Question 1

To maximize profit, the monopolist produces on the ________ portion of its demand where ________.

Accepted Answer

A)  elastic; P = MC 
B)  elastic; MR = MC 
C)  inelastic; P = MC 
D)  inelastic; MR = MC 
A)  elastic; P = MC 
B)  elastic; MR = MC 
C)  inelastic; P = MC 
D)  inelastic; MR = MC

Question 2

-The figure above provides information about Light-U-Up Utilities, which is a natural monopoly that provides electricity. If Light-U-Up is regulated, what is its economic profit if it must follow an average cost pricing rule?

Accepted Answer

A)  -$60 
B)  -$20 
C)  $0 
D)  $30 
A)  -$60 
B)  -$20 
C)  $0 
D)  $30

Question 3

-The figure above shows a monopoly's total revenue and total cost curves. The monopoly's economic profit is maximized when it produces

Accepted Answer

A)  0 units of output. 
B)  5 units of output. 
C)  15 units of output. 
D)  20 units of output. 
A)  0 units of output. 
B)  5 units of output. 
C)  15 units of output. 
D)  20 units of output.

Question 4

"A single-price natural monopoly that is regulated to set price equal to marginal cost incurs an economic loss." True or false? Explain.

Accepted Answer

The statement is true. A natural monopol

Question 5

-Sue's Surfboards is the sole renter of surfboards on Big Wave Island. Sue's demand and marginal revenue curves are illustrated in the figure above. The change in the total revenue from renting the 15th surfboard is

Accepted Answer

A)  $20. 
B)  $15. 
C)  $10. 
D)  $0. 
A)  $20. 
B)  $15. 
C)  $10. 
D)  $0.

Question 6

"A single-price monopolist charges a higher price and produces more output than a perfectly competitive industry." Is the previous statement correct or incorrect? Explain your answer.

Accepted Answer

The statement is partially correct becau

Question 7

An efficient use of resources occurs when

Accepted Answer

A)  there is a deadweight loss. 
B)  the total social benefit of a good equals its total social cost. 
C)  there is perfect price discrimination by a monopoly. 
D)  there is no producer surplus. 
A)  there is a deadweight loss. 
B)  the total social benefit of a good equals its total social cost. 
C)  there is perfect price discrimination by a monopoly. 
D)  there is no producer surplus.

Question 8

"Compared to a competitive market, a single-price monopoly decreases the consumer surplus and increases the economic profit." Is the previous statement correct or incorrect? Explain your answer.

Accepted Answer

The statement is correct. A si

Question 9

West Coast Gas, Inc., is a natural gas supplier. The firm faces the demand schedule shown in the table above and cannot price discriminate. The company's fixed cost is $1,000 per month and its marginal cost is constant at $10 per thousand of cubic feet. The government imposes a marginal cost pricing rule on the company.
a) What is the price of natural gas supplied by West Coast Gas? How many cubic feet does the company sell? What is the firm's economic profit per month?
b) How does the regulation affect total surplus?
c) Is the regulation in the social interest? Explain.

Accepted Answer

a) Marginal cost pricing regulation sets

Question 10

-For the monopoly shown in the figure above, when it maximizes its profit the marginal cost is ________ per unit and the price is ________ per unit.

Accepted Answer

A)  $10; $30 
B)  $20; $20 
C)  $10; $20 
D)  $30; $20. 
A)  $10; $30 
B)  $20; $20 
C)  $10; $20 
D)  $30; $20.

Question 11

Rent seeking

Accepted Answer

A)  is an additional social cost of monopoly. 
B)  is only a problem in the commercial real estate market. 
C)  helps employ resources that would otherwise be unemployed. 
D)  is beneficial to society. 
A)  is an additional social cost of monopoly. 
B)  is only a problem in the commercial real estate market. 
C)  helps employ resources that would otherwise be unemployed. 
D)  is beneficial to society.

Question 12

-In the above figure, if the market was a single-price monopoly rather than perfectly competitive, which area shows the transfer of consumer surplus from consumers to producers?

Accepted Answer

A)  A + B 
B)  C + D 
C)  C + D + E 
D)  E + H 
A)  A + B 
B)  C + D 
C)  C + D + E 
D)  E + H

Question 13

-The firm shown in the figure above is

Accepted Answer

A)  a natural monopoly because its LRAC curve slopes downward where it intersects the demand curve. 
B)  not a natural monopoly because its LRAC curve slopes downward where it intersects the demand curve. 
C)  not a natural monopoly because its MC curve is horizontal. 
D)  not a natural monopoly because its MC curve is below its LRAC curve. 
A)  a natural monopoly because its LRAC curve slopes downward where it intersects the demand curve. 
B)  not a natural monopoly because its LRAC curve slopes downward where it intersects the demand curve. 
C)  not a natural monopoly because its MC curve is horizontal. 
D)  not a natural monopoly because its MC curve is below its LRAC curve.

Question 14

In July 2008, the Federal Communications Commission approved the merger of satellite radio providers XM Satellite and Sirius Satellite Radio, establishing a single satellite radio company in America. What do you predict will happen to efficiency in the market for satellite radio?

Accepted Answer

A)  Deadweight loss will increase when an industry moves from competition to monopoly. 
B)  Consumer surplus will increase when an industry moves from competition to monopoly. 
C)  Producer surplus will decrease when an industry moves from competition to monopoly. 
D)  Total surplus will increase when an industry moves from competition to monopoly. 
A)  Deadweight loss will increase when an industry moves from competition to monopoly. 
B)  Consumer surplus will increase when an industry moves from competition to monopoly. 
C)  Producer surplus will decrease when an industry moves from competition to monopoly. 
D)  Total surplus will increase when an industry moves from competition to monopoly.

Question 15

-Adele's Springs produces a unique mineral water. The firm faces the demand schedule shown in the first table above and has the cost schedule shown in the second table above.
a) Calculate Adele's marginal revenue schedule. In a figure, draw the demand curve and the marginal revenue curve.
b) Calculate Adele's marginal cost and average total cost schedules. In the same figure that you drew the demand and marginal revenue curves, draw the marginal and the average total cost curves.
c) What are Adele's profit-maximizing output and price? What is Adele's economic profit? Explain your answer.
d) Does Adele's Springs use resources efficiently? Explain your answer.

Accepted Answer

@#IMG-DLM& a) Adele's marginal revenue schedule is

Question 16

-The table above gives the demand for a monopolist's output. What is the marginal revenue when output is increased from 2 to 3 units?

Accepted Answer

A)  $18 
B)  $4 
C)  $7 
D)  $6 
A)  $18 
B)  $4 
C)  $7 
D)  $6

Question 17

A single-price monopolist will maximize profit by producing so that marginal revenue

Accepted Answer

A)  exceeds marginal cost. 
B)  is less than marginal cost. 
C)  equals marginal cost. 
D)  equals price. 
A)  exceeds marginal cost. 
B)  is less than marginal cost. 
C)  equals marginal cost. 
D)  equals price.

Question 18

Suppose a new vaccine for Lyme disease is developed by Merck, a large drug company. Which of the following is most likely to occur?

Accepted Answer

A)  Merck will apply for a patent on the vaccine that grants it the monopoly rights to the vaccine for many years. 
B)  Merck will have a monopoly on this vaccine because of economies of scale. 
C)  Other firms will quickly copy the formula making the market for the vaccine competitive. 
D)  Merck will not tell anyone about its discovery though it will sell the vaccine. 
A)  Merck will apply for a patent on the vaccine that grants it the monopoly rights to the vaccine for many years. 
B)  Merck will have a monopoly on this vaccine because of economies of scale. 
C)  Other firms will quickly copy the formula making the market for the vaccine competitive. 
D)  Merck will not tell anyone about its discovery though it will sell the vaccine.

Question 19

Sue's Surfboards is the sole renter of surfboards on Big Wave Island. Sue does not price discriminate. For Sue's Surfboards, the change in total revenue from each additional surfboard rented is her

Accepted Answer

A)  marginal revenue and is equal to the rental price of a surfboard. 
B)  marginal cost and is greater than the rental price of a surfboard. 
C)  marginal revenue and is less than the rental price of a surfboard. 
D)  marginal cost and is constant regardless of how many surfboards are rented. 
A)  marginal revenue and is equal to the rental price of a surfboard. 
B)  marginal cost and is greater than the rental price of a surfboard. 
C)  marginal revenue and is less than the rental price of a surfboard. 
D)  marginal cost and is constant regardless of how many surfboards are rented.

Question 20

If a monopoly is producing an amount of output level at which marginal revenue exceeds marginal cost, in order to increase its profit the monopoly will ________ its price and ________ its output.

Accepted Answer

A)  raise; decrease 
B)  lower; increase 
C)  lower; decrease 
D)  raise; increase 
A)  raise; decrease 
B)  lower; increase 
C)  lower; decrease 
D)  raise; increase

To maximize profit, the monopolist produces on the portion of its demand where .

-The figure above provides information about Light-U-Up Utilities, which is a natural monopoly that provides electricity. If Light-U-Up is regulated, what is its economic profit if it must follow an average cost pricing rule?

-The figure above shows a monopoly's total revenue and total cost curves. The monopoly's economic profit is maximized when it produces

"A single-price natural monopoly that is regulated to set price equal to marginal cost incurs an economic loss." True or false? Explain.

-Sue's Surfboards is the sole renter of surfboards on Big Wave Island. Sue's demand and marginal revenue curves are illustrated in the figure above. The change in the total revenue from renting the 15th surfboard is

"A single-price monopolist charges a higher price and produces more output than a perfectly competitive industry." Is the previous statement correct or incorrect? Explain your answer.

An efficient use of resources occurs when

"Compared to a competitive market, a single-price monopoly decreases the consumer surplus and increases the economic profit." Is the previous statement correct or incorrect? Explain your answer.

-For the monopoly shown in the figure above, when it maximizes its profit the marginal cost is per unit and the price is per unit.

Rent seeking

-In the above figure, if the market was a single-price monopoly rather than perfectly competitive, which area shows the transfer of consumer surplus from consumers to producers?

-The firm shown in the figure above is

In July 2008, the Federal Communications Commission approved the merger of satellite radio providers XM Satellite and Sirius Satellite Radio, establishing a single satellite radio company in America. What do you predict will happen to efficiency in the market for satellite radio?

-The table above gives the demand for a monopolist's output. What is the marginal revenue when output is increased from 2 to 3 units?

A single-price monopolist will maximize profit by producing so that marginal revenue

Suppose a new vaccine for Lyme disease is developed by Merck, a large drug company. Which of the following is most likely to occur?

Sue's Surfboards is the sole renter of surfboards on Big Wave Island. Sue does not price discriminate. For Sue's Surfboards, the change in total revenue from each additional surfboard rented is her

If a monopoly is producing an amount of output level at which marginal revenue exceeds marginal cost, in order to increase its profit the monopoly will its price and its output.

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Organizing Production

Output and Costs

Perfect Competition

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

Exam 13: Monopoly

To maximize profit, the monopolist produces on the ________ portion of its demand where ________.

-The figure above provides information about Light-U-Up Utilities, which is a natural monopoly that provides electricity. If Light-U-Up is regulated, what is its economic profit if it must follow an average cost pricing rule?

-The figure above shows a monopoly's total revenue and total cost curves. The monopoly's economic profit is maximized when it produces

"A single-price natural monopoly that is regulated to set price equal to marginal cost incurs an economic loss." True or false? Explain.

-Sue's Surfboards is the sole renter of surfboards on Big Wave Island. Sue's demand and marginal revenue curves are illustrated in the figure above. The change in the total revenue from renting the 15th surfboard is

"A single-price monopolist charges a higher price and produces more output than a perfectly competitive industry." Is the previous statement correct or incorrect? Explain your answer.

An efficient use of resources occurs when

"Compared to a competitive market, a single-price monopoly decreases the consumer surplus and increases the economic profit." Is the previous statement correct or incorrect? Explain your answer.

-For the monopoly shown in the figure above, when it maximizes its profit the marginal cost is ________ per unit and the price is ________ per unit.

Rent seeking

-In the above figure, if the market was a single-price monopoly rather than perfectly competitive, which area shows the transfer of consumer surplus from consumers to producers?

-The firm shown in the figure above is

In July 2008, the Federal Communications Commission approved the merger of satellite radio providers XM Satellite and Sirius Satellite Radio, establishing a single satellite radio company in America. What do you predict will happen to efficiency in the market for satellite radio?

-The table above gives the demand for a monopolist's output. What is the marginal revenue when output is increased from 2 to 3 units?

A single-price monopolist will maximize profit by producing so that marginal revenue

Suppose a new vaccine for Lyme disease is developed by Merck, a large drug company. Which of the following is most likely to occur?

Sue's Surfboards is the sole renter of surfboards on Big Wave Island. Sue does not price discriminate. For Sue's Surfboards, the change in total revenue from each additional surfboard rented is her

If a monopoly is producing an amount of output level at which marginal revenue exceeds marginal cost, in order to increase its profit the monopoly will ________ its price and ________ its output.

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Organizing Production

Output and Costs

Perfect Competition

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

To maximize profit, the monopolist produces on the portion of its demand where .

-For the monopoly shown in the figure above, when it maximizes its profit the marginal cost is per unit and the price is per unit.

If a monopoly is producing an amount of output level at which marginal revenue exceeds marginal cost, in order to increase its profit the monopoly will its price and its output.