Question 1

Marginal revenue for a monopolist is computed as:

Accepted Answer

A) total revenue / quantity sold 
B) total costs / quantity sold 
C) (average revenue *quantity) / price 
D) the change to total revenue per unit change in quantity sold 
A) total revenue / quantity sold 
B) total costs / quantity sold 
C) (average revenue *quantity) / price 
D) the change to total revenue per unit change in quantity sold

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.If the monopolist wants to maximise its revenue, how many units of its product should it sell?

Accepted Answer

A) one 
B) six 
C) eight 
D) ten 
A) one 
B) six 
C) eight 
D) ten

Question 3

When the price of a good increases, which of the following happen(s) to the quantity sold for a monopoly firm?
(i) customers are forced to buy at the higher price
(ii) quantity sold will stay the same
(iii) revenue will necessarily increase
(iv) quantity sold will fall

Accepted Answer

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

Question 4

When a monopolist increases the number of units it sells, there are two effects on revenue: the output effect and the price effect.

Accepted Answer

A) True 
 B)False

Question 5

Encouraging firms to invest in research and development and individuals to engage in creative endeavours such as writing novels is one justification for:

Accepted Answer

A) natural monopolies 
B) government-created monopolies 
C) resource monopolies 
D) innovation 
A) natural monopolies 
B) government-created monopolies 
C) resource monopolies 
D) innovation

Question 6

Price discrimination is not possible if a firm:

Accepted Answer

A) is regulated by the government 
B) operates in a competitive market 
C) has perfect information about consumer demand 
D) faces a downward-sloping demand curve 
A) is regulated by the government 
B) operates in a competitive market 
C) has perfect information about consumer demand 
D) faces a downward-sloping demand curve

Question 7

Arbitrage is the process by which:

Accepted Answer

A) a good is purchased for a low price in one market and sold for a higher price in another market 
B) a good is purchased for a high price in one market and sold for a lower price in another market 
C) a good is purchased for a low price in one market and sold for the same price in the same market 
D) a good is purchased for a high price in one market and sold for the same price in the same market 
A) a good is purchased for a low price in one market and sold for a higher price in another market 
B) a good is purchased for a high price in one market and sold for a lower price in another market 
C) a good is purchased for a low price in one market and sold for the same price in the same market 
D) a good is purchased for a high price in one market and sold for the same price in the same market

Question 8

Generic drugs enter the pharmaceutical drug market once:

Accepted Answer

A) the ingredients to the name brand drug have been discovered 
B) the patent on the name brand drug expires 
C) 10 years have passed 
D) they are patented 
A) the ingredients to the name brand drug have been discovered 
B) the patent on the name brand drug expires 
C) 10 years have passed 
D) they are patented

Question 9

According to the information provided, if dozens of residents have their own wells, which of the following statements most adequately describes the behaviour of sellers of water?

Accepted Answer

A) sellers will be able to charge a premium for the water 
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) sellers will be able to charge a premium for the water 
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 10

For a monopoly market, total surplus can be defined as the value of the good to:

Accepted Answer

A) consumers minus the costs of making the good 
B) consumers plus the cost of making the good 
C) producers minus the cost incurred by consumers 
D) producer plus the cost incurred by consumers 
A) consumers minus the costs of making the good 
B) consumers plus the cost of making the good 
C) producers minus the cost incurred by consumers 
D) producer plus the cost incurred by consumers

Question 11

Airlines often separate their customers into business travellers and personal travellers by giving a discount to those travellers who stay over a Saturday night.

Accepted Answer

A) True 
 B)False

Question 12

Consider a profit-maximising monopoly pricing under the following conditions.The profit-maximising price charged for goods produced is $18.The intersection of the marginal-revenue and marginal-cost curves occurs where output is 10 units and marginal cost is $6.The socially efficient level of production is 14 units.The demand curve and marginal-cost curves are linear.What is the deadweight loss?

Accepted Answer

A) $6 
B) $24 
C) $48 
D) not enough information is given to answer this question 
A) $6 
B) $24 
C) $48 
D) not enough information is given to answer this question

Question 13

Total welfare when a monopoly can perfectly price discriminate is at least as high as when a monopoly must set one price.

Accepted Answer

A) True 
 B)False

Question 14

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.If the monopoly firm is currently producing output at a level of Q₃, reducing output will always cause profit to:

Accepted Answer

A) increase as long as output is at least Q₂ 
B) increase as long as output is at least Q₁ 
C) remain unchanged 
D) decrease 
A) increase as long as output is at least Q₂ 
B) increase as long as output is at least Q₁ 
C) remain unchanged 
D) decrease

Question 15

If the current price charged by a monopolist is $5 and marginal cost is $3, then increasing output will always lead to an increase in profit as P>MC.

Accepted Answer

A) True 
 B)False

Question 16

An important assumption about a monopoly is that it behaves as a:

Accepted Answer

A) price maximiser 
B) profit maximiser 
C) revenue maximiser 
D) wage minimiser 
A) price maximiser 
B) profit maximiser 
C) revenue maximiser 
D) wage minimiser

Question 17

A monopoly will be maximising total welfare if:

Accepted Answer

A) price equals marginal revenue 
B) price equals marginal profit 
C) price equals marginal cost 
D) the marginal cost curve intersects the marginal revenue curve 
A) price equals marginal revenue 
B) price equals marginal profit 
C) price equals marginal cost 
D) the marginal cost curve intersects the marginal revenue curve

Question 18

Which of the following statements is(are) true of monopolies?
(i) they cannot make unlimited profits
(ii) they have the ability to set prices at whatever level they desire
(iii) they do not have to worry about their revenue falling if they increase the prices

Accepted Answer

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

Question 19

Using the above information, if the publisher cannot price-discriminate then there is a dead-weight loss equal to:

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

Consider the following diagram of a monopoly.   
Assuming that the monopoly is at its profit-maximising point, identify the values of its marginal revenue, marginal cost, average revenue and price.

Accepted Answer

The profit maximising point is at point

Exam 15: Monopoly

Marginal revenue for a monopolist is computed as:

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.If the monopolist wants to maximise its revenue, how many units of its product should it sell?

When the price of a good increases, which of the following happen(s) to the quantity sold for a monopoly firm? (i) customers are forced to buy at the higher price (ii) quantity sold will stay the same (iii) revenue will necessarily increase (iv) quantity sold will fall

When a monopolist increases the number of units it sells, there are two effects on revenue: the output effect and the price effect.

Encouraging firms to invest in research and development and individuals to engage in creative endeavours such as writing novels is one justification for:

Price discrimination is not possible if a firm:

Arbitrage is the process by which:

Generic drugs enter the pharmaceutical drug market once:

According to the information provided, if dozens of residents have their own wells, which of the following statements most adequately describes the behaviour of sellers of water?

For a monopoly market, total surplus can be defined as the value of the good to:

Airlines often separate their customers into business travellers and personal travellers by giving a discount to those travellers who stay over a Saturday night.

Total welfare when a monopoly can perfectly price discriminate is at least as high as when a monopoly must set one price.

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.If the monopoly firm is currently producing output at a level of Q₃, reducing output will always cause profit to:

If the current price charged by a monopolist is $5 and marginal cost is $3, then increasing output will always lead to an increase in profit as P>MC.

An important assumption about a monopoly is that it behaves as a:

A monopoly will be maximising total welfare if:

Which of the following statements is(are) true of monopolies? (i) they cannot make unlimited profits (ii) they have the ability to set prices at whatever level they desire (iii) they do not have to worry about their revenue falling if they increase the prices

Using the above information, if the publisher cannot price-discriminate then there is a dead-weight loss equal to:

Consider the following diagram of a monopoly. Assuming that the monopoly is at its profit-maximising point, identify the values of its marginal revenue, marginal cost, average revenue and price.

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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