Question 1

Adam Smith believed that monopoly is the most efficient market structure.

Accepted Answer

A) True 
 B)False

Question 2

Why does perfect competition shun advertising? Does advertising benefit a monopoly?

Accepted Answer

In perfect competition, advertising expe

Question 3

Providing medical services for smaller fees to the poor than to the rich is

Accepted Answer

A)  misplaced charity. 
B)  benevolent pricing. 
C)  price discrimination. 
D)  social pricing. 
A)  misplaced charity. 
B)  benevolent pricing. 
C)  price discrimination. 
D)  social pricing.

Question 4

A monopolist is a price taker, just like a perfect competitor.

Accepted Answer

A) True 
 B)False

Question 5

A market structure in which only one firm has survived because of its economies of scale is called a

Accepted Answer

A)  natural monopoly. 
B)  planned monopoly. 
C)  structural monopoly. 
D)  free monopoly. 
A)  natural monopoly. 
B)  planned monopoly. 
C)  structural monopoly. 
D)  free monopoly.

Question 6

The existence of a natural monopoly stems from the size of the firm relative to the total market demand for the product of that firm.

Accepted Answer

A) True 
 B)False

Question 7

A monopolist maximizes profits by producing where which of the following occur?

Accepted Answer

A)  MC = P 
B)  AC = P 
C)  MC = MR 
D)  AC = AR 
A)  MC = P 
B)  AC = P 
C)  MC = MR 
D)  AC = AR

Question 8

A monopolist can sell 10 wangdoodles if he charges $10 per wangdoodle and 11 wangdoodles if he charges $9.The MR from selling the 11th wangdoodle is

Accepted Answer

A)  -$1. 
B)  $1. 
C)  $9. 
D)  $99. 
A)  -$1. 
B)  $1. 
C)  $9. 
D)  $99.

Question 9

How does the monopolist calculate profit per unit, and total profit?

Accepted Answer

A monopolist computes profit per unit by

Question 10

A monopoly firm always devotes some of its profits to research.

Accepted Answer

A) True 
 B)False

Question 11

Which of these contributes to the existence of monopoly power?

Accepted Answer

A)  a continuously decreasing long-run average cost curve 
B)  possession of a patent 
C)  control over essential output 
D)  All of the above are correct. 
A)  a continuously decreasing long-run average cost curve 
B)  possession of a patent 
C)  control over essential output 
D)  All of the above are correct.

Question 12

A monopolist's cost curves may shift down because

Accepted Answer

A)  large-scale input purchases may permit the monopolist to take quantity discounts. 
B)  of advertising expenditure. 
C)  competitors are pushed out of the market. 
D)  of bureaucratic inefficiencies. 
A)  large-scale input purchases may permit the monopolist to take quantity discounts. 
B)  of advertising expenditure. 
C)  competitors are pushed out of the market. 
D)  of bureaucratic inefficiencies.

Question 13

Figure 11-4
  
-Physicians have two types of patients: private patients who pay directly or with insurance, and Medicaid patients whose care is paid for by the state.Physicians must lower prices to attract more private patients, but they can add unlimited Medicaid patients at a constant price.The situation facing Dr.Casey is depicted in Figure 11-4.Units of medical service (say, number of patients × number of visits) are measured on the horizontal axis.How many units of medical service will Dr.Casey deliver?

Accepted Answer

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

Question 14

In perfect competition, one result of the model was that there were no economic profits in the long run.In a monopoly, the firm typically earns a positive economic profit.Why is there this difference?

Accepted Answer

The monopolist enjoys economic profit be

Question 15

Under what conditions might a monopoly be more efficient than a perfectly competitive firm?

Accepted Answer

When there is a natural monopoly, one fi

Question 16

Since a monopolist firm will lose some customers when the price is increased, it will make every effort to keep the price as low as possible.

Accepted Answer

A) True 
 B)False

Question 17

Firms that engage in price discrimination

Accepted Answer

A)  will earn less profit than those that do not discriminate. 
B)  will earn more profit than those that do not discriminate. 
C)  are biased against certain buyers in the market. 
D)  will always produce less output than firms that do not discriminate. 
A)  will earn less profit than those that do not discriminate. 
B)  will earn more profit than those that do not discriminate. 
C)  are biased against certain buyers in the market. 
D)  will always produce less output than firms that do not discriminate.

Question 18

A monopolist is best described as a price

Accepted Answer

A)  taker. 
B)  searcher. 
C)  maker. 
D)  follower. 
A)  taker. 
B)  searcher. 
C)  maker. 
D)  follower.

Question 19

An increase in fixed cost will, in the short run, alter the industry's output of

Accepted Answer

A)  both a monopolist and a competitive industry. 
B)  only a monopolist. 
C)  only a competitive industry. 
D)  neither a monopolist nor a competitive industry. 
A)  both a monopolist and a competitive industry. 
B)  only a monopolist. 
C)  only a competitive industry. 
D)  neither a monopolist nor a competitive industry.

Question 20

What is true for monopoly that is not true for perfect competition?

Accepted Answer

A)  The industry demand curve is downward sloping. 
B)  Profit is maximized where MR = MC. 
C)  The firm and the industry are exactly the same entity. 
D)  Positive economic profits may be earned in the short run. 
A)  The industry demand curve is downward sloping. 
B)  Profit is maximized where MR = MC. 
C)  The firm and the industry are exactly the same entity. 
D)  Positive economic profits may be earned in the short run.

Exam 11: Monopoly

Adam Smith believed that monopoly is the most efficient market structure.

Why does perfect competition shun advertising? Does advertising benefit a monopoly?

Providing medical services for smaller fees to the poor than to the rich is

A monopolist is a price taker, just like a perfect competitor.

A market structure in which only one firm has survived because of its economies of scale is called a

The existence of a natural monopoly stems from the size of the firm relative to the total market demand for the product of that firm.

A monopolist maximizes profits by producing where which of the following occur?

A monopolist can sell 10 wangdoodles if he charges $10 per wangdoodle and 11 wangdoodles if he charges $9.The MR from selling the 11th wangdoodle is

How does the monopolist calculate profit per unit, and total profit?

A monopoly firm always devotes some of its profits to research.

Which of these contributes to the existence of monopoly power?

A monopolist's cost curves may shift down because

In perfect competition, one result of the model was that there were no economic profits in the long run.In a monopoly, the firm typically earns a positive economic profit.Why is there this difference?

Under what conditions might a monopoly be more efficient than a perfectly competitive firm?

Since a monopolist firm will lose some customers when the price is increased, it will make every effort to keep the price as low as possible.

Firms that engage in price discrimination

A monopolist is best described as a price

An increase in fixed cost will, in the short run, alter the industry's output of

What is true for monopoly that is not true for perfect competition?

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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