Question 1

A profit-maximizing firm should shut down in the short run if the average revenue it receives is less than

Accepted Answer

A) average variable cost. 
B) average total cost. 
C) average fixed cost. 
D) marginal cost. 
A) average variable cost. 
B) average total cost. 
C) average fixed cost. 
D) marginal cost.

Question 2

In the accompanying diagram, if price is reduced from P ₁ to P ₂, total revenue will

Accepted Answer

A) increase by A −C. 
B) increase by C −A. 
C) decrease by A −C. 
D) decrease by C −A. 
A) increase by A −C. 
B) increase by C −A. 
C) decrease by A −C. 
D) decrease by C −A.

Question 3

A firm will earn economic profits whenever

Accepted Answer

A) marginal revenue exceeds marginal costs. 
B) marginal revenue exceeds variable costs. 
C) average revenue exceeds average total costs. 
D) average revenue exceeds average variable costs. 
A) marginal revenue exceeds marginal costs. 
B) marginal revenue exceeds variable costs. 
C) average revenue exceeds average total costs. 
D) average revenue exceeds average variable costs.

Question 4

The practice of price discrimination is associated with pure monopoly because

Accepted Answer

A) it can be practiced whenever a firm's demand curve is downsloping. 
B) monopolists have considerable ability to control output and price. 
C) monopolists usually realize economies of scale. 
D) most monopolists sell differentiated products. 
A) it can be practiced whenever a firm's demand curve is downsloping. 
B) monopolists have considerable ability to control output and price. 
C) monopolists usually realize economies of scale. 
D) most monopolists sell differentiated products.

Question 5

Answer the question on the basis of the provided demand and cost data for a pure monopolist.   The profit-maximizing level of output will be

Accepted Answer

A) 4 units. 
B) 7 units. 
C) 6 units. 
D) 5 units. 
A) 4 units. 
B) 7 units. 
C) 6 units. 
D) 5 units.

Question 6

Answer the question on the basis of the demand and cost data for a pure monopolist. The profit-maximizing price for the monopolist will be

Accepted Answer

A) $3.50. 
B) $3.75. 
C) $3.25. 
D) $4.00. 
A) $3.50. 
B) $3.75. 
C) $3.25. 
D) $4.00.

Question 7

Answer the question on the basis of the accompanying demand schedule.   The marginal revenue obtained from selling the third unit of output is

Accepted Answer

A) $6. 
B) $1. 
C) $3. 
D) $5. 
A) $6. 
B) $1. 
C) $3. 
D) $5.

Question 8

The firm described in the accompanying diagram is selling in

Accepted Answer

A) a market in which there are an extremely large number of other firms producing the same product. 
B) an imperfectly competitive market. 
C) a market in which demand is elastic at all prices. 
D) a purely competitive market. 
A) a market in which there are an extremely large number of other firms producing the same product. 
B) an imperfectly competitive market. 
C) a market in which demand is elastic at all prices. 
D) a purely competitive market.

Question 9

Refer to the graph, which shows a total revenue curve for a monopolist. The profit-maximizing firm will produce in that output level where total revenue is

Accepted Answer

A) rising. 
B) falling. 
C) rising and falling. 
D) zero. 
A) rising. 
B) falling. 
C) rising and falling. 
D) zero.

Question 10

One feature of pure monopoly is that the firm is

Accepted Answer

A) a producer of products with close substitutes. 
B) one of several producers of a product. 
C) a price taker. 
D) a price maker. 
A) a producer of products with close substitutes. 
B) one of several producers of a product. 
C) a price taker. 
D) a price maker.

Question 11

What is x-inefficiency? Why is it likely to occur in monopoly?

Accepted Answer

X-inefficiency occurs when a firm produc

Question 12

As a monopolist lowers the price of its product from a high level, it finds that its total revenue may at first increase and then, below a certain price, its total revenue begins to decrease.

Accepted Answer

A) True 
 B)False

Question 13

If a pure monopolist is producing at that output where P = ATC, then

Accepted Answer

A) its economic profits will be zero. 
B) it will be realizing losses. 
C) it will be producing less than the profit-maximizing level of output. 
D) it will be realizing an economic profit. 
A) its economic profits will be zero. 
B) it will be realizing losses. 
C) it will be producing less than the profit-maximizing level of output. 
D) it will be realizing an economic profit.

Question 14

Given a linear demand curve, at which combination of price and marginal revenue ( P, MR)is the price elasticity of demand less than 1?

Accepted Answer

A) P = 15, MR = -4 
B) P = 20, MR = 0 
C) P = 28, MR = 13 
D) P = 22, MR = 9 
A) P = 15, MR = -4 
B) P = 20, MR = 0 
C) P = 28, MR = 13 
D) P = 22, MR = 9

Question 15

Assume the figure applies to a pure monopolist and that MC is the same for both graphs. If this firm is able to price discriminate between children and adults, its profit-maximizing level of output will be

Accepted Answer

A) realize a smaller economic profit than a nondiscriminating monopolist. 
B) produce a larger output than a nondiscriminating monopolist. 
C) produce the same output as a nondiscriminating monopolist. 
D) produce a smaller output than a nondiscriminating monopolist. 
A) realize a smaller economic profit than a nondiscriminating monopolist. 
B) produce a larger output than a nondiscriminating monopolist. 
C) produce the same output as a nondiscriminating monopolist. 
D) produce a smaller output than a nondiscriminating monopolist.

Question 16

Refer to the graph for a monopolist in short-run equilibrium. The monopolist will charge a price equal to the distance:

Accepted Answer

A) 0 A. 
B) 0 B. 
C) 0 C. 
D) not labeled on the graph. 
A) 0 A. 
B) 0 B. 
C) 0 C. 
D) not labeled on the graph.

Question 17

Alex owns a luxury automobile and regularly purchases high-end fashion items online. Kara drives an old sedan and does most online shopping on eBay and Amazon. Suppose both Alex and Kara search the same online retailer for a nice watch to give on Father's Day. Based on Big Data and personalized pricing, we would expect

Accepted Answer

A) Alex to see a higher price than Kara for the same watch. 
B) Alex and Kara to see the same price for a given watch. 
C) Alex to see a lower price than Kara for the same watch. 
D) that either Alex or Kara might see a higher price for the same watch, as algorithms randomly determine what price each consumer sees. 
A) Alex to see a higher price than Kara for the same watch. 
B) Alex and Kara to see the same price for a given watch. 
C) Alex to see a lower price than Kara for the same watch. 
D) that either Alex or Kara might see a higher price for the same watch, as algorithms randomly determine what price each consumer sees.

Question 18

If the industry depicted in this graph were a pure monopoly, the product price would be

Accepted Answer

A) lower than $8. 
B) $8. 
C) $14. 
D) $16. 
A) lower than $8. 
B) $8. 
C) $14. 
D) $16.

Question 19

Based on the accompanying table, this nondiscriminating pure monopolist should set its price at

Accepted Answer

A) $300. 
B) $250. 
C) $200. 
D) $150. 
A) $300. 
B) $250. 
C) $200. 
D) $150.

Question 20

Price discrimination refers to

Accepted Answer

A) selling a given product for different prices at two different points in time. 
B) any price above that which is equal to a minimum average total cost. 
C) the selling of a given product to different customers at different prices that do not reflect cost differences. 
D) the difference between the prices a purely competitive seller and a purely monopolistic seller would charge. 
A) selling a given product for different prices at two different points in time. 
B) any price above that which is equal to a minimum average total cost. 
C) the selling of a given product to different customers at different prices that do not reflect cost differences. 
D) the difference between the prices a purely competitive seller and a purely monopolistic seller would charge.

Exam 12: Pure Monopoly

A profit-maximizing firm should shut down in the short run if the average revenue it receives is less than

In the accompanying diagram, if price is reduced from P ₁ to P ₂, total revenue will

A firm will earn economic profits whenever

The practice of price discrimination is associated with pure monopoly because

Answer the question on the basis of the provided demand and cost data for a pure monopolist. The profit-maximizing level of output will be

Answer the question on the basis of the demand and cost data for a pure monopolist. The profit-maximizing price for the monopolist will be

Answer the question on the basis of the accompanying demand schedule. The marginal revenue obtained from selling the third unit of output is

The firm described in the accompanying diagram is selling in

Refer to the graph, which shows a total revenue curve for a monopolist. The profit-maximizing firm will produce in that output level where total revenue is

One feature of pure monopoly is that the firm is

What is x-inefficiency? Why is it likely to occur in monopoly?

As a monopolist lowers the price of its product from a high level, it finds that its total revenue may at first increase and then, below a certain price, its total revenue begins to decrease.

If a pure monopolist is producing at that output where P = ATC, then

Given a linear demand curve, at which combination of price and marginal revenue ( P, MR)is the price elasticity of demand less than 1?

Assume the figure applies to a pure monopolist and that MC is the same for both graphs. If this firm is able to price discriminate between children and adults, its profit-maximizing level of output will be

Refer to the graph for a monopolist in short-run equilibrium. The monopolist will charge a price equal to the distance:

If the industry depicted in this graph were a pure monopoly, the product price would be

Based on the accompanying table, this nondiscriminating pure monopolist should set its price at

Price discrimination refers to

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures Caused by Externalities Asymmetric Information

Public Goods, Public Choice, and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, RD, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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