Question 1

If the industry depicted in this graph were purely competitive, then the market price would be

Accepted Answer

A) $25, which is higher than what the price would have been if the industry were a monopoly. 
B) $25, which is lower than what the price would have been if the industry were a monopoly. 
C) $20, which is higher than what the price would have been if the industry were a monopoly. 
D) $20, which is lower than what the price would have been if the industry were a monopoly. 
A) $25, which is higher than what the price would have been if the industry were a monopoly. 
B) $25, which is lower than what the price would have been if the industry were a monopoly. 
C) $20, which is higher than what the price would have been if the industry were a monopoly. 
D) $20, which is lower than what the price would have been if the industry were a monopoly.

Question 2

Assume that the owners of the only gambling casino in Wisconsin spend large sums of money lobbying state government officials to protect their gambling monopoly. Economists refer to these expenditures as

Accepted Answer

A) rent-seeking. 
B) price discrimination. 
C) X-efficiency. 
D) network effects. 
A) rent-seeking. 
B) price discrimination. 
C) X-efficiency. 
D) network effects.

Question 3

A price-discriminating monopolist will set a higher price where demand is more elastic and a lower price where demand is less elastic.

Accepted Answer

A) True 
 B)False

Question 4

A firm sells 99 units of output when price equals $10, and 100 units of output when price equals $9. Its marginal revenue for the 100th unit of output is negative.

Accepted Answer

A) True 
 B)False

Question 5

One defining characteristic of pure monopoly is that

Accepted Answer

A) the monopolist is a price taker. 
B) the monopolist uses advertising. 
C) the monopolist produces a product with no close substitutes. 
D) there is relatively easy entry into the industry, but exit is difficult. 
A) the monopolist is a price taker. 
B) the monopolist uses advertising. 
C) the monopolist produces a product with no close substitutes. 
D) there is relatively easy entry into the industry, but exit is difficult.

Question 6

If the profit-maximizing pure monopolist whose information is in the accompanying table is able to price discriminate, charging each customer the price associated with each given level of output, how much profit will the firm earn?

Accepted Answer

A) $1,100 
B) $550 
C) $620 
D) $400 
A) $1,100 
B) $550 
C) $620 
D) $400

Question 7

Refer to the diagrams. The price will be _______ and the quantity will be _______ with the industry structure represented by diagram (B)compared to the one represented in (A).

Accepted Answer

A) higher; higher 
B) higher; lower 
C) lower; lower 
D) lower; higher 
A) higher; higher 
B) higher; lower 
C) lower; lower 
D) lower; higher

Question 8

Based on the graph, what is the difference between the purely competitive equilibrium level of output and the pure monopoly equilibrium level of output?

Accepted Answer

A) 20 
B) 70 
C) 90 
D) 110 
A) 20 
B) 70 
C) 90 
D) 110

Question 9

Refer to the diagram for a pure monopolist. Monopoly profit

Accepted Answer

A) cannot be determined from the information given. 
B) will be ae per unit sold. 
C) will be bc per unit sold. 
D) will be ac per unit sold. 
A) cannot be determined from the information given. 
B) will be ae per unit sold. 
C) will be bc per unit sold. 
D) will be ac per unit sold.

Question 10

The data relate to a pure monopolist and the product it produces. What is the profit-maximizing output and price for this monopolist?

Accepted Answer

A) P = $12; Q = 5 
B) P = $14; Q = 4 
C) P = $15; Q = 3 
D) P = $18; Q = 2 
A) P = $12; Q = 5 
B) P = $14; Q = 4 
C) P = $15; Q = 3 
D) P = $18; Q = 2

Question 11

Many economists agree that government should deal with monopolists on a case-by-case basis. Which of the following is not a government policy option?

Accepted Answer

A) If the monopoly is attained and maintained through anticompetitive behavior, the government can file a suit based on antitrust laws. 
B) If the firm is a natural monopoly, the government may decide to regulate its prices and operations. 
C) If the monopoly is maximizing economic profits, the government can subsidize new firms to enter the industry. 
D) If the monopoly is subject, and vulnerable, to potential competition, the government can decide to leave it alone. 
A) If the monopoly is attained and maintained through anticompetitive behavior, the government can file a suit based on antitrust laws. 
B) If the firm is a natural monopoly, the government may decide to regulate its prices and operations. 
C) If the monopoly is maximizing economic profits, the government can subsidize new firms to enter the industry. 
D) If the monopoly is subject, and vulnerable, to potential competition, the government can decide to leave it alone.

Question 12

In the 1300s, the French government claimed for itself a monopoly over the sale of salt. Over the next few centuries

Accepted Answer

A) The French government would retain that monopoly, earning tremendous economic profits. 
B) The French government auctioned off the monopoly right to sell salt, earning large sums and freeing itself of collection costs. 
C) The French government retained that monopoly, selling salt at below market prices to ensure widespread access to salt. 
D) The French government deregulated the salt industry, ensuring that multiple sellers would create competitive market conditions and keep prices lower. 
A) The French government would retain that monopoly, earning tremendous economic profits. 
B) The French government auctioned off the monopoly right to sell salt, earning large sums and freeing itself of collection costs. 
C) The French government retained that monopoly, selling salt at below market prices to ensure widespread access to salt. 
D) The French government deregulated the salt industry, ensuring that multiple sellers would create competitive market conditions and keep prices lower.

Question 13

A monopolist can sell 20 toys per day for $8.00 each. To sell 21 toys per day, the price must be cut to $7.00. The marginal revenue of the 21st toy is

Accepted Answer

A) $7.00. 
B) $−10.00. 
C) $−13.00. 
D) $21. 
A) $7.00. 
B) $−10.00. 
C) $−13.00. 
D) $21.

Question 14

Answer the question on the basis of the demand and cost data for a pure monopolist. At the profit-maximizing price and quantity of output, the monopolist will realize profit of

Accepted Answer

A) $11.25. 
B) $10.00. 
C) $6.50. 
D) $4.50. 
A) $11.25. 
B) $10.00. 
C) $6.50. 
D) $4.50.

Question 15

Consumers who clip and redeem discount coupons

Accepted Answer

A) exhibit the same price elasticity of demand for a given product than consumers who do not clip and redeem coupons. 
B) exhibit a higher price elasticity of demand for a given product than consumers who do not clip and redeem coupons. 
C) exhibit a lower price elasticity of demand for a given product than consumers who do not clip and redeem coupons. 
D) cause total revenue to decrease for firms that issue coupons for their products. 
A) exhibit the same price elasticity of demand for a given product than consumers who do not clip and redeem coupons. 
B) exhibit a higher price elasticity of demand for a given product than consumers who do not clip and redeem coupons. 
C) exhibit a lower price elasticity of demand for a given product than consumers who do not clip and redeem coupons. 
D) cause total revenue to decrease for firms that issue coupons for their products.

Question 16

A price-discriminating monopolist will follow a system where

Accepted Answer

A) buyers with inelastic demand are charged higher prices than buyers with elastic demand. 
B) buyers with inelastic demand are charged lower prices than buyers with elastic demand. 
C) all buyers are charged the same price regardless of their elasticity of demand. 
D) the price of the product is held the same even if the demand changes. 
A) buyers with inelastic demand are charged higher prices than buyers with elastic demand. 
B) buyers with inelastic demand are charged lower prices than buyers with elastic demand. 
C) all buyers are charged the same price regardless of their elasticity of demand. 
D) the price of the product is held the same even if the demand changes.

Question 17

How does monopoly compare with pure competition in terms of price, output, and efficiency? Explain.

Accepted Answer

The monopolist sells a smaller output at

Question 18

A pure monopolist

Accepted Answer

A) will realize an economic profit if price exceeds ATC at the profit-maximizing/loss-minimizing level of output. 
B) will realize an economic profit if ATC exceeds MR at the profit-maximizing/loss-minimizing level of output. 
C) will realize an economic loss if MC intersects the downsloping portion of MR. 
D) always realizes an economic profit. 
A) will realize an economic profit if price exceeds ATC at the profit-maximizing/loss-minimizing level of output. 
B) will realize an economic profit if ATC exceeds MR at the profit-maximizing/loss-minimizing level of output. 
C) will realize an economic loss if MC intersects the downsloping portion of MR. 
D) always realizes an economic profit.

Question 19

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

Accepted Answer

A) P = 15, MR = 8 
B) P = 12, MR = 0 
C) P = 8, MR = −2 
D) P = 4, MR = −4 
A) P = 15, MR = 8 
B) P = 12, MR = 0 
C) P = 8, MR = −2 
D) P = 4, MR = −4

Question 20

Refer to the diagram for a nondiscriminating monopolist. If the government regulates the monopolist so that it charges the socially optimal price, the monopolist will produce output Q.

Accepted Answer

A) True 
 B)False

Exam 12: Pure Monopoly

If the industry depicted in this graph were purely competitive, then the market price would be

Assume that the owners of the only gambling casino in Wisconsin spend large sums of money lobbying state government officials to protect their gambling monopoly. Economists refer to these expenditures as

A price-discriminating monopolist will set a higher price where demand is more elastic and a lower price where demand is less elastic.

A firm sells 99 units of output when price equals $10, and 100 units of output when price equals $9. Its marginal revenue for the 100th unit of output is negative.

One defining characteristic of pure monopoly is that

If the profit-maximizing pure monopolist whose information is in the accompanying table is able to price discriminate, charging each customer the price associated with each given level of output, how much profit will the firm earn?

Refer to the diagrams. The price will be _______ and the quantity will be _______ with the industry structure represented by diagram (B)compared to the one represented in (A).

Based on the graph, what is the difference between the purely competitive equilibrium level of output and the pure monopoly equilibrium level of output?

Refer to the diagram for a pure monopolist. Monopoly profit

The data relate to a pure monopolist and the product it produces. What is the profit-maximizing output and price for this monopolist?

Many economists agree that government should deal with monopolists on a case-by-case basis. Which of the following is not a government policy option?

In the 1300s, the French government claimed for itself a monopoly over the sale of salt. Over the next few centuries

A monopolist can sell 20 toys per day for $8.00 each. To sell 21 toys per day, the price must be cut to $7.00. The marginal revenue of the 21st toy is

Answer the question on the basis of the demand and cost data for a pure monopolist. At the profit-maximizing price and quantity of output, the monopolist will realize profit of

Consumers who clip and redeem discount coupons

A price-discriminating monopolist will follow a system where

How does monopoly compare with pure competition in terms of price, output, and efficiency? Explain.

A pure monopolist

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

Refer to the diagram for a nondiscriminating monopolist. If the government regulates the monopolist so that it charges the socially optimal price, the monopolist will produce output Q.

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

Filters

Refer to the diagrams. The price will be _ and the quantity will be _ with the industry structure represented by diagram (B)compared to the one represented in (A).