Question 1

Which of the following statements is correct?

Accepted Answer

A) In the short run, the pure monopolist will maximize total profits by producing at that level of output where the difference between price and average total cost is greatest. 
B) In the short run, the pure monopolist will charge the highest price it can get for its product. 
C) Because of its ability to set its own price, the pure monopolist can increase price and increase its volume of sales simultaneously. 
D) Pure monopolists do not always realize positive profits, sometimes they suffer losses. 
A) In the short run, the pure monopolist will maximize total profits by producing at that level of output where the difference between price and average total cost is greatest. 
B) In the short run, the pure monopolist will charge the highest price it can get for its product. 
C) Because of its ability to set its own price, the pure monopolist can increase price and increase its volume of sales simultaneously. 
D) Pure monopolists do not always realize positive profits, sometimes they suffer losses.

Question 2

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) $9. 
B) $1. 
C) $6. 
D) $8. 
A) $9. 
B) $1. 
C) $6. 
D) $8.

Question 3

In the short run a pure monopolist will charge the highest price the market will bear for its product.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following is not a barrier to entry?

Accepted Answer

A) patents 
B) X-inefficiency 
C) economies of scale 
D) ownership of essential resources 
A) patents 
B) X-inefficiency 
C) economies of scale 
D) ownership of essential resources

Question 5

The demand curve confronting a nondiscriminating pure monopolist is

Accepted Answer

A) horizontal. 
B) the same as the industry's demand curve. 
C) more elastic than the demand curve confronting a competitive firm. 
D) derived by vertically summing the individual demand curves for the buyers. 
A) horizontal. 
B) the same as the industry's demand curve. 
C) more elastic than the demand curve confronting a competitive firm. 
D) derived by vertically summing the individual demand curves for the buyers.

Question 6

If a nondiscriminating imperfectly competitive firm is selling its 100th unit of output for $35, its marginal revenue

Accepted Answer

A) may be either greater or less than $35. 
B) will also be $35. 
C) will be less than $35. 
D) will be greater than $35. 
A) may be either greater or less than $35. 
B) will also be $35. 
C) will be less than $35. 
D) will be greater than $35.

Question 7

Pure monopolists always earn economic profits.

Accepted Answer

A) True 
 B)False

Question 8

Barriers to entry

Accepted Answer

A) usually result in pure competition. 
B) can result from government regulation. 
C) exist in economic theory but not in the real world. 
D) are typically the result of wrongdoing on the part of a firm. 
A) usually result in pure competition. 
B) can result from government regulation. 
C) exist in economic theory but not in the real world. 
D) are typically the result of wrongdoing on the part of a firm.

Question 9

The nondiscriminating pure monopolist's demand curve

Accepted Answer

A) is the industry demand curve. 
B) shows a direct or positive relationship between price and quantity demanded. 
C) tends to be inelastic at high prices and elastic at low prices. 
D) is identical to its marginal revenue curve. 
A) is the industry demand curve. 
B) shows a direct or positive relationship between price and quantity demanded. 
C) tends to be inelastic at high prices and elastic at low prices. 
D) is identical to its marginal revenue curve.

Question 10

Suppose that a pure monopolist can sell 7 units of output at $9 per unit and 8 units at $8.50 per unit. For the monopolist to profitably produce and sell the eighth unit of output, its marginal cost must be anywhere at or below

Accepted Answer

A) $9. 
B) $8.50. 
C) $6.50. 
D) $5.00. 
A) $9. 
B) $8.50. 
C) $6.50. 
D) $5.00.

Question 11

If a monopoly is faced with competition from foreign multinational corporations or from potential new entrants, then it would probably

Accepted Answer

A) raise price and reduce output. 
B) reduce price and raise output. 
C) start operating at the inelastic portion of its demand curve. 
D) increase production so that MR > MC. 
A) raise price and reduce output. 
B) reduce price and raise output. 
C) start operating at the inelastic portion of its demand curve. 
D) increase production so that MR > MC.

Question 12

If a monopolist were to produce in the inelastic segment of its demand curve,

Accepted Answer

A) total revenue would be at a maximum. 
B) marginal revenue would be positive. 
C) the firm would not be maximizing profits. 
D) it would necessarily incur a loss. 
A) total revenue would be at a maximum. 
B) marginal revenue would be positive. 
C) the firm would not be maximizing profits. 
D) it would necessarily incur a loss.

Question 13

Refer to the graph, which shows the revenue curves for a monopolist. At what output level is demand inelastic?

Accepted Answer

A) Q₁ 
B) Q₂ 
C) Q₃ 
D) Q₄ 
A) Q₁ 
B) Q₂ 
C) Q₃ 
D) Q₄

Question 14

Large minimum efficient scale of plant combined with limited market demand may lead to

Accepted Answer

A) natural monopoly. 
B) patent monopoly. 
C) government franchise monopoly. 
D) shared monopoly. 
A) natural monopoly. 
B) patent monopoly. 
C) government franchise monopoly. 
D) shared monopoly.

Question 15

Refer to the diagram for a nondiscriminating monopolist. Demand is elastic

Accepted Answer

A) in the q₁ q₃ output range. 
B) only for outputs greater than q₄. 
C) for all levels of output less than q₂. 
D) for all levels of output greater than q₂. 
A) in the q₁ q₃ output range. 
B) only for outputs greater than q₄. 
C) for all levels of output less than q₂. 
D) for all levels of output greater than q₂.

Question 16

The table shows the demand schedule facing Nina, a monopolist selling baskets. If Nina had no production costs, what price would she charge to maximize profits?

Accepted Answer

A) $20 
B) $16 
C) $10 
D) $12 
A) $20 
B) $16 
C) $10 
D) $12

Question 17

Refer to the graphs of D and MR for a monopolist. Which of the following statements is true?

Accepted Answer

A) Demand is elastic at a price of P₁. 
B) Demand is inelastic at a price of P₂. 
C) The price elasticity of demand is constant over the entire demand curve. 
D) Demand is unitary-elastic over the entire demand curve. 
A) Demand is elastic at a price of P₁. 
B) Demand is inelastic at a price of P₂. 
C) The price elasticity of demand is constant over the entire demand curve. 
D) Demand is unitary-elastic over the entire demand curve.

Question 18

Because of the ability to influence price, a pure monopolist can increase price and increase volume of sales simultaneously.

Accepted Answer

A) True 
 B)False

Question 19

One feature of pure monopoly is that the demand curve

Accepted Answer

A) is vertical. 
B) is horizontal. 
C) slopes upward. 
D) slopes downward. 
A) is vertical. 
B) is horizontal. 
C) slopes upward. 
D) slopes downward.

Question 20

The region of demand in which the monopolist will choose a price-output combination will be

Accepted Answer

A) inelastic because, as price declines and output increases, total revenue will increase. 
B) inelastic because, as price declines and output increases, total revenue will decrease. 
C) elastic because, as price declines and output increases, total revenue will decrease. 
D) elastic because, as price declines and output increases, total revenue will increase. 
A) inelastic because, as price declines and output increases, total revenue will increase. 
B) inelastic because, as price declines and output increases, total revenue will decrease. 
C) elastic because, as price declines and output increases, total revenue will decrease. 
D) elastic because, as price declines and output increases, total revenue will increase.

Exam 12: Pure Monopoly

Which of the following statements is correct?

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

In the short run a pure monopolist will charge the highest price the market will bear for its product.

Which of the following is not a barrier to entry?

The demand curve confronting a nondiscriminating pure monopolist is

If a nondiscriminating imperfectly competitive firm is selling its 100th unit of output for $35, its marginal revenue

Pure monopolists always earn economic profits.

Barriers to entry

The nondiscriminating pure monopolist's demand curve

Suppose that a pure monopolist can sell 7 units of output at $9 per unit and 8 units at $8.50 per unit. For the monopolist to profitably produce and sell the eighth unit of output, its marginal cost must be anywhere at or below

If a monopoly is faced with competition from foreign multinational corporations or from potential new entrants, then it would probably

If a monopolist were to produce in the inelastic segment of its demand curve,

Refer to the graph, which shows the revenue curves for a monopolist. At what output level is demand inelastic?

Large minimum efficient scale of plant combined with limited market demand may lead to

Refer to the diagram for a nondiscriminating monopolist. Demand is elastic

The table shows the demand schedule facing Nina, a monopolist selling baskets. If Nina had no production costs, what price would she charge to maximize profits?

Refer to the graphs of D and MR for a monopolist. Which of the following statements is true?

Because of the ability to influence price, a pure monopolist can increase price and increase volume of sales simultaneously.

One feature of pure monopoly is that the demand curve

The region of demand in which the monopolist will choose a price-output combination will be

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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