Question 1

The problem with socially optimal pricing regulation of a natural monopoly is that

Accepted Answer

A) P < MC. 
B) P < AVC. 
C) P < ATC. 
D) P < MR. 
A) P < MC. 
B) P < AVC. 
C) P < ATC. 
D) P < MR.

Question 2

Refer to the diagram for a nondiscriminating monopolist. Marginal revenue will be zero at output

Accepted Answer

A) q₁. 
B) q₂. 
C) q₃. 
D) q₄. 
A) q₁. 
B) q₂. 
C) q₃. 
D) q₄.

Question 3

At the profit-maximizing level of output for a monopolist,

Accepted Answer

A) price is greater than marginal cost. 
B) price is greater than average revenue. 
C) average total cost equals marginal cost. 
D) total revenue is greater than total cost. 
A) price is greater than marginal cost. 
B) price is greater than average revenue. 
C) average total cost equals marginal cost. 
D) total revenue is greater than total cost.

Question 4

Society suffers a deadweight loss in a pure-monopoly market because

Accepted Answer

A) output is less, while price is more, than is socially optimal. 
B) output is more, while price is less, than is socially optimal. 
C) both output and price are higher than is socially optimal. 
D) both output and price are lower than is socially optimal. 
A) output is less, while price is more, than is socially optimal. 
B) output is more, while price is less, than is socially optimal. 
C) both output and price are higher than is socially optimal. 
D) both output and price are lower than is socially optimal.

Question 5

If the firm in the diagram lowers price from P ₁ to P ₂, it will

Accepted Answer

A) lose P₁ P₂ ba in revenue from the price cut but increase revenue by Q₁ bcQ₂ from the increase in sales. 
B) lose P₁ P₂ ca in revenue from the price cut but increase revenue by Q₁ acQ₂ from the increase in sales. 
C) incur a decline in total revenue because it is operating on the elastic segment of the demand curve. 
D) incur an increase in total revenue because it is operating on the inelastic segment of the demand curve. 
A) lose P₁ P₂ ba in revenue from the price cut but increase revenue by Q₁ bcQ₂ from the increase in sales. 
B) lose P₁ P₂ ca in revenue from the price cut but increase revenue by Q₁ acQ₂ from the increase in sales. 
C) incur a decline in total revenue because it is operating on the elastic segment of the demand curve. 
D) incur an increase in total revenue because it is operating on the inelastic segment of the demand curve.

Question 6

The table shows the demand schedule facing Nina, a monopolist selling baskets. What is the change in total revenue if she raises the price from $10 to $12?

Accepted Answer

A) $-300 
B) $300 
C) $-120 
D) $120 
A) $-300 
B) $300 
C) $-120 
D) $120

Question 7

Based on the accompanying table, how many units would the given profit-maximizing nondiscriminating pure monopolist produce?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
A) 1 
B) 2 
C) 3 
D) 4

Question 8

A firm that has the long-run cost curves shown in the graph would be able to do or have the following, except

Accepted Answer

A) exploit economies of scale. 
B) have an entry barrier protecting it from new entrants into the market. 
C) serve an increasing share of the market at lower and lower unit costs. 
D) attain lower unit costs by reducing its output level. 
A) exploit economies of scale. 
B) have an entry barrier protecting it from new entrants into the market. 
C) serve an increasing share of the market at lower and lower unit costs. 
D) attain lower unit costs by reducing its output level.

Question 9

Answer the question on the basis of the accompanying table, which shows the demand schedule facing a nondiscriminating monopolist.   The profit-maximizing monopolist will sell at a price

Accepted Answer

A) of $5. 
B) of $4. 
C) of $8. 
D) that cannot be determined with the information provided. 
A) of $5. 
B) of $4. 
C) of $8. 
D) that cannot be determined with the information provided.

Question 10

X-inefficiency is said to occur when a monopolist's

Accepted Answer

A) average cost is greater than the minimum possible average cost. 
B) marginal costs are greater than the minimum possible average cost. 
C) output level is higher than is socially optimal. 
D) price is higher than its average cost. 
A) average cost is greater than the minimum possible average cost. 
B) marginal costs are greater than the minimum possible average cost. 
C) output level is higher than is socially optimal. 
D) price is higher than its average cost.

Question 11

The monopolist's demand curve is more elastic than the industry demand curve.

Accepted Answer

A) True 
 B)False

Question 12

An unregulated pure monopolist will maximize profits by producing that output at which

Accepted Answer

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

Question 13

If the industry depicted in this graph were purely competitive, the market 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 14

In which one of the following market models is X-inefficiency most likely to be the greatest?

Accepted Answer

A) pure competition 
B) oligopoly 
C) monopolistic competition 
D) pure monopoly 
A) pure competition 
B) oligopoly 
C) monopolistic competition 
D) pure monopoly

Question 15

A pure monopolist is producing an output such that ATC = $7, P = $9, MC = $6, MR = $5, and AVC = $5.50. This firm is realizing

Accepted Answer

A) an economic loss that could be reduced by producing more output. 
B) an economic loss that could be reduced by producing less output. 
C) an economic profit that could be increased by producing less output. 
D) an economic profit that could be increased by producing more output. 
A) an economic loss that could be reduced by producing more output. 
B) an economic loss that could be reduced by producing less output. 
C) an economic profit that could be increased by producing less output. 
D) an economic profit that could be increased by producing more output.

Question 16

Price discrimination is often used by businesses. Explain the three conditions under which price discrimination is practiced.

Accepted Answer

Price discrimination is possible when th

Question 17

Refer to the diagram for a nondiscriminating monopolist. At output M total cost will be 0CHM.

Accepted Answer

A) True 
 B)False

Question 18

Children are charged less than adults for admission to professional baseball games but are charged the same prices as adults at the concession stands. Which of the following conditions of price discrimination explains why this occurs?

Accepted Answer

A) The seller must have some monopoly power; that is, it must be able to set the product price. 
B) The seller must be able to identify buyers by group characteristics such as age or income. 
C) Groups must have different elasticities of demand for the product. 
D) Concession items could be bought by people in the low-price group and transferred to members of the high-price group. 
A) The seller must have some monopoly power; that is, it must be able to set the product price. 
B) The seller must be able to identify buyers by group characteristics such as age or income. 
C) Groups must have different elasticities of demand for the product. 
D) Concession items could be bought by people in the low-price group and transferred to members of the high-price group.

Question 19

Refer to the diagram. At the profit-maximizing level of output, total cost will be

Accepted Answer

A) NM times 0 M. 
B) 0 AJE. 
C) 0 CGC. 
D) 0 BHE. 
A) NM times 0 M. 
B) 0 AJE. 
C) 0 CGC. 
D) 0 BHE.

Question 20

At equilibrium, the profit-maximizing monopolist facing the situation shown in the graph will face a negative

Accepted Answer

A) average revenue. 
B) total revenue. 
C) marginal revenue. 
D) profit. 
A) average revenue. 
B) total revenue. 
C) marginal revenue. 
D) profit.

Exam 12: Pure Monopoly

The problem with socially optimal pricing regulation of a natural monopoly is that

Refer to the diagram for a nondiscriminating monopolist. Marginal revenue will be zero at output

At the profit-maximizing level of output for a monopolist,

Society suffers a deadweight loss in a pure-monopoly market because

If the firm in the diagram lowers price from P ₁ to P ₂, it will

The table shows the demand schedule facing Nina, a monopolist selling baskets. What is the change in total revenue if she raises the price from $10 to $12?

Based on the accompanying table, how many units would the given profit-maximizing nondiscriminating pure monopolist produce?

A firm that has the long-run cost curves shown in the graph would be able to do or have the following, except

Answer the question on the basis of the accompanying table, which shows the demand schedule facing a nondiscriminating monopolist. The profit-maximizing monopolist will sell at a price

X-inefficiency is said to occur when a monopolist's

The monopolist's demand curve is more elastic than the industry demand curve.

An unregulated pure monopolist will maximize profits by producing that output at which

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

In which one of the following market models is X-inefficiency most likely to be the greatest?

A pure monopolist is producing an output such that ATC = $7, P = $9, MC = $6, MR = $5, and AVC = $5.50. This firm is realizing

Price discrimination is often used by businesses. Explain the three conditions under which price discrimination is practiced.

Refer to the diagram for a nondiscriminating monopolist. At output M total cost will be 0CHM.

Children are charged less than adults for admission to professional baseball games but are charged the same prices as adults at the concession stands. Which of the following conditions of price discrimination explains why this occurs?

Refer to the diagram. At the profit-maximizing level of output, total cost will be

At equilibrium, the profit-maximizing monopolist facing the situation shown in the graph will face a negative

Limits, Alternatives, and Choices

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Market Failures Caused by Externalities Asymmetric Information

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