Question 1

Given that monopoly firms do not have to compete with other firms, the outcome in a monopoly market is best described as:

Accepted Answer

A) not in the best interest of society 
B) where excessive pollution occurs 
C) efficient, but not equitable 
D) all of the above 
A) not in the best interest of society 
B) where excessive pollution occurs 
C) efficient, but not equitable 
D) all of the above

Question 2

Refer to the information provided.Jack, the sole owner of all the wells in town, decides to move to a more suitable climate, so he sells the wells to a couple of dozen different town residents.Which of the following is likely to occur?

Accepted Answer

A) the price of water is likely to fall 
B) the individual water sellers will not have as much pricing power as Jack had 
C) the town residents will likely be better off 
D) all of the above will occur 
A) the price of water is likely to fall 
B) the individual water sellers will not have as much pricing power as Jack had 
C) the town residents will likely be better off 
D) all of the above will occur

Question 3

For a monopolist, when does marginal revenue equal demand?

Accepted Answer

A) when output is less than profit-maximising output 
B) when output is greater than profit-maximising output 
C) when there is a zero output 
D) marginal revenue is never equal to demand 
A) when output is less than profit-maximising output 
B) when output is greater than profit-maximising output 
C) when there is a zero output 
D) marginal revenue is never equal to demand

Question 4

According to the information provided, suppose only one resident owns all the wells in town.Which of the following statements is most likely going to be true of the market for water?

Accepted Answer

A) the seller will be able to earn unlimited profit 
B) the price of a gallon of water will be driven to equal its marginal cost 
C) the price of a gallon of water will exceed its marginal cost 
D) since water is a necessity of life, there will be no decline in the quantity of water consumed, regardless of how high the price is raised 
A) the seller will be able to earn unlimited profit 
B) the price of a gallon of water will be driven to equal its marginal cost 
C) the price of a gallon of water will exceed its marginal cost 
D) since water is a necessity of life, there will be no decline in the quantity of water consumed, regardless of how high the price is raised

Question 5

Graph 15-4   This graph depicts the demand and marginal-cost curves of a profit-maximising monopolist.Use the graph to answer the following question(s).
-Refer to Graph 15-4.If the monopoly operates at an output level below q₀, decreasing output would:

Accepted Answer

A) raise the price and raise total surplus 
B) lower the price and raise total surplus 
C) raise the price and lower total surplus 
D) lower the price and lower total surplus 
A) raise the price and raise total surplus 
B) lower the price and raise total surplus 
C) raise the price and lower total surplus 
D) lower the price and lower total surplus

Question 6

An appropriate way to measure the economic inefficiency of a monopoly is the:

Accepted Answer

A) number of consumers who are unable to purchase the product because of its high price 
B) deadweight loss 
C) low wages paid to the monopolist's workers 
D) poor quality of service offered by monopoly firms 
A) number of consumers who are unable to purchase the product because of its high price 
B) deadweight loss 
C) low wages paid to the monopolist's workers 
D) poor quality of service offered by monopoly firms

Question 7

In theory, perfect price discrimination:

Accepted Answer

A) increases the monopolist's profits 
B) decreases consumer surplus 
C) decreases deadweight loss 
D) does all of the above 
A) increases the monopolist's profits 
B) decreases consumer surplus 
C) decreases deadweight loss 
D) does all of the above

Question 8

The key difference between a competitive firm and a monopoly firm is the ability to select the level of production.

Accepted Answer

A) True 
 B)False

Question 9

Where does the marginal-revenue curve for a monopoly firm start?
(i) at the same point on the vertical axis as the average-revenue curve
(ii) above the demand curve
(iii) below the demand curve

Accepted Answer

A) (i) only 
B) (i) and (ii) 
C) (i) and (iii) 
D) (iii) only 
A) (i) only 
B) (i) and (ii) 
C) (i) and (iii) 
D) (iii) only

Question 10

Price discrimination is a rational strategy for a profit-maximising monopolist when:

Accepted Answer

A) there is no opportunity for arbitrage across market segmentations 
B) there is an opportunity for arbitrage across market segmentations 
C) consumers are unable to be segmented into identifiable markets 
D) they want to increase the deadweight loss that results from profit-maximising behaviour 
A) there is no opportunity for arbitrage across market segmentations 
B) there is an opportunity for arbitrage across market segmentations 
C) consumers are unable to be segmented into identifiable markets 
D) they want to increase the deadweight loss that results from profit-maximising behaviour

Question 11

Suppose that at the current output level the price received by a monopolist for its good is $10, marginal revenue is equal to $6, and marginal cost is $8.To maximise profit the monopolist should:

Accepted Answer

A) decrease output 
B) increase output 
C) keep output constant 
D) we cannot say without more information 
A) decrease output 
B) increase output 
C) keep output constant 
D) we cannot say without more information

Question 12

If a monopolist is able to perfectly price discriminate:

Accepted Answer

A) consumer surplus is increased and deadweight loss is transformed into monopoly profit 
B) consumer surplus is decreased and deadweight loss is increased 
C) consumer surplus is increased and deadweight loss is increased 
D) consumer surplus and deadweight losses are transformed into monopoly profits 
A) consumer surplus is increased and deadweight loss is transformed into monopoly profit 
B) consumer surplus is decreased and deadweight loss is increased 
C) consumer surplus is increased and deadweight loss is increased 
D) consumer surplus and deadweight losses are transformed into monopoly profits

Question 13

What is the monopolist's profit under the following conditions? The profit-maximising price charged for goods produced is $40.The intersection of the marginal-revenue and marginal cost-curves occurs where output is 20 units and marginal cost is $25.Average cost for 20 units of output is $15.

Accepted Answer

A) $300 
B) $500 
C) $200 
D) $40 
A) $300 
B) $500 
C) $200 
D) $40

Question 14

The market demand curve for a monopolist is typically:

Accepted Answer

A) downward-sloping 
B) horizontal 
C) unit elastic 
D) perfectly elastic at market price 
A) downward-sloping 
B) horizontal 
C) unit elastic 
D) perfectly elastic at market price

Question 15

A social planner maximises total welfare by charging a price equal to marginal cost.

Accepted Answer

A) True 
 B)False

Question 16

In a monopoly, consumers will purchase if their willingness-to-pay is above:

Accepted Answer

A) price 
B) firm profit 
C) marginal cost 
D) marginal revenue 
A) price 
B) firm profit 
C) marginal cost 
D) marginal revenue

Question 17

A natural monopoly can arise when a single firm has equal or greater average total costs than two or more firms.

Accepted Answer

A) True 
 B)False

Question 18

Graphically depict the deadweight loss caused by a monopoly.How is this similar to the deadweight loss from taxation?

Accepted Answer

A profit-maximising monopolist will choo

Question 19

Suppose there is one firm in a market.If this firm sells the same good at different prices to different customers, then this practice is called:

Accepted Answer

A) price determination 
B) predatory pricing 
C) variable pricing 
D) price discrimination 
A) price determination 
B) predatory pricing 
C) variable pricing 
D) price discrimination

Question 20

Graph 15-6   This graph depicts the demand, marginal-revenue and marginal-cost curves of a profit-maximising monopolist.Use the graph to answer the following question(s).
-Refer to Graph 15-6.What is the deadweight loss equal to when the monopolist engages in perfect price discrimination?

Accepted Answer

A) ABC 
B) ADF 
C) CEF 
D) deadweight loss will equal zero 
A) ABC 
B) ADF 
C) CEF 
D) deadweight loss will equal zero

Exam 15: Monopoly

Given that monopoly firms do not have to compete with other firms, the outcome in a monopoly market is best described as:

Refer to the information provided.Jack, the sole owner of all the wells in town, decides to move to a more suitable climate, so he sells the wells to a couple of dozen different town residents.Which of the following is likely to occur?

For a monopolist, when does marginal revenue equal demand?

According to the information provided, suppose only one resident owns all the wells in town.Which of the following statements is most likely going to be true of the market for water?

Graph 15-4 This graph depicts the demand and marginal-cost curves of a profit-maximising monopolist.Use the graph to answer the following question(s). -Refer to Graph 15-4.If the monopoly operates at an output level below q₀, decreasing output would:

An appropriate way to measure the economic inefficiency of a monopoly is the:

In theory, perfect price discrimination:

The key difference between a competitive firm and a monopoly firm is the ability to select the level of production.

Where does the marginal-revenue curve for a monopoly firm start? (i) at the same point on the vertical axis as the average-revenue curve (ii) above the demand curve (iii) below the demand curve

Price discrimination is a rational strategy for a profit-maximising monopolist when:

Suppose that at the current output level the price received by a monopolist for its good is $10, marginal revenue is equal to $6, and marginal cost is $8.To maximise profit the monopolist should:

If a monopolist is able to perfectly price discriminate:

What is the monopolist's profit under the following conditions? The profit-maximising price charged for goods produced is $40.The intersection of the marginal-revenue and marginal cost-curves occurs where output is 20 units and marginal cost is $25.Average cost for 20 units of output is $15.

The market demand curve for a monopolist is typically:

A social planner maximises total welfare by charging a price equal to marginal cost.

In a monopoly, consumers will purchase if their willingness-to-pay is above:

A natural monopoly can arise when a single firm has equal or greater average total costs than two or more firms.

Graphically depict the deadweight loss caused by a monopoly.How is this similar to the deadweight loss from taxation?

Suppose there is one firm in a market.If this firm sells the same good at different prices to different customers, then this practice is called:

Graph 15-6 This graph depicts the demand, marginal-revenue and marginal-cost curves of a profit-maximising monopolist.Use the graph to answer the following question(s). -Refer to Graph 15-6.What is the deadweight loss equal to when the monopolist engages in perfect price discrimination?

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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