Question 1

Why is marginal revenue for a monopolist less than the sales price?

Accepted Answer

A)  As the monopolist expands output, the average total cost of production declines. 
B)  To sell more units, the monopolist must reduce price on all units sold. 
C)  When a firm has a monopoly, consumers have no choice other than to pay the price set by the monopolist. 
D)  The monopolist charges each consumer the highest possible price. 
A)  As the monopolist expands output, the average total cost of production declines. 
B)  To sell more units, the monopolist must reduce price on all units sold. 
C)  When a firm has a monopoly, consumers have no choice other than to pay the price set by the monopolist. 
D)  The monopolist charges each consumer the highest possible price.

Question 2

Where does allocative efficiency occur?

Accepted Answer

A)  where the price of a good is equal to the marginal cost of producing it 
B)  where the greatest quantity of output is available for sale 
C)  where the price of a good is greater than the marginal cost of producing it 
D)  where the price of a good is less than the marginal cost of producing it 
A)  where the price of a good is equal to the marginal cost of producing it 
B)  where the greatest quantity of output is available for sale 
C)  where the price of a good is greater than the marginal cost of producing it 
D)  where the price of a good is less than the marginal cost of producing it

Question 3

If a profit-maximizing monopolist finds that marginal cost is increasing and exceeds marginal revenue, what action should it take?

Accepted Answer

A)  Increase price and decrease output. 
B)  Increase both price and output. 
C)  Increase output and decrease price. 
D)  Decrease both price and output. 
A)  Increase price and decrease output. 
B)  Increase both price and output. 
C)  Increase output and decrease price. 
D)  Decrease both price and output.

Question 4

A monopoly producer of canned iced coffee produces with the following costs:
TABLE 9-3
  
-Refer to Table 9-3. What are the firm's profits at the profit-maximizing level of output?

Accepted Answer

A)  $2.35 
B)  $5 
C)  $8.25 
D)  $10.25 
A)  $2.35 
B)  $5 
C)  $8.25 
D)  $10.25

Question 5

The following diagram contains information on cost and revenue curves facing a regulated monopoly.
FIGURE 9-3
  
-Refer to Figure 9-3. Where would the socially efficient level of output occur?

Accepted Answer

A)  where price equals average total cost at Q3 
B)  where marginal revenue equals marginal cost at Q2 
C)  where price equals marginal cost at Q4 
D)  where price equals marginal revenue at Q1 
A)  where price equals average total cost at Q3 
B)  where marginal revenue equals marginal cost at Q2 
C)  where price equals marginal cost at Q4 
D)  where price equals marginal revenue at Q1

Question 6

Which of the following describes perfect competition, but does NOT describe a monopoly?

Accepted Answer

A)  Marginal revenue is equal to price. 
B)  Profits may exist in the short run. 
C)  The firm's average total cost curve is U-shaped. 
D)  A profit-maximizing firm chooses output where marginal revenue equals marginal cost. 
A)  Marginal revenue is equal to price. 
B)  Profits may exist in the short run. 
C)  The firm's average total cost curve is U-shaped. 
D)  A profit-maximizing firm chooses output where marginal revenue equals marginal cost.

Question 7

Figure 9-1
  
-Refer to Figure 9-1. What is the socially efficient level of output?

Accepted Answer

A)  0Q1 
B)  0Q2 
C)  0Q3 
D)  zero (shutdown) 
A)  0Q1 
B)  0Q2 
C)  0Q3 
D)  zero (shutdown)

Question 8

What is the aim of anti-combine laws?

Accepted Answer

A)  Prevent firms from acquiring or exercising undue market power. 
B)  Regulate the prices charged by perfectly competitive firms. 
C)  Protect established firms by deterring new entry into industries. 
D)  Provide adequate incentives for inventors and entrepreneurs. 
A)  Prevent firms from acquiring or exercising undue market power. 
B)  Regulate the prices charged by perfectly competitive firms. 
C)  Protect established firms by deterring new entry into industries. 
D)  Provide adequate incentives for inventors and entrepreneurs.

Question 9

What will the use of average-cost pricing for a natural monopoly result in?

Accepted Answer

A)  the socially efficient level of output 
B)  the firm suffering economic losses 
C)  a greater than socially efficient level of output 
D)  a less than socially efficient level of output 
A)  the socially efficient level of output 
B)  the firm suffering economic losses 
C)  a greater than socially efficient level of output 
D)  a less than socially efficient level of output

Question 10

Which of the following is NOT potentially a barrier to entry into a product market?

Accepted Answer

A)  patent protection on the design of the product 
B)  the absence of economies of scale in the product market 
C)  the control of a crucial input necessary to produce the product 
D)  government licensing of the product's producers 
A)  patent protection on the design of the product 
B)  the absence of economies of scale in the product market 
C)  the control of a crucial input necessary to produce the product 
D)  government licensing of the product's producers

Question 11

What is occurring when producers charge different customers different prices for the same good or service?

Accepted Answer

A)  price discrimination 
B)  price management 
C)  price regulation 
D)  price maximization 
A)  price discrimination 
B)  price management 
C)  price regulation 
D)  price maximization

Question 12

It is sometimes argued that the lack of competition in monopolized markets could retard innovation.

Accepted Answer

A) True 
 B)False

Question 13

When a monopolist practices price discrimination, profits tend to increase.

Accepted Answer

A) True 
 B)False

Question 14

The following diagram contains information on cost and revenue curves facing a regulated monopoly.
FIGURE 9-3
  
-Refer to Figure 9-3. If the government is able to regulate the monopolist using marginal-cost pricing, what price and output combinations are expected to result?

Accepted Answer

A)  P6 and Q4 
B)  P5 and Q2 
C)  P3 and Q1 
D)  P2 and Q2 
A)  P6 and Q4 
B)  P5 and Q2 
C)  P3 and Q1 
D)  P2 and Q2

Question 15

Which of the following is NOT a cause of monopoly?

Accepted Answer

A)  economies of scale 
B)  a copyright 
C)  freely available critical inputs to production 
D)  a patent 
A)  economies of scale 
B)  a copyright 
C)  freely available critical inputs to production 
D)  a patent

Why is marginal revenue for a monopolist less than the sales price?

Where does allocative efficiency occur?

If a profit-maximizing monopolist finds that marginal cost is increasing and exceeds marginal revenue, what action should it take?

A monopoly producer of canned iced coffee produces with the following costs: TABLE 9-3 -Refer to Table 9-3. What are the firm's profits at the profit-maximizing level of output?

The following diagram contains information on cost and revenue curves facing a regulated monopoly. FIGURE 9-3 -Refer to Figure 9-3. Where would the socially efficient level of output occur?

Which of the following describes perfect competition, but does NOT describe a monopoly?

Figure 9-1 -Refer to Figure 9-1. What is the socially efficient level of output?

What is the aim of anti-combine laws?

What will the use of average-cost pricing for a natural monopoly result in?

Which of the following is NOT potentially a barrier to entry into a product market?

What is occurring when producers charge different customers different prices for the same good or service?

It is sometimes argued that the lack of competition in monopolized markets could retard innovation.

When a monopolist practices price discrimination, profits tend to increase.

The following diagram contains information on cost and revenue curves facing a regulated monopoly. FIGURE 9-3 -Refer to Figure 9-3. If the government is able to regulate the monopolist using marginal-cost pricing, what price and output combinations are expected to result?

Which of the following is NOT a cause of monopoly?

The Role and Method of Economics

Scarcity, Trade-Offs, and Production Possibilities

Supply and Demand

Bringing Supply and Demand Together

Elasticity

Market Efficiency and Market Failure

Production and Costs

Perfect Competition

Monopolistic Competition and Oligopoly

Labour Markets and the Distribution of Income

The Environment

Filters

Exam 9: Monopoly

Why is marginal revenue for a monopolist less than the sales price?

Where does allocative efficiency occur?

If a profit-maximizing monopolist finds that marginal cost is increasing and exceeds marginal revenue, what action should it take?

A monopoly producer of canned iced coffee produces with the following costs: TABLE 9-3 -Refer to Table 9-3. What are the firm's profits at the profit-maximizing level of output?

The following diagram contains information on cost and revenue curves facing a regulated monopoly. FIGURE 9-3 -Refer to Figure 9-3. Where would the socially efficient level of output occur?

Which of the following describes perfect competition, but does NOT describe a monopoly?

Figure 9-1 -Refer to Figure 9-1. What is the socially efficient level of output?

What is the aim of anti-combine laws?

What will the use of average-cost pricing for a natural monopoly result in?

Which of the following is NOT potentially a barrier to entry into a product market?

What is occurring when producers charge different customers different prices for the same good or service?

It is sometimes argued that the lack of competition in monopolized markets could retard innovation.

When a monopolist practices price discrimination, profits tend to increase.

The following diagram contains information on cost and revenue curves facing a regulated monopoly. FIGURE 9-3 -Refer to Figure 9-3. If the government is able to regulate the monopolist using marginal-cost pricing, what price and output combinations are expected to result?

Which of the following is NOT a cause of monopoly?

The Role and Method of Economics

Scarcity, Trade-Offs, and Production Possibilities

Supply and Demand

Bringing Supply and Demand Together

Elasticity

Market Efficiency and Market Failure

Production and Costs

Perfect Competition

Monopolistic Competition and Oligopoly

Labour Markets and the Distribution of Income

The Environment

Filters