Question 1

Suppose that a pure monopolist can sell 20 units of output at $10 per unit and 21 units at $9.75 per unit. The marginal revenue of the 21st unit of output is

Accepted Answer

A) $9.75. 
B) $204.75 
C) $4.75. 
D) $0.25. 
A) $9.75. 
B) $204.75 
C) $4.75. 
D) $0.25.

Question 2

Suppose that a pure monopolist can sell 9 units of output at $12 per unit and 10 units at $11.50 per unit. For the monopolist to profitably produce and sell the tenth unit of output, its marginal cost must be anywhere at or below

Accepted Answer

A) $12. 
B) $11.50. 
C) $9.00. 
D) $7.00. 
A) $12. 
B) $11.50. 
C) $9.00. 
D) $7.00.

Question 3

Barriers to entering an industry

Accepted Answer

A) encourage allocative efficiency. 
B) encourage productive efficiency. 
C) are the basis for monopoly. 
D) apply only to purely monopolistic industries. 
A) encourage allocative efficiency. 
B) encourage productive efficiency. 
C) are the basis for monopoly. 
D) apply only to purely monopolistic industries.

Question 4

The table shows the relationship between output, total costs, and total revenue for a pure monopoly.   Within which of the following ranges of output will the firm earn maximum economic profits?

Accepted Answer

A) 50 to 60 units 
B) 60 to 70 units 
C) 70 to 80 units 
D) 80 to 90 units 
A) 50 to 60 units 
B) 60 to 70 units 
C) 70 to 80 units 
D) 80 to 90 units

Question 5

In an unregulated monopoly at equilibrium, the output level is higher than the economically efficient level.

Accepted Answer

A) True 
 B)False

Question 6

Refer to the provided graph for an industry. If the industry was initially a monopoly, but the monopolist was broken up into a large number of small, purely competitive firms and production cost-curves remained unchanged, then market price and industry output would be

Accepted Answer

A) P₃ and Q₁. 
B) P₁ and Q₃. 
C) P₂ and Q₂. 
D) P₁ and Q₁. 
A) P₃ and Q₁. 
B) P₁ and Q₃. 
C) P₂ and Q₂. 
D) P₁ and Q₁.

Question 7

In what ways do the demand schedules for a purely competitive firm and a pure monopolist differ? What significance does this have for the price-output behavior of each?

Accepted Answer

The purely competitive seller faces a pe

Question 8

Refer to the graph, which shows a total revenue curve for a monopolist. If total revenue falls as output expands, marginal revenue is

Accepted Answer

A) positive. 
B) negative. 
C) zero. 
D) greater than demand at that output level. 
A) positive. 
B) negative. 
C) zero. 
D) greater than demand at that output level.

Question 9

Refer to the diagrams. Firm A is a

Accepted Answer

A) pure competitor, and Firm B is a pure monopoly. 
B) pure competitor, as is Firm B. 
C) pure monopoly, and Firm B is a pure competitor. 
D) pure monopoly, as is Firm B. 
A) pure competitor, and Firm B is a pure monopoly. 
B) pure competitor, as is Firm B. 
C) pure monopoly, and Firm B is a pure competitor. 
D) pure monopoly, as is Firm B.

Question 10

Which phrase would be most characteristic of pure monopoly?

Accepted Answer

A) close substitutes 
B) efficient advertiser 
C) price taker 
D) sole seller 
A) close substitutes 
B) efficient advertiser 
C) price taker 
D) sole seller

Question 11

Refer to the graph, which shows a total revenue curve for a monopolist. The firm's marginal revenue curve must be

Accepted Answer

A) downsloping. 
B) constant. 
C) upsloping. 
D) U-shaped. 
A) downsloping. 
B) constant. 
C) upsloping. 
D) U-shaped.

Question 12

A monopolist sells 6 units of a product per day at a unit price of $15. If it lowers the price to $14, its total revenue increases by $22. This implies that its sales quantity increases by

Accepted Answer

A) 4 units per day. 
B) 3 units per day. 
C) 2 units per day. 
D) 1 unit per day. 
A) 4 units per day. 
B) 3 units per day. 
C) 2 units per day. 
D) 1 unit per day.

Question 13

Refer to the diagram for a nondiscriminating monopolist. At output Q production will be unprofitable.

Accepted Answer

A) True 
 B)False

Question 14

If a nondiscriminating pure monopolist decides to sell one more unit of output, the marginal revenue associated with that unit will be

Accepted Answer

A) equal to its price. 
B) the price at which that unit is sold less the price reductions that apply to all other units of output. 
C) the price at which that unit is sold plus the price increases that apply to all other units of output. 
D) indeterminate unless marginal cost data are known. 
A) equal to its price. 
B) the price at which that unit is sold less the price reductions that apply to all other units of output. 
C) the price at which that unit is sold plus the price increases that apply to all other units of output. 
D) indeterminate unless marginal cost data are known.

Question 15

If profits are maximized (or losses minimized), which of the following conditions is common to both unregulated monopoly and pure competition?

Accepted Answer

A) MC = P 
B) MC = ATC 
C) MR = MC 
D) P = MR 
A) MC = P 
B) MC = ATC 
C) MR = MC 
D) P = MR

Question 16

Pure monopolists may obtain economic profits in the long run because

Accepted Answer

A) of advertising. 
B) marginal revenue is constant as sales increase. 
C) of barriers to entry. 
D) of rising average fixed costs. 
A) of advertising. 
B) marginal revenue is constant as sales increase. 
C) of barriers to entry. 
D) of rising average fixed costs.

Question 17

The graphs represent the demand for use of a local golf course for which there is no significant competition. (It has a local monopoly.)P denotes the price of a round of golf, and Q is the quantity of rounds "sold" each day. If the left graph represents the demand during weekdays and the right graph the weekend demand, this profit-maximizing golf course should

Accepted Answer

A) charge $9 for each round, regardless of the day of the week. 
B) charge $7 for each round, regardless of the day of the week. 
C) charge $7 for each round on weekdays and $10 during the weekend. 
D) charge $9 for each round on weekdays and $10 during the weekend. 
A) charge $9 for each round, regardless of the day of the week. 
B) charge $7 for each round, regardless of the day of the week. 
C) charge $7 for each round on weekdays and $10 during the weekend. 
D) charge $9 for each round on weekdays and $10 during the weekend.

Question 18

"Price maker" means that a monopoly can decide whatever price it wants to, in order to sell a specific given quantity of its product.

Accepted Answer

A) True 
 B)False

Question 19

Under which of the following situations would a monopolist increase profits by lowering price (and increasing output)?

Accepted Answer

A) if it discovered that it was producing where MC = MR 
B) if it discovered that it was producing where its MC curve intersects its demand curve 
C) if it discovered that it was producing where MC < MR 
D) under none of these circumstances because a monopolist would never lower price 
A) if it discovered that it was producing where MC = MR 
B) if it discovered that it was producing where its MC curve intersects its demand curve 
C) if it discovered that it was producing where MC < MR 
D) under none of these circumstances because a monopolist would never lower price

Question 20

Under which of the following conditions would a profit-maximizing monopolist necessarily raise price?

Accepted Answer

A) if product demand was price-elastic 
B) if marginal revenue is positive 
C) if marginal revenue was greater than marginal cost 
D) if marginal cost was greater than marginal revenue 
A) if product demand was price-elastic 
B) if marginal revenue is positive 
C) if marginal revenue was greater than marginal cost 
D) if marginal cost was greater than marginal revenue

Exam 12: Pure Monopoly

Suppose that a pure monopolist can sell 20 units of output at $10 per unit and 21 units at $9.75 per unit. The marginal revenue of the 21st unit of output is

Suppose that a pure monopolist can sell 9 units of output at $12 per unit and 10 units at $11.50 per unit. For the monopolist to profitably produce and sell the tenth unit of output, its marginal cost must be anywhere at or below

Barriers to entering an industry

The table shows the relationship between output, total costs, and total revenue for a pure monopoly. Within which of the following ranges of output will the firm earn maximum economic profits?

In an unregulated monopoly at equilibrium, the output level is higher than the economically efficient level.

Refer to the provided graph for an industry. If the industry was initially a monopoly, but the monopolist was broken up into a large number of small, purely competitive firms and production cost-curves remained unchanged, then market price and industry output would be

In what ways do the demand schedules for a purely competitive firm and a pure monopolist differ? What significance does this have for the price-output behavior of each?

Refer to the graph, which shows a total revenue curve for a monopolist. If total revenue falls as output expands, marginal revenue is

Refer to the diagrams. Firm A is a

Which phrase would be most characteristic of pure monopoly?

Refer to the graph, which shows a total revenue curve for a monopolist. The firm's marginal revenue curve must be

A monopolist sells 6 units of a product per day at a unit price of $15. If it lowers the price to $14, its total revenue increases by $22. This implies that its sales quantity increases by

Refer to the diagram for a nondiscriminating monopolist. At output Q production will be unprofitable.

If a nondiscriminating pure monopolist decides to sell one more unit of output, the marginal revenue associated with that unit will be

If profits are maximized (or losses minimized), which of the following conditions is common to both unregulated monopoly and pure competition?

Pure monopolists may obtain economic profits in the long run because

"Price maker" means that a monopoly can decide whatever price it wants to, in order to sell a specific given quantity of its product.

Under which of the following situations would a monopolist increase profits by lowering price (and increasing output)?

Under which of the following conditions would a profit-maximizing monopolist necessarily raise price?

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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