Question 1

Compared to perfect competition, monopoly

Accepted Answer

A) provides less output. 
B) charges a higher price. 
C) results in higher cost (inefficient) production. 
D) All of these responses are correct. 
A) provides less output. 
B) charges a higher price. 
C) results in higher cost (inefficient) production. 
D) All of these responses are correct.

Question 2

Economists object to monopoly because

Accepted Answer

A) monopoly profits go to the rich. 
B) monopolies overproduce to maximize profits. 
C) monopolies are usually polluters. 
D) monopolists keep output below efficient levels. 
A) monopoly profits go to the rich. 
B) monopolies overproduce to maximize profits. 
C) monopolies are usually polluters. 
D) monopolists keep output below efficient levels.

Question 3

When theaters charge lower prices for matinee showing, it is not price discrimination, since it is more expensive to operate a theater during the day, as compared to the evening hours.

Accepted Answer

A) True 
 B)False

Question 4

Figure 11-9  
-In Figure 11-9, at the profit-maximizing monopolist output, this firm receives how much profit per unit?

Accepted Answer

A) $1 
B) $2 
C) $3 
D) $11 
A) $1 
B) $2 
C) $3 
D) $11

Question 5

Figure 11-6  
-At its optimal output level, the profit-maximizing monopolist in Figure 11-6 has total costs equal to

Accepted Answer

A) zero. 
B) P2 × Q2. 
C) P3 × Q2. 
D) P4 × Q3. 
A) zero. 
B) P2 × Q2. 
C) P3 × Q2. 
D) P4 × Q3.

Question 6

A monopolist that is making a profit is producing where which of the following occurs?

Accepted Answer

A) P = MC. 
B) P = AC. 
C) MC = AC. 
D) P > AC. 
A) P = MC. 
B) P = AC. 
C) MC = AC. 
D) P > AC.

Question 7

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 8

Figure 11-9  
-In Figure 11-9, how much more than the short-run competitive price will the profit-maximizing monopolist charge?

Accepted Answer

A) $1 
B) $2 
C) $3 
D) $10 
A) $1 
B) $2 
C) $3 
D) $10

Question 9

Figure 11-6  
-The profit-maximizing monopolist in Figure 11-6 will sell its output at

Accepted Answer

A) P1. 
B) P2. 
C) P3. 
D) P4. 
A) P1. 
B) P2. 
C) P3. 
D) P4.

Question 10

Explain why marginal revenue is less than price for a monopolist.

Accepted Answer

To sell additional units, a monopoly mus

Question 11

Figure 11-8  
-Consider the average cost curve shown in Figure 11-8, for the production of cleaning.If the firm serves the entire market and sells Q1 units.Based upon this information, the firm is experiencing

Accepted Answer

A) constant returns to scale . 
B) increasing returns to scale. 
C) decreasing returns to scale. 
D) externalities. 
A) constant returns to scale . 
B) increasing returns to scale. 
C) decreasing returns to scale. 
D) externalities.

Question 12

Figure 11-8  
-Given the average cost curve shown in Figure 11-8 for dry cleaning, where Q1 is the quantity demanded in a small town, and Q2 for a larger town, you would expect dry cleaning to be a monopoly

Accepted Answer

A) in a small town, but not a large one. 
B) in both large and small towns. 
C) in a large town, but not a small one. 
D) only if the process is patented. 
A) in a small town, but not a large one. 
B) in both large and small towns. 
C) in a large town, but not a small one. 
D) only if the process is patented.

Question 13

Figure 11-9  
-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.

Question 14

A profit-maximizing monopolist will stop production while MR is still greater than MC.

Accepted Answer

A) True 
 B)False

Question 15

Figure 11-3  
-In Figure 11-3, one can tell from the graph that the monopolist will earn a positive profit only if

Accepted Answer

A) the price exceeds $3. 
B) the price exceeds $2. 
C) output is less than 60 units. 
D) One cannot tell from the information given. 
A) the price exceeds $3. 
B) the price exceeds $2. 
C) output is less than 60 units. 
D) One cannot tell from the information given.

Question 16

A monopolist faces a horizontal demand schedule.

Accepted Answer

A) True 
 B)False

Question 17

A monopolist will maximize profits by producing a quantity specified by setting marginal revenue equal to marginal cost.

Accepted Answer

A) True 
 B)False

Question 18

Figure 11-5  
-In which of the following ways is a monopolist different from a perfect competitor?

Accepted Answer

A) Average cost will continually drop as output expands. 
B) Price is above marginal revenue. 
C) Average total cost equals average fixed costs plus average variable costs. 
D) The demand curve for the industry has a negative slope. 
A) Average cost will continually drop as output expands. 
B) Price is above marginal revenue. 
C) Average total cost equals average fixed costs plus average variable costs. 
D) The demand curve for the industry has a negative slope.

Question 19

Technical superiority can be a source of entry barriers.

Accepted Answer

A) True 
 B)False

Question 20

Figure 11-1  
-Is the monopolist supply decision more complicated than that of competitive supply?

Accepted Answer

A) Yes, because the monopolist can choose its price, and the perfect competitor cannot. 
B) No, because they are both price takers. 
C) No, because the market determines the quantity for the monopolist. 
D) No, because the market determines the price for both firms. 
A) Yes, because the monopolist can choose its price, and the perfect competitor cannot. 
B) No, because they are both price takers. 
C) No, because the market determines the quantity for the monopolist. 
D) No, because the market determines the price for both firms.

Exam 12: Monopoly

Compared to perfect competition, monopoly

Economists object to monopoly because

When theaters charge lower prices for matinee showing, it is not price discrimination, since it is more expensive to operate a theater during the day, as compared to the evening hours.

Figure 11-9 -In Figure 11-9, at the profit-maximizing monopolist output, this firm receives how much profit per unit?

Figure 11-6 -At its optimal output level, the profit-maximizing monopolist in Figure 11-6 has total costs equal to

A monopolist that is making a profit is producing where which of the following occurs?

Firms that engage in price discrimination

Figure 11-9 -In Figure 11-9, how much more than the short-run competitive price will the profit-maximizing monopolist charge?

Figure 11-6 -The profit-maximizing monopolist in Figure 11-6 will sell its output at

Explain why marginal revenue is less than price for a monopolist.

Figure 11-8 -Consider the average cost curve shown in Figure 11-8, for the production of cleaning.If the firm serves the entire market and sells Q1 units.Based upon this information, the firm is experiencing

Figure 11-8 -Given the average cost curve shown in Figure 11-8 for dry cleaning, where Q1 is the quantity demanded in a small town, and Q2 for a larger town, you would expect dry cleaning to be a monopoly

Figure 11-9 -What is true for monopoly that is not true for perfect competition?

A profit-maximizing monopolist will stop production while MR is still greater than MC.

Figure 11-3 -In Figure 11-3, one can tell from the graph that the monopolist will earn a positive profit only if

A monopolist faces a horizontal demand schedule.

A monopolist will maximize profits by producing a quantity specified by setting marginal revenue equal to marginal cost.

Figure 11-5 -In which of the following ways is a monopolist different from a perfect competitor?

Technical superiority can be a source of entry barriers.

Figure 11-1 -Is the monopolist supply decision more complicated than that of competitive supply?

What Is Economics

The Economony: 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

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Between Competition and Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

The Economics of 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

Contemporary Issues in the Useconomy

Filters

Figure 11-8 -Consider the average cost curve shown in Figure 11-8, for the production of cleaning.If the firm serves the entire market and sells Q₁ units.Based upon this information, the firm is experiencing

Figure 11-8 -Given the average cost curve shown in Figure 11-8 for dry cleaning, where Q₁ is the quantity demanded in a small town, and Q₂ for a larger town, you would expect dry cleaning to be a monopoly