Question 1

Suppose a pure monopolist is charging a price of $12 and the associated marginal revenue is $9. We thus know that

Accepted Answer

A) demand is inelastic at this price. 
B) the firm is maximizing profits. 
C) total revenue is increasing. 
D) total revenue is at a maximum. 
A) demand is inelastic at this price. 
B) the firm is maximizing profits. 
C) total revenue is increasing. 
D) total revenue is at a maximum.

Question 2

Refer to the graph for a monopolist in short-run equilibrium. This monopolist

Accepted Answer

A) has a loss per unit equal to DE. 
B) has total fixed costs equal to area BEFC. 
C) earns positive economic profit equal to the area of ABED. 
D) will cease production since its economic profits are negative. 
A) has a loss per unit equal to DE. 
B) has total fixed costs equal to area BEFC. 
C) earns positive economic profit equal to the area of ABED. 
D) will cease production since its economic profits are negative.

Question 3

Which of the following statements is correct?

Accepted Answer

A) The pure monopolist will maximize profit by producing at that point on the demand curve where elasticity is zero. 
B) In seeking the profit-maximizing output, the pure monopolist underallocates resources to its production. 
C) The pure monopolist maximizes profits by producing that output at which the differential between price and average cost is the greatest. 
D) Purely monopolistic sellers earn only normal profits in the long run. 
A) The pure monopolist will maximize profit by producing at that point on the demand curve where elasticity is zero. 
B) In seeking the profit-maximizing output, the pure monopolist underallocates resources to its production. 
C) The pure monopolist maximizes profits by producing that output at which the differential between price and average cost is the greatest. 
D) Purely monopolistic sellers earn only normal profits in the long run.

Question 4

Why is there a supply curve in pure competition but no supply curve in pure monopoly?

Accepted Answer

Initially, we might expect the pure mono

Question 5

A nondiscriminating profit-maximizing monopolist

Accepted Answer

A) will never produce in the output range where marginal revenue is positive. 
B) will never produce in the output range where demand is inelastic. 
C) will never produce in the output range where demand is elastic. 
D) may produce where demand is either elastic or inelastic, depending on the level of production costs. 
A) will never produce in the output range where marginal revenue is positive. 
B) will never produce in the output range where demand is inelastic. 
C) will never produce in the output range where demand is elastic. 
D) may produce where demand is either elastic or inelastic, depending on the level of production costs.

Question 6

Refer to the diagrams. With the industry structures represented by diagram

Accepted Answer

A) (
B) , there will be allocative efficiency. 
B) (
A) , economic profit can persist in the long run. 
C) (
B) , output will be less than in diagram (
A) . 
D) (
B) , output will be the same as in diagram (
A) . 
A) (
B) , there will be allocative efficiency. 
B) (
A) , economic profit can persist in the long run. 
C) (
B) , output will be less than in diagram (
A) . 
D) (
B) , output will be the same as in diagram (
A) .

Question 7

Refer to the diagrams. The demand for Firm A's product is

Accepted Answer

A) perfectly elastic over all ranges of output. 
B) perfectly inelastic over all ranges of output. 
C) elastic for prices above $1 and inelastic for prices below $1. 
D) inelastic for prices above $1 and elastic for prices below $1. 
A) perfectly elastic over all ranges of output. 
B) perfectly inelastic over all ranges of output. 
C) elastic for prices above $1 and inelastic for prices below $1. 
D) inelastic for prices above $1 and elastic for prices below $1.

Question 8

A single-price pure monopoly is economically inefficient

Accepted Answer

A) only because it produces beyond the point of minimum average total cost. 
B) only because it produces short of the point of minimum average total cost. 
C) because it produces short of minimum average total cost and price is greater than marginal cost. 
D) because it produces beyond minimum average total cost and marginal cost is greater than price. 
A) only because it produces beyond the point of minimum average total cost. 
B) only because it produces short of the point of minimum average total cost. 
C) because it produces short of minimum average total cost and price is greater than marginal cost. 
D) because it produces beyond minimum average total cost and marginal cost is greater than price.

Question 9

Because the monopolist's demand curve is downsloping,

Accepted Answer

A) MR will equal price. 
B) price must be lowered to sell more output. 
C) the elasticity coefficient will increase as price is lowered. 
D) its supply curve will also be downsloping. 
A) MR will equal price. 
B) price must be lowered to sell more output. 
C) the elasticity coefficient will increase as price is lowered. 
D) its supply curve will also be downsloping.

Question 10

In the middle ages, the French government auctioned off monopoly rights to the sale of salt. Economic theory predicts that the highest bids would

Accepted Answer

A) leave substantial economic profits for the winning bidders. 
B) equal the economic profits the winning bidder would expect to earn by owning the monopoly rights to sell salt. 
C) ensure that prices remained low, making salt available to the masses. 
D) equal the winner bidder's explicit costs of selling the salt. 
A) leave substantial economic profits for the winning bidders. 
B) equal the economic profits the winning bidder would expect to earn by owning the monopoly rights to sell salt. 
C) ensure that prices remained low, making salt available to the masses. 
D) equal the winner bidder's explicit costs of selling the salt.

Question 11

A nondiscriminating pure monopolist finds that it can sell its 50th unit of output for $50. We can surmise that the marginal

Accepted Answer

A) cost of the 50th unit is also $50. 
B) revenue of the 50th unit is also $50. 
C) revenue of the 50th unit is less than $50. 
D) revenue of the 50th unit is greater than $50. 
A) cost of the 50th unit is also $50. 
B) revenue of the 50th unit is also $50. 
C) revenue of the 50th unit is less than $50. 
D) revenue of the 50th unit is greater than $50.

Question 12

How is the fair-return price used in regulating monopolies? Is this an easy regulation to implement? Why or why not?

Accepted Answer

The fair return price means that regulat

Question 13

Natural monopoly may result where products produce substantial network effects and can be simultaneously consumed by a large number of consumers.

Accepted Answer

A) True 
 B)False

Question 14

Price discrimination will result in consumers with more elastic demand purchasing more of the good than when a single price is charged to all consumers in the market.

Accepted Answer

A) True 
 B)False

Question 15

When a pure monopolist is producing its profit-maximizing output, price will

Accepted Answer

A) be less than MR. 
B) equal neither MC nor MR. 
C) equal MR. 
D) equal MC. 
A) be less than MR. 
B) equal neither MC nor MR. 
C) equal MR. 
D) equal MC.

Question 16

Answer the question on the basis of the accompanying demand schedule.   At the point where 3 units are being sold, the coefficient of price elasticity of demand

Accepted Answer

A) cannot be estimated. 
B) suggests that the market is purely competitive. 
C) is less than unity (one). 
D) is greater than unity (one). 
A) cannot be estimated. 
B) suggests that the market is purely competitive. 
C) is less than unity (one). 
D) is greater than unity (one).

Question 17

What is the price discrimination strategy used by companies that sell products online? Can consumers overcome this?

Accepted Answer

Online companies are using a strategy ca

Question 18

If the XYZ Company can sell 4 units per week at $10 per unit and 5 units per week at $9 per unit, the marginal revenue of the fifth unit is $5.

Accepted Answer

A) True 
 B)False

Question 19

A single-price monopoly is economically inefficient because, at the profit-maximizing output,

Accepted Answer

A) marginal revenue exceeds product price at all profitable levels of production. 
B) monopolists always price their products on the basis of the ability of consumers to pay rather than on costs of production. 
C) MC > P. 
D) society values additional units of the monopolized product more highly than it does the alternative products those resources could otherwise produce. 
A) marginal revenue exceeds product price at all profitable levels of production. 
B) monopolists always price their products on the basis of the ability of consumers to pay rather than on costs of production. 
C) MC > P. 
D) society values additional units of the monopolized product more highly than it does the alternative products those resources could otherwise produce.

Question 20

Refer to the diagram for a pure monopolist. If the monopolist is unregulated, it will maximize profits by charging

Accepted Answer

A) a price above P₃ and selling a quantity less than Q₃. 
B) price P₃ and producing output Q₃. 
C) price P₂ and producing output Q₂. 
D) price P₁ and producing output Q₁. 
A) a price above P₃ and selling a quantity less than Q₃. 
B) price P₃ and producing output Q₃. 
C) price P₂ and producing output Q₂. 
D) price P₁ and producing output Q₁.

Exam 12: Pure Monopoly

Suppose a pure monopolist is charging a price of $12 and the associated marginal revenue is $9. We thus know that

Refer to the graph for a monopolist in short-run equilibrium. This monopolist

Which of the following statements is correct?

Why is there a supply curve in pure competition but no supply curve in pure monopoly?

A nondiscriminating profit-maximizing monopolist

Refer to the diagrams. With the industry structures represented by diagram

Refer to the diagrams. The demand for Firm A's product is

A single-price pure monopoly is economically inefficient

Because the monopolist's demand curve is downsloping,

In the middle ages, the French government auctioned off monopoly rights to the sale of salt. Economic theory predicts that the highest bids would

A nondiscriminating pure monopolist finds that it can sell its 50th unit of output for $50. We can surmise that the marginal

How is the fair-return price used in regulating monopolies? Is this an easy regulation to implement? Why or why not?

Natural monopoly may result where products produce substantial network effects and can be simultaneously consumed by a large number of consumers.

Price discrimination will result in consumers with more elastic demand purchasing more of the good than when a single price is charged to all consumers in the market.

When a pure monopolist is producing its profit-maximizing output, price will

Answer the question on the basis of the accompanying demand schedule. At the point where 3 units are being sold, the coefficient of price elasticity of demand

What is the price discrimination strategy used by companies that sell products online? Can consumers overcome this?

If the XYZ Company can sell 4 units per week at $10 per unit and 5 units per week at $9 per unit, the marginal revenue of the fifth unit is $5.

A single-price monopoly is economically inefficient because, at the profit-maximizing output,

Refer to the diagram for a pure monopolist. If the monopolist is unregulated, it will maximize profits by charging

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

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Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

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The Demand for Resources

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