Question 1

Another form of price discrimination is when a monopoly offers lower prices to customers who buy small quantities.

Accepted Answer

A) True 
 B)False

Question 2

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.Profit can always be increased by decreasing the level of output by one unit if the monopolist is currently operating at which of the following output levels?
(i) q₀
(ii) Q₁
(iii) Q₂
(iv) Q₃

Accepted Answer

A) (i) or (ii) 
B) (i), (ii) or (iii) 
C) (iii) or (iv) 
D) (iv) only 
A) (i) or (ii) 
B) (i), (ii) or (iii) 
C) (iii) or (iv) 
D) (iv) only

Question 3

In a monopoly, the firm demand-curve and market demand-curve are identical.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is likely to be a natural monopoly?

Accepted Answer

A) the distribution of water through pipes to homes and businesses 
B) the generation of electricity, that is before it is distributed through the power grid 
C) the manufacture of large cars and trucks 
D) professional services, such as legal advice and accounting services 
A) the distribution of water through pipes to homes and businesses 
B) the generation of electricity, that is before it is distributed through the power grid 
C) the manufacture of large cars and trucks 
D) professional services, such as legal advice and accounting services

Question 5

Using the above information, how much higher would profit be 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 6

A perfectly price-discriminating monopolist is able to:

Accepted Answer

A) maximise profit, but not produce a level of output consistent with optimal social wellbeing 
B) produce a level of output consistent with optimal social wellbeing, but not maximise profit 
C) exercise illegal preferences over the gender of its employees 
D) maximise profit and produce a level of output more consistent with optimal social wellbeing 
A) maximise profit, but not produce a level of output consistent with optimal social wellbeing 
B) produce a level of output consistent with optimal social wellbeing, but not maximise profit 
C) exercise illegal preferences over the gender of its employees 
D) maximise profit and produce a level of output more consistent with optimal social wellbeing

Question 7

Because monopoly firms do not have to compete with other firms, the outcome in a market with a monopoly is often efficient, but not equitable.

Accepted Answer

A) True 
 B)False

Question 8

Perfect price discrimination leads to zero consumer surplus.With this in mind, why do economists argue that perfect price discrimination maximises total welfare?

Accepted Answer

Perfect price discrimination leads to ze

Question 9

When a local grocery store offers discount coupons in the Sunday paper, it is most likely trying to:

Accepted Answer

A) offer its customers a reward for reading the paper 
B) reduce prices for all customers 
C) price discriminate 
D) gain some pricing power over the other grocery stores in town 
A) offer its customers a reward for reading the paper 
B) reduce prices for all customers 
C) price discriminate 
D) gain some pricing power over the other grocery stores in town

Question 10

Suppose a pesticide company discovers and patents a new weed killer.This patent gives the company:

Accepted Answer

A) a monopoly right to sell the weed killer for an unlimited number of years 
B) a monopoly right to sell the weed killer for a limited number of years 
C) partial ownership of the right to sell the weed killer for a limited number of years 
D) partial ownership of the right to sell the weed killer for an unlimited number of years 
A) a monopoly right to sell the weed killer for an unlimited number of years 
B) a monopoly right to sell the weed killer for a limited number of years 
C) partial ownership of the right to sell the weed killer for a limited number of years 
D) partial ownership of the right to sell the weed killer for an unlimited number of years

Question 11

One example of price discrimination occurs in the publishing industry when a publisher initially releases an expensive hardcover edition of a popular novel, and later releases a cheaper paperback edition.Use this example to demonstrate the benefits and potential pitfalls of a price discrimination pricing strategy.

Accepted Answer

The answer should address the three basi

Question 12

A rational pricing strategy for a profit-maximising monopolist is:

Accepted Answer

A) synergy pricing 
B) price discrimination 
C) price segregation 
D) average cost pricing 
A) synergy pricing 
B) price discrimination 
C) price segregation 
D) average cost pricing

Question 13

Due to the nature of the patent laws on pharmaceuticals, the market for such drugs:

Accepted Answer

A) switches from competitive to monopolistic once the firm's patent runs out 
B) switches from monopolistic to competitive once the firm's patent runs out 
C) always remains a monopolistic market 
D) always remains a competitive market 
A) switches from competitive to monopolistic once the firm's patent runs out 
B) switches from monopolistic to competitive once the firm's patent runs out 
C) always remains a monopolistic market 
D) always remains a competitive market

Question 14

Competitive firms maximise profit by setting MR = MC.This is not always true for monopoly firms.

Accepted Answer

A) True 
 B)False

Question 15

Suppose demand for a monopoly's product is perfectly elastic.In this case the monopoly should set P = MR = MC and the monopoly market outcome will be identical to the competitive market outcome.

Accepted Answer

A) True 
 B)False

Question 16

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.A benevolent social planner would cause the monopoly firm to operate at an output level:

Accepted Answer

A) above q₀ 
B) equal to q₀ 
C) below q₀ 
D) equal to zero 
A) above q₀ 
B) equal to q₀ 
C) below q₀ 
D) equal to zero

Question 17

Suppose the market for coffee cups is a monopoly.If a consumer's willingness to pay is below the market price, then it is not possible for a mutually beneficial trade to occur.

Accepted Answer

A) True 
 B)False

Question 18

In the market for home heating, consumers typically have several options (e.g.electricity, heating fuel, natural gas, propane, etc.), yet we often think of firms in this industry as behaving like monopolists.Using your understanding of monopoly, discuss the context in which your electricity provider is a monopolist.Is this characterisation universally applicable? Carefully explain your answer.

Accepted Answer

In this case, the firms are monopolists

Question 19

Discount coupons have the ability to help a supermarket price discriminate.

Accepted Answer

A) True 
 B)False

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.If the monopoly firm is NOT allowed to price discriminate, what will the consumer surplus be?

Accepted Answer

A) ABC 
B) ADF 
C) CEF 
D) consumer surplus will equal zero 
A) ABC 
B) ADF 
C) CEF 
D) consumer surplus will equal zero

Exam 15: Monopoly

Another form of price discrimination is when a monopoly offers lower prices to customers who buy small quantities.

In a monopoly, the firm demand-curve and market demand-curve are identical.

Which of the following is likely to be a natural monopoly?

Using the above information, how much higher would profit be if the publisher can price-discriminate?

A perfectly price-discriminating monopolist is able to:

Because monopoly firms do not have to compete with other firms, the outcome in a market with a monopoly is often efficient, but not equitable.

Perfect price discrimination leads to zero consumer surplus.With this in mind, why do economists argue that perfect price discrimination maximises total welfare?

When a local grocery store offers discount coupons in the Sunday paper, it is most likely trying to:

Suppose a pesticide company discovers and patents a new weed killer.This patent gives the company:

A rational pricing strategy for a profit-maximising monopolist is:

Due to the nature of the patent laws on pharmaceuticals, the market for such drugs:

Competitive firms maximise profit by setting MR = MC.This is not always true for monopoly firms.

Suppose demand for a monopoly's product is perfectly elastic.In this case the monopoly should set P = MR = MC and the monopoly market outcome will be identical to the competitive market outcome.

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.A benevolent social planner would cause the monopoly firm to operate at an output level:

Suppose the market for coffee cups is a monopoly.If a consumer's willingness to pay is below the market price, then it is not possible for a mutually beneficial trade to occur.

Discount coupons have the ability to help a supermarket price discriminate.

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.If the monopoly firm is NOT allowed to price discriminate, what will the consumer surplus be?

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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