Question 1

A firm in a competitive market sells a product that has many substitutes.This means the demand curve such a firm faces is:

Accepted Answer

A) unit inelastic 
B) downward sloping 
C) perfectly elastic 
D) above the marginal-revenue curve 
A) unit inelastic 
B) downward sloping 
C) perfectly elastic 
D) above the marginal-revenue curve

Question 2

Which of the following qualify as a social cost of monopoly power?
(i) loss of consumer surplus
(ii) loss of producer surplus
(iii) excessive profit earned by the owner of a monopoly

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 3

Identify the true statements below.(i) when a competitive firm sells an additional unit of output, its revenue increases by an amount less than the price
(ii) when a monopoly firm sells an additional unit of output, its revenue increases by an amount less than the price
(iii) marginal revenue is the same for both competitive and monopoly firms

Accepted Answer

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

Question 4

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 average-total-cost 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 5

It is very rare for monopolies to arise from exclusive ownership of a resource because:

Accepted Answer

A) actual economies are quite small 
B) the natural scope of many such markets is often local 
C) few firms own a resource for which there are no close substitutes 
D) all of the above are true 
A) actual economies are quite small 
B) the natural scope of many such markets is often local 
C) few firms own a resource for which there are no close substitutes 
D) all of the above are true

Question 6

Discount coupons have the ability to help a grocery store:

Accepted Answer

A) maximise its profit 
B) price discriminate 
C) target their customers based on their individual willingness to pay 
D) do all of the above 
A) maximise its profit 
B) price discriminate 
C) target their customers based on their individual willingness to pay 
D) do all of the above

Question 7

When a monopolist reduces the amount of output that it sells, the price of its output:

Accepted Answer

A) increases 
B) decreases 
C) stays the same 
D) may increase or decrease, depending on the elasticity of demand 
A) increases 
B) decreases 
C) stays the same 
D) may increase or decrease, depending on the elasticity of demand

Question 8

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.Monopoly profit with perfect price discrimination equals:

Accepted Answer

A) ABC 
B) BDEC 
C) ADEC 
D) ADF 
A) ABC 
B) BDEC 
C) ADEC 
D) ADF

Question 9

What is the monopolist's profit under the following conditions? The profit-maximising price charged for goods produced is $14.The intersection of the marginal-revenue and marginal-cost curves occurs where output is 15 units and marginal cost is $7.

Accepted Answer

A) $98 
B) $105 
C) $210 
D) there is not enough information to answer this question 
A) $98 
B) $105 
C) $210 
D) there is not enough information to answer this question

Question 10

Compared to the monopoly outcome with a single price, imperfect price discrimination can do which of the following?
(i) raise welfare
(ii) lower welfare
(iii) leave welfare unchanged

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 11

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 a total revenue 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 12

Competitive firms have:

Accepted Answer

A) horizontal demand curves and can sell only a limited amount at each price 
B) horizontal demand curves and can sell as much as they want at the market price 
C) downward-sloping demand curves and can sell as much as they want at the market price 
D) downward-sloping demand curves and can sell only a limited amount at each price 
A) horizontal demand curves and can sell only a limited amount at each price 
B) horizontal demand curves and can sell as much as they want at the market price 
C) downward-sloping demand curves and can sell as much as they want at the market price 
D) downward-sloping demand curves and can sell only a limited amount at each price

Question 13

Monopolies most often arise because of barriers to entry.What are the three main sources of barrier to entry and give examples of each.

Accepted Answer

The three main sources of barriers to en

Question 14

Suppose a monopolist lowers the price of its good, this would cause consumers to:

Accepted Answer

A) buy more 
B) buy less 
C) continue to buy the same amount 
D) buy more or less, depending on elasticity of demand 
A) buy more 
B) buy less 
C) continue to buy the same amount 
D) buy more or less, depending on elasticity of demand

Question 15

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.Monopoly profit without price discrimination equals:

Accepted Answer

A) ABC 
B) BDEC 
C) ADEC 
D) ADF 
A) ABC 
B) BDEC 
C) ADEC 
D) ADF

Question 16

The extra profit that a monopoly makes comes from a loss of which of the following?
(i) consumer surplus
(ii) total surplus
(iii) producer surplus

Accepted Answer

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

Question 17

Monopoly firms have:

Accepted Answer

A) horizontal demand curves and can sell only a limited amount at each price 
B) horizontal demand curves and can sell as much as they want at each price 
C) downward-sloping demand curves and can sell as much as they want at each price 
D) downward-sloping demand curves and can sell only a limited amount at each price 
A) horizontal demand curves and can sell only a limited amount at each price 
B) horizontal demand curves and can sell as much as they want at each price 
C) downward-sloping demand curves and can sell as much as they want at each price 
D) downward-sloping demand curves and can sell only a limited amount at each price

Question 18

As a monopolist increases the quantity of output it sells, the price consumers are willing to pay for the good:

Accepted Answer

A) increases 
B) decreases 
C) is unaffected 
D) not enough information is given to answer this question 
A) increases 
B) decreases 
C) is unaffected 
D) not enough information is given to answer this question

Question 19

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 will be maximised by charging a price equal to:

Accepted Answer

A) P₀ 
B) P₁ 
C) P₂ 
D) P₃ 
A) P₀ 
B) P₁ 
C) P₂ 
D) P₃

Question 20

Apple is likely to charge a price above marginal cost for the iPhone.

Accepted Answer

A) True 
 B)False

Exam 15: Monopoly

A firm in a competitive market sells a product that has many substitutes.This means the demand curve such a firm faces is:

Which of the following qualify as a social cost of monopoly power? (i) loss of consumer surplus (ii) loss of producer surplus (iii) excessive profit earned by the owner of a monopoly

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 average-total-cost curve for a monopoly firm is depicted by curve:

It is very rare for monopolies to arise from exclusive ownership of a resource because:

Discount coupons have the ability to help a grocery store:

When a monopolist reduces the amount of output that it sells, the price of its output:

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.Monopoly profit with perfect price discrimination equals:

What is the monopolist's profit under the following conditions? The profit-maximising price charged for goods produced is $14.The intersection of the marginal-revenue and marginal-cost curves occurs where output is 15 units and marginal cost is $7.

Compared to the monopoly outcome with a single price, imperfect price discrimination can do which of the following? (i) raise welfare (ii) lower welfare (iii) leave welfare unchanged

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 a total revenue equal to:

Competitive firms have:

Monopolies most often arise because of barriers to entry.What are the three main sources of barrier to entry and give examples of each.

Suppose a monopolist lowers the price of its good, this would cause consumers to:

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.Monopoly profit without price discrimination equals:

The extra profit that a monopoly makes comes from a loss of which of the following? (i) consumer surplus (ii) total surplus (iii) producer surplus

Monopoly firms have:

As a monopolist increases the quantity of output it sells, the price consumers are willing to pay for the good:

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 will be maximised by charging a price equal to:

Apple is likely to charge a price above marginal cost for the iPhone.

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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