Question 1

The ability of personalized pricing by online retailers to price discriminate

Accepted Answer

A) is enhanced by Big Data's ability to accurately determine a buyer's reservation price. 
B) is only effective at the group level. 
C) means that buyers with more elastic demand face systematically higher prices. 
D) is limited by buyers' willingness and ability to easily search out lower prices at other online sites. 
A) is enhanced by Big Data's ability to accurately determine a buyer's reservation price. 
B) is only effective at the group level. 
C) means that buyers with more elastic demand face systematically higher prices. 
D) is limited by buyers' willingness and ability to easily search out lower prices at other online sites.

Question 2

Refer to the long-run cost diagram for a firm. If the firm produces output Q₂ at an average cost of ATC₃, then the firm is

Accepted Answer

A) producing the profit-maximizing output but is failing to minimize production costs. 
B) incurring X-inefficiency but is realizing all existing economies of scale. 
C) incurring X-inefficiency and is failing to realize all existing economies of scale. 
D) producing that output with the most efficient combination of inputs and is realizing all existing economies of scale. 
A) producing the profit-maximizing output but is failing to minimize production costs. 
B) incurring X-inefficiency but is realizing all existing economies of scale. 
C) incurring X-inefficiency and is failing to realize all existing economies of scale. 
D) producing that output with the most efficient combination of inputs and is realizing all existing economies of scale.

Question 3

Which of the following is not a possible source of natural monopoly?

Accepted Answer

A) large-scale network effects 
B) simultaneous consumption 
C) greater use of specialized inputs 
D) rent-seeking behavior 
A) large-scale network effects 
B) simultaneous consumption 
C) greater use of specialized inputs 
D) rent-seeking behavior

Question 4

Refer to the diagram for a nondiscriminating monopolist. At output R economic profits will be zero.

Accepted Answer

A) True 
 B)False

Question 5

Marginal costs of a producer may be very small due to its product's ability to satisfy a large number of consumers at the same time. This characteristic of a product is called

Accepted Answer

A) economies of scale. 
B) rent-seeking. 
C) simultaneous consumption. 
D) consumer sovereignty. 
A) economies of scale. 
B) rent-seeking. 
C) simultaneous consumption. 
D) consumer sovereignty.

Question 6

If the industry depicted in this graph were purely competitive, the output quantity would be

Accepted Answer

A) 90. 
B) 160. 
C) 195. 
D) a level that is not labeled in the graph. 
A) 90. 
B) 160. 
C) 195. 
D) a level that is not labeled in the graph.

Question 7

A monopolist can sell 10 toys per day for $10.00 each. To sell 11 toys per day, the price must be cut to $9.50. The marginal revenue of the 11th toy is

Accepted Answer

A) $9.50. 
B) $-0.50. 
C) $4.50 . 
D) $11. 
A) $9.50. 
B) $-0.50. 
C) $4.50 . 
D) $11.

Question 8

If a pure monopolist can price discriminate by separating buyers into two or more groups,

Accepted Answer

A) the marginal revenue curve and the total revenue curve will now coincide. 
B) the marginal revenue curve will now shift to a position above the demand curve. 
C) the firm will face multiple marginal revenue curves. 
D) marginal revenue will become less at each level of output than it would be without price discrimination. 
A) the marginal revenue curve and the total revenue curve will now coincide. 
B) the marginal revenue curve will now shift to a position above the demand curve. 
C) the firm will face multiple marginal revenue curves. 
D) marginal revenue will become less at each level of output than it would be without price discrimination.

Question 9

Which is true of a price-discriminating pure monopolist?

Accepted Answer

A) P > MR for the last unit sold. 
B) Profit will be higher than in the nondiscriminating case. 
C) The average price will be higher than in the nondiscriminating case. 
D) Allocative inefficiency will be greater than in the nondiscriminating case. 
A) P > MR for the last unit sold. 
B) Profit will be higher than in the nondiscriminating case. 
C) The average price will be higher than in the nondiscriminating case. 
D) Allocative inefficiency will be greater than in the nondiscriminating case.

Question 10

Refer to the graph for a profit-maximizing monopolist. The firm will produce a quantity equal to the distance:

Accepted Answer

A) 0 V. 
B) 0 Y. 
C) 0 T. 
D) 0 X. 
A) 0 V. 
B) 0 Y. 
C) 0 T. 
D) 0 X.

Question 11

Refer to the diagram for a nondiscriminating monopolist. The profit-maximizing output for this firm is M.

Accepted Answer

A) True 
 B)False

Question 12

Refer to the data for a nondiscriminating monopolist. At its profit-maximizing output, this firm's total profit will be

Accepted Answer

A) $82. 
B) zero. 
C) $54. 
D) $27. 
A) $82. 
B) zero. 
C) $54. 
D) $27.

Question 13

A monopolist will avoid setting a price in the elastic segment of the demand curve and prefer to set the price in the inelastic segment.

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is a characteristic of pure monopoly?

Accepted Answer

A) close substitute products 
B) barriers to entry 
C) the absence of market power 
D) "price taking" 
A) close substitute products 
B) barriers to entry 
C) the absence of market power 
D) "price taking"

Question 15

If a regulatory commission wants to establish a socially optimal price for a natural monopoly, it should select a price

Accepted Answer

A) at which the marginal cost curve intersects the demand curve. 
B) at which marginal revenue is zero. 
C) at which the average total cost curve intersects the demand curve. 
D) that corresponds with the equality of marginal cost and marginal revenue. 
A) at which the marginal cost curve intersects the demand curve. 
B) at which marginal revenue is zero. 
C) at which the average total cost curve intersects the demand curve. 
D) that corresponds with the equality of marginal cost and marginal revenue.

Question 16

The supply curve for a monopoly is

Accepted Answer

A) the portion of the marginal cost curve that lies above the average variable cost curve. 
B) the portion of the marginal cost curve that lies above the average total cost curve. 
C) the portion of the marginal cost curve that lies above the average fixed cost curve. 
D) not clearly defined. 
A) the portion of the marginal cost curve that lies above the average variable cost curve. 
B) the portion of the marginal cost curve that lies above the average total cost curve. 
C) the portion of the marginal cost curve that lies above the average fixed cost curve. 
D) not clearly defined.

Question 17

Refer to the diagram for a nondiscriminating monopolist. The profit-seeking monopolist will

Accepted Answer

A) always produce at output q₂. 
B) always produce more than q₂. 
C) never produce an output larger than q₂. 
D) never produce an output larger than q₁. 
A) always produce at output q₂. 
B) always produce more than q₂. 
C) never produce an output larger than q₂. 
D) never produce an output larger than q₁.

Question 18

Which of the diagrams correctly portrays the demand (D)and marginal revenue (MR)curves of a pure monopolist that is able to price discriminate by charging each customer his or her maximum willingness to pay?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 19

Which of the graphs shows the correct relationship between demand and marginal revenue?

Accepted Answer

A) A 
B) B 
C) C 
D) D 
A) A 
B) B 
C) C 
D) D

Question 20

If a monopolist finds itself operating in the inelastic portion of its demand curve, then it should never lower its price because doing so would reduce its profits.

Accepted Answer

A) True 
 B)False

Exam 12: Pure Monopoly

The ability of personalized pricing by online retailers to price discriminate

Refer to the long-run cost diagram for a firm. If the firm produces output Q₂ at an average cost of ATC₃, then the firm is

Which of the following is not a possible source of natural monopoly?

Refer to the diagram for a nondiscriminating monopolist. At output R economic profits will be zero.

Marginal costs of a producer may be very small due to its product's ability to satisfy a large number of consumers at the same time. This characteristic of a product is called

If the industry depicted in this graph were purely competitive, the output quantity would be

A monopolist can sell 10 toys per day for $10.00 each. To sell 11 toys per day, the price must be cut to $9.50. The marginal revenue of the 11th toy is

If a pure monopolist can price discriminate by separating buyers into two or more groups,

Which is true of a price-discriminating pure monopolist?

Refer to the graph for a profit-maximizing monopolist. The firm will produce a quantity equal to the distance:

Refer to the diagram for a nondiscriminating monopolist. The profit-maximizing output for this firm is M.

Refer to the data for a nondiscriminating monopolist. At its profit-maximizing output, this firm's total profit will be

A monopolist will avoid setting a price in the elastic segment of the demand curve and prefer to set the price in the inelastic segment.

Which of the following is a characteristic of pure monopoly?

If a regulatory commission wants to establish a socially optimal price for a natural monopoly, it should select a price

The supply curve for a monopoly is

Refer to the diagram for a nondiscriminating monopolist. The profit-seeking monopolist will

Which of the diagrams correctly portrays the demand (D)and marginal revenue (MR)curves of a pure monopolist that is able to price discriminate by charging each customer his or her maximum willingness to pay?

Which of the graphs shows the correct relationship between demand and marginal revenue?

If a monopolist finds itself operating in the inelastic portion of its demand curve, then it should never lower its price because doing so would reduce its profits.

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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