Question 1

Which of the following statements about a firm's market pricing of its product is true?

Accepted Answer

A) a competitive firm is a price taker and a monopoly is a price maker 
B) a competitive firm is a price maker and a monopoly is a price taker 
C) both competitive firms and monopolies are price makers 
D) both competitive firms and monopolies are price takers 
A) a competitive firm is a price taker and a monopoly is a price maker 
B) a competitive firm is a price maker and a monopoly is a price taker 
C) both competitive firms and monopolies are price makers 
D) both competitive firms and monopolies are price takers A

Question 2

A monopoly firm is able to charge a price that is higher than their marginal revenue.

Accepted Answer

A) True 
 B)False  True

Question 3

The most important feature of a natural monopoly is:

Accepted Answer

A) constant returns to scale over the relevant range of output 
B) it exploits a natural resource 
C) diseconomies of scale over the relevant range of output 
D) economies of scale over the relevant range of output 
A) constant returns to scale over the relevant range of output 
B) it exploits a natural resource 
C) diseconomies of scale over the relevant range of output 
D) economies of scale over the relevant range of output D

Question 4

When the government creates a monopoly, the social loss may include:

Accepted Answer

A) high monopoly profits 
B) falling marginal cost 
C) the cost of lawyers and lobbyists to convince lawmakers to continue its monopoly 
D) all of the above 
A) high monopoly profits 
B) falling marginal cost 
C) the cost of lawyers and lobbyists to convince lawmakers to continue its monopoly 
D) all of the above

Question 5

Consider the following graph of a monopoly.   
Use the graph to identify the marginal-revenue curve, the average-revenue curve, the average-total-cost curve and the marginal-cost curve.Then identify the price a profit-maximising monopolist would charge and the output it would produce.

Accepted Answer

Curve A is the average revenue or demand

Question 6

A government created monopoly arises when:

Accepted Answer

A) government spending in a certain industry gives rise to monopoly power 
B) the government gives a firm the exclusive right to sell some good or service 
C) the government exercises its market control by encouraging competition among sellers 
D) all of the above could qualify as government created monopolies 
A) government spending in a certain industry gives rise to monopoly power 
B) the government gives a firm the exclusive right to sell some good or service 
C) the government exercises its market control by encouraging competition among sellers 
D) all of the above could qualify as government created monopolies

Question 7

Monopoly firms can employ their market power to charge a price that is:

Accepted Answer

A) above marginal cost 
B) equal to marginal cost 
C) above average revenue 
D) too high for most consumers to afford 
A) above marginal cost 
B) equal to marginal cost 
C) above average revenue 
D) too high for most consumers to afford

Question 8

The monopolist's demand curve slopes downwards whenever marginal costs are increasing.

Accepted Answer

A) True 
 B)False

Question 9

Suppose monopoly firm has exclusive ownership of a key resource, this results in:

Accepted Answer

A) high standards of service for customers 
B) a price that reflects the best interests of society 
C) a price that equals marginal cost of production 
D) a price that exceeds marginal cost of production 
A) high standards of service for customers 
B) a price that reflects the best interests of society 
C) a price that equals marginal cost of production 
D) a price that exceeds marginal cost of production

Question 10

A monopoly is likely to occur if it is the incumbent firm and there are significant barriers to entry.

Accepted Answer

A) True 
 B)False

Question 11

A profit-maximising monopolist chooses the output level where marginal revenue equals marginal cost and chooses the corresponding price off the market demand curve.

Accepted Answer

A) True 
 B)False

Question 12

When a natural monopoly exists, it is never more cost-effective for two or more private firms to produce the product.

Accepted Answer

A) True 
 B)False

Question 13

If a firm is in a competitive market, it is not able to price discriminate.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following curves can plausibly go negative?

Accepted Answer

A) marginal revenue 
B) marginal cost 
C) average variable cost 
D) quantity supplied 
A) marginal revenue 
B) marginal cost 
C) average variable cost 
D) quantity supplied

Question 15

Price discrimination explains why high-ranking universities often set rules that determine prices of admission based on the students:

Accepted Answer

A) final high-school exam results 
B) sex 
C) age 
D) financial resources 
A) final high-school exam results 
B) sex 
C) age 
D) financial resources

Question 16

When a firm operates under conditions of a monopoly, its price is unconstrained.

Accepted Answer

A) True 
 B)False

Question 17

When deciding what price to charge consumers, the monopolist may choose to charge them different prices based on:

Accepted Answer

A) the customers' geographical location 
B) the customers' age 
C) the customers' income 
D) all of the above 
A) the customers' geographical location 
B) the customers' age 
C) the customers' income 
D) all of the above

Question 18

The De Beers Diamond company is not worried about differentiating their product from all the other gemstones.

Accepted Answer

A) True 
 B)False

Question 19

Using the above information, what is the dead-weight loss of monopoly if the publisher can price-discriminate?

Accepted Answer

A) $0 
B) $80 000 
C) $120 000 
D) $200 000 
A) $0 
B) $80 000 
C) $120 000 
D) $200 000

Question 20

Which of the following is an impossible feat for a monopolist to accomplish?

Accepted Answer

A) control of the price of its good 
B) maximisation of its profit 
C) operation at any point on the demand curve 
D) charging a higher price and continuing to sell the same quantity 
A) control of the price of its good 
B) maximisation of its profit 
C) operation at any point on the demand curve 
D) charging a higher price and continuing to sell the same quantity

Exam 15: Monopoly

Which of the following statements about a firm's market pricing of its product is true?

A monopoly firm is able to charge a price that is higher than their marginal revenue.

The most important feature of a natural monopoly is:

When the government creates a monopoly, the social loss may include:

Consider the following graph of a monopoly. Use the graph to identify the marginal-revenue curve, the average-revenue curve, the average-total-cost curve and the marginal-cost curve.Then identify the price a profit-maximising monopolist would charge and the output it would produce.

A government created monopoly arises when:

Monopoly firms can employ their market power to charge a price that is:

The monopolist's demand curve slopes downwards whenever marginal costs are increasing.

Suppose monopoly firm has exclusive ownership of a key resource, this results in:

A monopoly is likely to occur if it is the incumbent firm and there are significant barriers to entry.

A profit-maximising monopolist chooses the output level where marginal revenue equals marginal cost and chooses the corresponding price off the market demand curve.

When a natural monopoly exists, it is never more cost-effective for two or more private firms to produce the product.

If a firm is in a competitive market, it is not able to price discriminate.

Which of the following curves can plausibly go negative?

Price discrimination explains why high-ranking universities often set rules that determine prices of admission based on the students:

When a firm operates under conditions of a monopoly, its price is unconstrained.

When deciding what price to charge consumers, the monopolist may choose to charge them different prices based on:

The De Beers Diamond company is not worried about differentiating their product from all the other gemstones.

Using the above information, what is the dead-weight loss of monopoly if the publisher can price-discriminate?

Which of the following is an impossible feat for a monopolist to accomplish?

Ten Lessons From Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand and Government Policies

Consumers, Producers and the Efficiency of Markets

Application: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopolistic Competition

Business Strategy and Oligopoly

Competition Policy

The Markets for the Factors of Production

Earnings, Unions and Discrimination

Income Inequity and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment and the Financial System

The Natural Rate of Unemployment

The Monetary System

Inflation: Its Causes and Costs

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Global Financial Crisis of 2008 and Beyond

Five Debates Over Macroeconomic Policy

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