Question 1

A natural monopoly occurs when:

Accepted Answer

A) the monopolist product is an organic, pesticide-free product 
B) firms are characterised by rising marginal-cost curves 
C) average total cost of production increases as more output is produced 
D) average total cost of production decreases as more output is produced 
A) the monopolist product is an organic, pesticide-free product 
B) firms are characterised by rising marginal-cost curves 
C) average total cost of production increases as more output is produced 
D) average total cost of production decreases as more output is produced

Question 2

Table 15-1
 $$\begin{array} { | l | l | l | l | l | } 
\hline \text { Qunatity } & \text { Price } & \begin{array} { l } 
\text { Total } \
\text { revenue }
\end{array} & \begin{array} { l } 
\text { Average } \
\text { revenue }
\end{array} & \begin{array} { l } 
\text { Marginal } \
\text { revenue }
\end{array} \
\hline 1 & 47 & 47 & & \
\hline 2 & & 88 & 44 & 41 \
\hline 3 & 41 & & & \
\hline 4 & & & & 29 \
\hline 5 & 35 & & & 23 \
\hline 6 & & 192 & & \
\hline 7 & 29 & & & 11 \
\hline 8 & & & & 5 \
\hline 9 & & 207 & 23 & - 1 \
\hline 10 & 20 & 200 & & \
\hline
\end{array}$$
-Refer to Table 15-1.What is the average revenue received from selling four units of the monopolist's product?

Accepted Answer

A) 29 
B) 38 
C) 35 
D) 152 
A) 29 
B) 38 
C) 35 
D) 152

Question 3

Refer to the information provided.If Black Box Pay TV is unable to price discriminate, what price will it choose to maximise its profit and what is the amount of profit?

Accepted Answer

A) price = $15, profit = $600 000 
B) price = $200, profit = $1 000 000 
C) price = $200, profit = $750 000 
D) price = $15, profit = $350 000 
A) price = $15, profit = $600 000 
B) price = $200, profit = $1 000 000 
C) price = $200, profit = $750 000 
D) price = $15, profit = $350 000

Question 4

Along with the monopoly firms' cost curves, the shape and position of the demand curve determine which of the following?
(i) the price the monopoly will charge for its good
(ii) the shape and position of the marginal-revenue curve
(iii) the profit-maximising quantity

Accepted Answer

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

Question 5

Graph 15-3   This graph reflects the cost and revenue structure for a monopoly firm.Use the graph to answer the following question(s).
-Refer to Graph 15-3.A profit-maximising monopoly would have profit equal to:

Accepted Answer

A) (P₃ - P₀) * Q₂ 
B) (P₃ - P₀) * Q₄ 
C) P₃ * Q₂ 
D) P₂ * Q₄ 
A) (P₃ - P₀) * Q₂ 
B) (P₃ - P₀) * Q₄ 
C) P₃ * Q₂ 
D) P₂ * Q₄

Question 6

For a competitive firm, average revenue always equals the price of the good.This is also true for monopolies.

Accepted Answer

A) True 
 B)False

Question 7

The practice of selling the same goods to different customers at different prices, but with the same marginal cost, is known as:

Accepted Answer

A) price discrimination 
B) monopoly pricing 
C) arbitrage 
D) price segregation 
A) price discrimination 
B) monopoly pricing 
C) arbitrage 
D) price segregation

Question 8

Suppose a drug patent runs out, the market consequences of this are?
(i) the price will increase
(ii) the price will converge on the marginal cost
(iii) the quantity sold will increase

Accepted Answer

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

Question 9

When AT&T had a monopoly on telephones as a result of patents, it:

Accepted Answer

A) kept prices above the competitive level 
B) created a shift in the demand for telephones 
C) compelled consumers to search for telephone substitutes 
D) compelled consumers to look after their telephones 
A) kept prices above the competitive level 
B) created a shift in the demand for telephones 
C) compelled consumers to search for telephone substitutes 
D) compelled consumers to look after their telephones

Question 10

Graph 15-2   This graph reflects the cost and revenue structure for a monopoly firm.Use the graph to answer the following question(s).
-Refer to Graph 15-2.The demand curve for a monopoly firm is depicted by curve:

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 11

When a firm's average-total-cost curve continually declines, the firm is:

Accepted Answer

A) a government-created monopoly 
B) a resource monopoly 
C) a natural monopoly 
D) all of the above 
A) a government-created monopoly 
B) a resource monopoly 
C) a natural monopoly 
D) all of the above

Question 12

Which of the following statements concerning profit maximisation for a monopoly firm is correct?

Accepted Answer

A) P > MR = MC 
B) P  MC 
D) P = MR = MC 
A) P > MR = MC 
B) P  MC 
D) P = MR = MC

Question 13

According to the information provided, what is the deadweight loss associated with the non-discriminating pricing policy compared to the price-discriminating policy?

Accepted Answer

A) not enough information is given to answer this question 
B) $150 000 
C) $525 000 
D) $400 000 
A) not enough information is given to answer this question 
B) $150 000 
C) $525 000 
D) $400 000

Question 14

Choose the correct statement.The deadweight loss from monopoly pricing arises because:
i. monopolists profits are a transfer from consumers to producers
ii. the value some consumers place on the good is greater than the cost of providing it
iii. the market price is above marginal cost

Accepted Answer

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

Question 15

Characteristics of a monopoly include which of the following?
(i) it is the sole seller of its product
(ii) its product does not have close substitutes
(iii) it generates large economic profits
(iv) it is located in a small geographic market

Accepted Answer

A) (i), (iii), and (iv) 
B) both (i) and (iii) 
C) both (i) and (ii) 
D) (i), (ii), (iii) and (iv) 
A) (i), (iii), and (iv) 
B) both (i) and (iii) 
C) both (i) and (ii) 
D) (i), (ii), (iii) and (iv)

Question 16

Adult and concession prices for movie tickets are examples of perfect price discrimination.

Accepted Answer

A) True 
 B)False

Question 17

Perfect price discrimination describes a situation in which the monopolist:

Accepted Answer

A) knows the exact willingness to pay of each of its customers 
B) cannot charge each customer a different price 
C) collects a part but not all of the consumer surplus in the form of higher profit 
D) all of the above are correct 
A) knows the exact willingness to pay of each of its customers 
B) cannot charge each customer a different price 
C) collects a part but not all of the consumer surplus in the form of higher profit 
D) all of the above are correct

Question 18

The socially efficient level of production occurs where the marginal-cost curve intersects which of the following curves?

Accepted Answer

A) demand 
B) marginal revenue 
C) supply 
D) average cost 
A) demand 
B) marginal revenue 
C) supply 
D) average cost

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

If a firm's average total cost is everywhere decreasing, then this is likely to lead to a natural monopoly.

Accepted Answer

A) True 
 B)False

Exam 15: Monopoly

A natural monopoly occurs when:

Table 15-1 Qunatity Price Total revenue Average revenue Marginal revenue 1 47 47 2 88 44 41 3 41 4 29 5 35 23 6 192 7 29 11 8 5 9 207 23 -1 10 20 200 -Refer to Table 15-1.What is the average revenue received from selling four units of the monopolist's product?

Refer to the information provided.If Black Box Pay TV is unable to price discriminate, what price will it choose to maximise its profit and what is the amount of profit?

Along with the monopoly firms' cost curves, the shape and position of the demand curve determine which of the following? (i) the price the monopoly will charge for its good (ii) the shape and position of the marginal-revenue curve (iii) the profit-maximising quantity

Graph 15-3 This graph reflects the cost and revenue structure for a monopoly firm.Use the graph to answer the following question(s). -Refer to Graph 15-3.A profit-maximising monopoly would have profit equal to:

For a competitive firm, average revenue always equals the price of the good.This is also true for monopolies.

The practice of selling the same goods to different customers at different prices, but with the same marginal cost, is known as:

Suppose a drug patent runs out, the market consequences of this are? (i) the price will increase (ii) the price will converge on the marginal cost (iii) the quantity sold will increase

When AT&T had a monopoly on telephones as a result of patents, it:

Graph 15-2 This graph reflects the cost and revenue structure for a monopoly firm.Use the graph to answer the following question(s). -Refer to Graph 15-2.The demand curve for a monopoly firm is depicted by curve:

When a firm's average-total-cost curve continually declines, the firm is:

Which of the following statements concerning profit maximisation for a monopoly firm is correct?

According to the information provided, what is the deadweight loss associated with the non-discriminating pricing policy compared to the price-discriminating policy?

Choose the correct statement.The deadweight loss from monopoly pricing arises because: i. monopolists profits are a transfer from consumers to producers ii. the value some consumers place on the good is greater than the cost of providing it iii. the market price is above marginal cost

Characteristics of a monopoly include which of the following? (i) it is the sole seller of its product (ii) its product does not have close substitutes (iii) it generates large economic profits (iv) it is located in a small geographic market

Adult and concession prices for movie tickets are examples of perfect price discrimination.

Perfect price discrimination describes a situation in which the monopolist:

The socially efficient level of production occurs where the marginal-cost curve intersects which of the following curves?

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

If a firm's average total cost is everywhere decreasing, then this is likely to lead to a natural monopoly.

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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