Question 1

What are the major barriers to entry that explain the existence of monopoly?

Accepted Answer

The major barriers to entry ar

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) $1. 
B) $5. 
C) $10. 
D) $20. 
A) $1. 
B) $5. 
C) $10. 
D) $20.

Question 3

Answer the question on the basis of the accompanying table, which shows the demand schedule facing a nondiscriminating monopolist.   The monopolist will select its profit-maximizing level of output somewhere within the

Accepted Answer

A) 3-5 unit range of output. 
B) 1-3 unit range of output. 
C) 1-4 unit range of output. 
D) 2-4 unit range of output. 
A) 3-5 unit range of output. 
B) 1-3 unit range of output. 
C) 1-4 unit range of output. 
D) 2-4 unit range of output.

Question 4

Why is a monopolist a price maker?

Accepted Answer

All imperfect competitors, whether pure

Question 5

Explain the relationship between the price elasticity of demand and price discrimination.

Accepted Answer

The price-discriminating monopolist maxi

Question 6

A pure monopoly firm will never charge a price in the inelastic range of its demand curve because lowering price to get into this region will

Accepted Answer

A) increase total revenue, increase total cost, and decrease profit. 
B) decrease total revenue, increase total cost, and decrease profit. 
C) increase total revenue, decrease total cost, and decrease profit. 
D) decrease total revenue, total cost, and profit. 
A) increase total revenue, increase total cost, and decrease profit. 
B) decrease total revenue, increase total cost, and decrease profit. 
C) increase total revenue, decrease total cost, and decrease profit. 
D) decrease total revenue, total cost, and profit.

Question 7

Refer to the diagram. At the profit-maximizing level of output, the firm will realize

Accepted Answer

A) an economic profit of ABHJ. 
B) an economic profit of ACGJ. 
C) a loss of GH per unit. 
D) a loss of JH per unit. 
A) an economic profit of ABHJ. 
B) an economic profit of ACGJ. 
C) a loss of GH per unit. 
D) a loss of JH per unit.

Question 8

With respect to the pure monopolist's demand curve, it can be said that

Accepted Answer

A) the stronger the barriers to entry, the more elastic is the monopolist's demand curve. 
B) price exceeds marginal revenue at all outputs greater than 1. 
C) demand is perfectly inelastic. 
D) marginal revenue equals price at all outputs. 
A) the stronger the barriers to entry, the more elastic is the monopolist's demand curve. 
B) price exceeds marginal revenue at all outputs greater than 1. 
C) demand is perfectly inelastic. 
D) marginal revenue equals price at all outputs.

Question 9

If a regulatory commission imposes upon a nondiscriminating natural monopoly a price that is equal to marginal cost and below average total cost at the resulting output, then

Accepted Answer

A) the firm will realize an economic profit. 
B) the firm will earn only a normal profit. 
C) allocative efficiency will be worsened. 
D) the firm must be subsidized or it will go bankrupt. 
A) the firm will realize an economic profit. 
B) the firm will earn only a normal profit. 
C) allocative efficiency will be worsened. 
D) the firm must be subsidized or it will go bankrupt.

Question 10

Refer to the diagrams. If $4 is Firm B's profit-maximizing price, its

Accepted Answer

A) ATC must be $4. 
B) MC must be $4. 
C) MR must be $4. 
D) MC must be zero. 
A) ATC must be $4. 
B) MC must be $4. 
C) MR must be $4. 
D) MC must be zero.

Question 11

Refer to the graph. At its equilibrium level of output, this monopolist earns

Accepted Answer

A) positive economic profits. 
B) negative economic profits. 
C) zero economic profits. 
D) zero revenues. 
A) positive economic profits. 
B) negative economic profits. 
C) zero economic profits. 
D) zero revenues.

Question 12

Refer to the diagram for a pure monopolist. Monopoly output will be

Accepted Answer

A) between f and g. 
B) h. 
C) g. 
D) f. 
A) between f and g. 
B) h. 
C) g. 
D) f.

Question 13

Which of the following is characteristic of a pure monopolist's demand curve?

Accepted Answer

A) Average revenue is less than price. 
B) Its elasticity coefficient is 1 at all levels of output. 
C) Price and marginal revenue are equal at all levels of output. 
D) It is the same as the market demand curve. 
A) Average revenue is less than price. 
B) Its elasticity coefficient is 1 at all levels of output. 
C) Price and marginal revenue are equal at all levels of output. 
D) It is the same as the market demand curve.

Question 14

Other things equal, in which of the following cases would economic profit be the greatest?

Accepted Answer

A) an unregulated monopolist that is able to engage in price discrimination 
B) an unregulated, nondiscriminating monopolist 
C) a regulated monopolist charging a price equal to average total cost 
D) a regulated monopolist charging a price equal to marginal cost 
A) an unregulated monopolist that is able to engage in price discrimination 
B) an unregulated, nondiscriminating monopolist 
C) a regulated monopolist charging a price equal to average total cost 
D) a regulated monopolist charging a price equal to marginal cost

Question 15

With a natural monopoly, the fair-return price

Accepted Answer

A) is allocatively efficient; the socially optimal price is allocatively inefficient. 
B) is allocatively inefficient; the socially optimal price is allocatively efficient. 
C) and the socially optimal price are both allocatively inefficient. 
D) and the socially optimal price are both allocatively efficient. 
A) is allocatively efficient; the socially optimal price is allocatively inefficient. 
B) is allocatively inefficient; the socially optimal price is allocatively efficient. 
C) and the socially optimal price are both allocatively inefficient. 
D) and the socially optimal price are both allocatively efficient.

Question 16

Refer to the demand and cost data for a pure monopolist given in the table. If the monopolist perfectly price-discriminated and sold each unit of the product at the maximum price the buyer of that unit would be willing to pay, and if the monopolist maximized profits, then the total profit received would be

Accepted Answer

A) $700. 
B) $190. 
C) $540. 
D) $70. 
A) $700. 
B) $190. 
C) $540. 
D) $70.

Question 17

To maximize profit, a pure monopolist must

Accepted Answer

A) maximize its total revenue. 
B) maximize the difference between marginal revenue and marginal cost. 
C) maximize the difference between total revenue and total cost. 
D) produce where average total cost is at a minimum. 
A) maximize its total revenue. 
B) maximize the difference between marginal revenue and marginal cost. 
C) maximize the difference between total revenue and total cost. 
D) produce where average total cost is at a minimum.

Question 18

One of the economic effects of monopoly is an income transfer from consumers to the firm.

Accepted Answer

A) True 
 B)False

Question 19

An argument for making regulated monopolies adopt marginal-cost pricing is that this would

Accepted Answer

A) increase productive efficiency by making price equal average cost. 
B) benefit higher-income groups by making monopoly products more affordable. 
C) increase managerial incentives to reduce employment and production. 
D) make the marginal cost equal to society's valuation of the marginal benefit. 
A) increase productive efficiency by making price equal average cost. 
B) benefit higher-income groups by making monopoly products more affordable. 
C) increase managerial incentives to reduce employment and production. 
D) make the marginal cost equal to society's valuation of the marginal benefit.

Question 20

The gains to monopolists from exercising market power

Accepted Answer

A) exceed the losses to consumers in monopoly markets, resulting in a net gain to society. 
B) equal the losses to consumers in monopoly markets, resulting in no net change for society. 
C) are less than the losses to consumers in monopoly markets, resulting in a net loss to society. 
D) create smaller deadweight losses than occur in purely competitive industries. 
A) exceed the losses to consumers in monopoly markets, resulting in a net gain to society. 
B) equal the losses to consumers in monopoly markets, resulting in no net change for society. 
C) are less than the losses to consumers in monopoly markets, resulting in a net loss to society. 
D) create smaller deadweight losses than occur in purely competitive industries.

Exam 12: Pure Monopoly

What are the major barriers to entry that explain the existence of monopoly?

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

Answer the question on the basis of the accompanying table, which shows the demand schedule facing a nondiscriminating monopolist. The monopolist will select its profit-maximizing level of output somewhere within the

Why is a monopolist a price maker?

Explain the relationship between the price elasticity of demand and price discrimination.

A pure monopoly firm will never charge a price in the inelastic range of its demand curve because lowering price to get into this region will

Refer to the diagram. At the profit-maximizing level of output, the firm will realize

With respect to the pure monopolist's demand curve, it can be said that

If a regulatory commission imposes upon a nondiscriminating natural monopoly a price that is equal to marginal cost and below average total cost at the resulting output, then

Refer to the diagrams. If $4 is Firm B's profit-maximizing price, its

Refer to the graph. At its equilibrium level of output, this monopolist earns

Refer to the diagram for a pure monopolist. Monopoly output will be

Which of the following is characteristic of a pure monopolist's demand curve?

Other things equal, in which of the following cases would economic profit be the greatest?

With a natural monopoly, the fair-return price

To maximize profit, a pure monopolist must

One of the economic effects of monopoly is an income transfer from consumers to the firm.

An argument for making regulated monopolies adopt marginal-cost pricing is that this would

The gains to monopolists from exercising market power

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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