Question 1

For a profit-maximising monopolist, output should be increased to enhance economic wellbeing as long as:

Accepted Answer

A) marginal revenue exceeds marginal cost 
B) marginal revenue exceeds average total cost 
C) average revenue exceeds average total cost 
D) average revenue exceeds marginal cost 
A) marginal revenue exceeds marginal cost 
B) marginal revenue exceeds average total cost 
C) average revenue exceeds average total cost 
D) average revenue exceeds marginal cost

Question 2

Many bus companies allow discount tickets to be sold to students because:

Accepted Answer

A) education laws mandate such discounts 
B) it signals that the companies care about education 
C) they are profit maximisers 
D) students have argued forcefully for the right to cheaper tickets 
A) education laws mandate such discounts 
B) it signals that the companies care about education 
C) they are profit maximisers 
D) students have argued forcefully for the right to cheaper tickets

Question 3

Price discrimination requires the firm to:

Accepted Answer

A) differentiate between different units of its product 
B) engage in arbitrage 
C) separate customers according to their willingness to pay 
D) do all of the above 
A) differentiate between different units of its product 
B) engage in arbitrage 
C) separate customers according to their willingness to pay 
D) do all of the above

Question 4

A monopolist's marginal-revenue curve is less than price for which of the following reasons?
(i) to sell additional units of the good, the price charged on all units must decrease
(ii) with the sale of an additional unit, the monopolist receives less revenue for each of the previous units it planned to sell
(iii) because of the downward-sloping demand curve

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

Excessive monopoly profits themselves represent:

Accepted Answer

A) a deadweight loss 
B) a shrinkage in total surplus 
C) a shrinkage in consumer surplus 
D) all of the above 
A) a deadweight loss 
B) a shrinkage in total surplus 
C) a shrinkage in consumer surplus 
D) all of the above

Question 6

Round-trip airline tickets are usually cheaper if you stay over a Saturday night before you fly back.What is the reason for this price discrepancy?

Accepted Answer

A) airlines are attempting to charge people based on their willingness to pay 
B) airlines are practicing imperfect price discrimination to raise their profits 
C) airlines charge a different rate based on the different nature of peoples' travel needs 
D) all of the above are true 
A) airlines are attempting to charge people based on their willingness to pay 
B) airlines are practicing imperfect price discrimination to raise their profits 
C) airlines charge a different rate based on the different nature of peoples' travel needs 
D) all of the above are true

Question 7

Governments should always avoid creating monopolies, as it leads to prices above marginal costs.

Accepted Answer

A) True 
 B)False

Question 8

When a natural monopoly exists, it is always more cost-effective for two or more private firms to produce the product.

Accepted Answer

A) True 
 B)False

Question 9

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

Accepted Answer

A) constrained by marginal cost 
B) constrained by demand 
C) constrained only by its social agenda 
D) not constrained 
A) constrained by marginal cost 
B) constrained by demand 
C) constrained only by its social agenda 
D) not constrained

Question 10

In many cases additional firms do not try to compete with a natural monopoly because:

Accepted Answer

A) the natural monopoly doesn't make a huge profit 
B) they are unsure of the size of the market in general 
C) they know they cannot achieve the same low costs that the monopolist enjoys 
D) they fear retaliation in the form of pricing wars from the natural monopolist 
A) the natural monopoly doesn't make a huge profit 
B) they are unsure of the size of the market in general 
C) they know they cannot achieve the same low costs that the monopolist enjoys 
D) they fear retaliation in the form of pricing wars from the natural monopolist

Question 11

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 a level of output in which:

Accepted Answer

A) curve C > curve B 
B) curve B > curve C 
C) curve B > curve D 
D) curve D > curve B 
A) curve C > curve B 
B) curve B > curve C 
C) curve B > curve D 
D) curve D > curve B

Question 12

Which of the following are barriers to entry that can give rise to a monopoly?
(i) a patent giving exclusive right to manufacture a new electronic device
(ii) a single firm buys all the rights to mine iron ore in Australia
(iii) a single firm can produce at lower cost than several firms

Accepted Answer

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

Question 13

If a resource can be traded internationally, then it is less likely that a single domestic supplier will be able to price at the monopoly price.

Accepted Answer

A) True 
 B)False

Question 14

Graph 15-5   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 15-5.Which of the following areas represents the deadweight loss due to monopoly pricing?

Accepted Answer

A) rectangle ACDB 
B) rectangle CFGD 
C) triangle BDE 
D) triangle BGE 
A) rectangle ACDB 
B) rectangle CFGD 
C) triangle BDE 
D) triangle BGE

Question 15

The De Beers Diamond company advertises heavily to promote the sale of all diamonds, not just its own.This is evidence that they have a monopoly position to some degree.

Accepted Answer

A) True 
 B)False

Question 16

In a market characterised by monopoly, the market demand curve is:

Accepted Answer

A) downward-sloping 
B) horizontal 
C) upward-sloping 
D) vertical 
A) downward-sloping 
B) horizontal 
C) upward-sloping 
D) vertical

Question 17

When a firm operates under conditions of a monopoly, its price is constrained by demand.

Accepted Answer

A) True 
 B)False

Question 18

A price-maker can charge a price above marginal cost.

Accepted Answer

A) True 
 B)False

Question 19

The profits that a monopoly makes are:

Accepted Answer

A) a dead-weight loss to society 
B) inefficient as they hurt consumers 
C) a direct transfer of economic surplus from consumers to producers 
D) the amount by which total surplus is lower as a result of monopoly 
A) a dead-weight loss to society 
B) inefficient as they hurt consumers 
C) a direct transfer of economic surplus from consumers to producers 
D) the amount by which total surplus is lower as a result of monopoly

Question 20

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 marginal-revenue 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

Exam 15: Monopoly

For a profit-maximising monopolist, output should be increased to enhance economic wellbeing as long as:

Many bus companies allow discount tickets to be sold to students because:

Price discrimination requires the firm to:

Excessive monopoly profits themselves represent:

Round-trip airline tickets are usually cheaper if you stay over a Saturday night before you fly back.What is the reason for this price discrepancy?

Governments should always avoid creating monopolies, as it leads to prices above marginal costs.

When a natural monopoly exists, it is always more cost-effective for two or more private firms to produce the product.

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

In many cases additional firms do not try to compete with a natural monopoly because:

Which of the following are barriers to entry that can give rise to a monopoly? (i) a patent giving exclusive right to manufacture a new electronic device (ii) a single firm buys all the rights to mine iron ore in Australia (iii) a single firm can produce at lower cost than several firms

If a resource can be traded internationally, then it is less likely that a single domestic supplier will be able to price at the monopoly price.

Graph 15-5 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 15-5.Which of the following areas represents the deadweight loss due to monopoly pricing?

The De Beers Diamond company advertises heavily to promote the sale of all diamonds, not just its own.This is evidence that they have a monopoly position to some degree.

In a market characterised by monopoly, the market demand curve is:

When a firm operates under conditions of a monopoly, its price is constrained by demand.

A price-maker can charge a price above marginal cost.

The profits that a monopoly makes are:

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 marginal-revenue curve for a monopoly firm is depicted by curve:

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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