)  market structure in which there are many substitute products. 
C)  market structure maintained by entry of many rival firms. 
D)  market structure created by special government sanctions.

Question 8

A pure monopoly is defined as having only one seller.

Accepted Answer

A) True 
 B)False

Question 9

Monopolists may in the long run

Accepted Answer

A)  earn positive economic profit. 
B)  be protected by barriers to entry. 
C)  grow wealthy at the expense of their consumers. 
D)  All of the above are correct. 
A)  earn positive economic profit. 
B)  be protected by barriers to entry. 
C)  grow wealthy at the expense of their consumers. 
D)  All of the above are correct.

Question 10

Figure 11-6
  
-The industry described in Figure 11-6

Accepted Answer

A)  is not a natural monopoly because no firm would produce in the long run unless the government intervened in the market. 
B)  is not a natural monopoly because the average total cost curve is U-shaped. 
C)  is a natural monopoly because the economic profit is positive for a monopolist if the government doesn't intervene. 
D)  is a natural monopoly because price is less than average total cost at the output that would be produced by the industry under perfect competition. 
A)  is not a natural monopoly because no firm would produce in the long run unless the government intervened in the market. 
B)  is not a natural monopoly because the average total cost curve is U-shaped. 
C)  is a natural monopoly because the economic profit is positive for a monopolist if the government doesn't intervene. 
D)  is a natural monopoly because price is less than average total cost at the output that would be produced by the industry under perfect competition.

Question 11

Figure 11-5
  
-In Figure 11-5 are the cost and revenue curves of a monopolist in the theater market, Crown Theater, which is the only movie theater in the city.At its profit-maximizing quantity of tickets sold, movie goers will buy ____ tickets.

Accepted Answer

A)  60 
B)  100 
C)  120 
D)  140 
A)  60 
B)  100 
C)  120 
D)  140

Question 12

Monopoly as a market structure leads to

Accepted Answer

A)  prices equal to average cost. 
B)  quick response to economic change. 
C)  prices that equal minimum long-run average cost. 
D)  persistent economic profits. 
A)  prices equal to average cost. 
B)  quick response to economic change. 
C)  prices that equal minimum long-run average cost. 
D)  persistent economic profits.

Question 13

Technical superiority can be a source of entry barriers.

Accepted Answer

A) True 
 B)False

Question 14

In order for a natural monopoly to develop, it

Accepted Answer

A)  is important that the firm be very large. 
B)  is important that the firm prices its product below cost. 
C)  is not the absolute size of the firm but its size relative to the total market demand that is important. 
D)  must be in the presence of government intervention. 
A)  is important that the firm be very large. 
B)  is important that the firm prices its product below cost. 
C)  is not the absolute size of the firm but its size relative to the total market demand that is important. 
D)  must be in the presence of government intervention.

Question 15

Figure 11-2
  
-In Figure 11-2, at what quantity would the monopolist maximize profit?

Accepted Answer

A)  E 
B)  F 
C)  G 
D)  H 
A)  E 
B)  F 
C)  G 
D)  H

Question 16

A monopolist sets price at $10 and sells 100 units.The corresponding marginal revenue is $5 and marginal cost $3.What recommendation regarding price and quantity would you give this monopolist? Use a graph if you wish.

Accepted Answer

Since MR exceeds MC, recommend

Question 17

A patent

Accepted Answer

A)  is given only to government owned companies. 
B)  is not a legal impediment to entry. 
C)  is a privilege granted by a state to an inventor over his invention. 
D)  does not give the holder a monopoly during the period it is in effect. 
A)  is given only to government owned companies. 
B)  is not a legal impediment to entry. 
C)  is a privilege granted by a state to an inventor over his invention. 
D)  does not give the holder a monopoly during the period it is in effect.

Question 18

A monopoly restricts output and charges a higher price than other types of firms.

Accepted Answer

A) True 
 B)False

Question 19

Figure 11-1
  
-The Red Cross is virtually the only operator of blood banks in the United States.In Figure 11-1 are the demand and supply curves facing the Red Cross blood bank.If it were to operate like a profit-maximizing business, how many units of blood would it sell?

Accepted Answer

A)  OA 
B)  OB 
C)  OC 
D)  OD 
A)  OA 
B)  OB 
C)  OC 
D)  OD

Question 20

What are the reasons for preferring competition to monopoly?

Accepted Answer

Monopolists sell at too high a price and

Exam 11: Monopoly

In the long run under monopoly,

At his current level of output, a monopolist has an MR of $10, an MC of $6, and an economic profit of zero.If the market demand curve is downward sloping and his marginal cost curve upward sloping, the monopolist

A natural monopoly is one that deliberately erects entry barriers.

A monopolist maximizes profit by producing the quantity at which MC = MR, just like a perfect competitor.

Economists consider price discrimination to always be undesirable.

Perfect Competition is an industry in which there is only one supplier of a product that has no close substitutes.

Pure monopoly is defined as a

A pure monopoly is defined as having only one seller.

Monopolists may in the long run

Figure 11-6 -The industry described in Figure 11-6

Figure 11-5 -In Figure 11-5 are the cost and revenue curves of a monopolist in the theater market, Crown Theater, which is the only movie theater in the city.At its profit-maximizing quantity of tickets sold, movie goers will buy ____ tickets.

Monopoly as a market structure leads to

Technical superiority can be a source of entry barriers.

In order for a natural monopoly to develop, it

Figure 11-2 -In Figure 11-2, at what quantity would the monopolist maximize profit?

A monopolist sets price at $10 and sells 100 units.The corresponding marginal revenue is $5 and marginal cost $3.What recommendation regarding price and quantity would you give this monopolist? Use a graph if you wish.

A patent

A monopoly restricts output and charges a higher price than other types of firms.

Figure 11-1 -The Red Cross is virtually the only operator of blood banks in the United States.In Figure 11-1 are the demand and supply curves facing the Red Cross blood bank.If it were to operate like a profit-maximizing business, how many units of blood would it sell?

What are the reasons for preferring competition to monopoly?

What Is Economics?

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: An Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: The Importance of Marginal Analysis

Securities: Business Finance, and the Economy: The Tail that Wags the Dog?

The Firm and the Industry under Perfect Competition

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets I: The Price System

The Shortcomings of Free Markets

The Market's Prime Achievement: Innovation and Growth

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: The Human Inputs

Poverty, Inequality, and Discrimination

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation?

Bringing in the Supply Side: Unemployment and Inflation?

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

The Financial Crisis and the Great Recession

The Debate over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder?

Exchange Rates and the Macroeconomy

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