Question 1

At the profit-maximizing quantity of output for a monopolist,average revenue,marginal revenue,and price are all equal.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is not an example of a barrier to entry?

Accepted Answer

A)  A soybean farmer is the first in her county to use a new brand of fertilizer. 
B)  Microsoft obtains a copyright for its Windows operating system. 
C)  A pharmaceutical company obtains a patent for a new medication to treat migraine headaches. 
D)  A taxi cab driver in New York City obtains a license to legally provide transportation in New York City. 
A)  A soybean farmer is the first in her county to use a new brand of fertilizer. 
B)  Microsoft obtains a copyright for its Windows operating system. 
C)  A pharmaceutical company obtains a patent for a new medication to treat migraine headaches. 
D)  A taxi cab driver in New York City obtains a license to legally provide transportation in New York City.

Question 3

Assume that a monopolist decides to maximize revenue rather than profit.How does this operating objective change the size of the deadweight loss? If you are a "benevolent" manager of a monopoly firm and are interested in reducing the deadweight loss of monopoly,should you maximize profits or maximize revenue? Explain your answer.

Accepted Answer

A revenue maximizer operates where MR =

Question 4

Scenario 15-8
Mega Media Cable TV is able to purchase an exclusive right to sell a premium sports channel in its market area. Let's assume that Mega Media pays $100,000 a year for the exclusive marketing rights to the sports channel. Since Mega Media has already installed cable to all of the homes in its market area, the marginal cost of delivering the sports channel to subscribers is zero. The manager of Mega Media needs to know what price to charge for the sports channel service to maximize her profit. Before setting price, she hires an economist to estimate demand for the sports channel. The economist discovers that there are two types of subscribers who value premium sporting channels. First are the 3,000 die-hard sports fans who will pay as much as $150 a year for the new channel. Second, the premium sports channel will appeal to 20,000 occasional sports viewers who will pay as much as $25 a year for a subscription to it.
-Refer to Scenario 15-8.If Mega Media Cable TV is able to price discriminate,what would be the maximum amount of profit it could generate?

Accepted Answer

A)  $950,000 
B)  $850,000 
C)  $400,000 
D)  $350,000 
A)  $950,000 
B)  $850,000 
C)  $400,000 
D)  $350,000

Question 5

The simplest way for a monopoly to arise is for a single firm to

Accepted Answer

A)  decrease its price below its competitors' prices. 
B)  decrease production to increase demand for its product. 
C)  make pricing decisions jointly with other firms. 
D)  own a key resource. 
A)  decrease its price below its competitors' prices. 
B)  decrease production to increase demand for its product. 
C)  make pricing decisions jointly with other firms. 
D)  own a key resource.

Question 6

A profit-maximizing monopolist will produce the level of output at which

Accepted Answer

A)  average revenue is equal to average total cost. 
B)  average revenue is equal to marginal cost. 
C)  marginal revenue is equal to marginal cost. 
D)  total revenue is equal to opportunity cost. 
A)  average revenue is equal to average total cost. 
B)  average revenue is equal to marginal cost. 
C)  marginal revenue is equal to marginal cost. 
D)  total revenue is equal to opportunity cost.

Question 7

The first major piece of antitrust legislation was the

Accepted Answer

A)  Clayton Act. 
B)  Reagan-Bush Act. 
C)  Sherman Act. 
D)  Clinton-Gore Act. 
A)  Clayton Act. 
B)  Reagan-Bush Act. 
C)  Sherman Act. 
D)  Clinton-Gore Act.

Question 8

When a certain monopoly sets its price at $8 it sells 64 units.When the monopoly sets its price at $10 it sells 60 units.The marginal revenue for the firm over this range is

Accepted Answer

A)  $11. 
B)  $22. 
C)  $33. 
D)  $44. 
A)  $11. 
B)  $22. 
C)  $33. 
D)  $44.

Question 9

Which of the following are necessary characteristics of a monopoly?
(i)The firm is the sole seller of its product.
(ii)The firm's product does not have close substitutes.
(iii)The firm generates a large economic profit.
(iv)The firm is located in a small geographic market.

Accepted Answer

A)  (i) and (ii) only 
B)  (i) and (iii) only 
C)  (i), (ii), and (iii) only 
D)  (i), (ii), (iii), and (iv) 
A)  (i) and (ii) only 
B)  (i) and (iii) only 
C)  (i), (ii), and (iii) only 
D)  (i), (ii), (iii), and (iv)

Question 10

After the patent runs out on a brand name drug,generic drugs enter the market.What happens next in the market?

Accepted Answer

A)  Price increases, and total surplus decreases. 
B)  Price decreases, and total surplus decreases. 
C)  Price decreases, and total surplus increases. 
D)  Price increases, and total surplus increases. 
A)  Price increases, and total surplus decreases. 
B)  Price decreases, and total surplus decreases. 
C)  Price decreases, and total surplus increases. 
D)  Price increases, and total surplus increases.

Question 11

Scenario 15-8
Mega Media Cable TV is able to purchase an exclusive right to sell a premium sports channel in its market area. Let's assume that Mega Media pays $100,000 a year for the exclusive marketing rights to the sports channel. Since Mega Media has already installed cable to all of the homes in its market area, the marginal cost of delivering the sports channel to subscribers is zero. The manager of Mega Media needs to know what price to charge for the sports channel service to maximize her profit. Before setting price, she hires an economist to estimate demand for the sports channel. The economist discovers that there are two types of subscribers who value premium sporting channels. First are the 3,000 die-hard sports fans who will pay as much as $150 a year for the new channel. Second, the premium sports channel will appeal to 20,000 occasional sports viewers who will pay as much as $25 a year for a subscription to it.
-Refer to Scenario 15-8.How much profit will Mega Media Cable TV earn if it sets the price at $25?

Accepted Answer

A)  $350,000 
B)  $450,000 
C)  $475,000 
D)  $575,000 
A)  $350,000 
B)  $450,000 
C)  $475,000 
D)  $575,000

Question 12

A monopolist's average revenue is always

Accepted Answer

A)  equal to marginal revenue. 
B)  greater than the price of its product. 
C)  equal to the price of its product. 
D)  less than the price of its product. 
A)  equal to marginal revenue. 
B)  greater than the price of its product. 
C)  equal to the price of its product. 
D)  less than the price of its product.

Question 13

Even with market power,monopolists cannot achieve any level of profit they desire because they will sell lower quantities at higher prices.

Accepted Answer

A) True 
 B)False

Question 14

Table 15-17
  
-Refer to Table 15-17.If a monopolist faces a constant marginal cost of $3,how much output should the firm produce in order to equate marginal revenue with marginal cost?

Accepted Answer

A)  3 units 
B)  4 units 
C)  5 units 
D)  6 units 
A)  3 units 
B)  4 units 
C)  5 units 
D)  6 units

Question 15

The defining characteristic of a natural monopoly is

Accepted Answer

A)  constant marginal cost over the relevant range of output. 
B)  economies of scale over the relevant range of output. 
C)  constant returns to scale over the relevant range of output. 
D)  diseconomies of scale over the relevant range of output. 
A)  constant marginal cost over the relevant range of output. 
B)  economies of scale over the relevant range of output. 
C)  constant returns to scale over the relevant range of output. 
D)  diseconomies of scale over the relevant range of output.

Question 16

A monopoly creates a deadweight loss to society because it earns both short-run and long-run positive economic profits.

Accepted Answer

A) True 
 B)False

Question 17

Patent and copyright laws encourage

Accepted Answer

A)  creative activity. 
B)  research and development. 
C)  competition among firms. 
D)  Both a and b are correct. 
A)  creative activity. 
B)  research and development. 
C)  competition among firms. 
D)  Both a and b are correct.

Question 18

In theory,perfect price discrimination

Accepted Answer

A)  decreases the monopolist's profits. 
B)  decreases consumer surplus. 
C)  increases deadweight loss. 
D)  reduces the number of consumers who purchase the monopoly's product. 
A)  decreases the monopolist's profits. 
B)  decreases consumer surplus. 
C)  increases deadweight loss. 
D)  reduces the number of consumers who purchase the monopoly's product.

Question 19

In order for antitrust laws to raise social welfare,the government must

Accepted Answer

A)  disallow synergy benefits from accruing to monopolists. 
B)  disallow any mergers from taking place. 
C)  be able to determine which mergers are desirable and which are not. 
D)  always attempt to keep markets in their most competitive form. 
A)  disallow synergy benefits from accruing to monopolists. 
B)  disallow any mergers from taking place. 
C)  be able to determine which mergers are desirable and which are not. 
D)  always attempt to keep markets in their most competitive form.

Question 20

Suppose most people regard emeralds,rubies,and sapphires as close substitutes for diamonds.Then DeBeers,a large diamond company,has

Accepted Answer

A)  less incentive to advertise than it would otherwise have. 
B)  less market power than it would otherwise have. 
C)  more control over the price of diamonds than it would otherwise have. 
D)  higher profits than it would otherwise have. 
A)  less incentive to advertise than it would otherwise have. 
B)  less market power than it would otherwise have. 
C)  more control over the price of diamonds than it would otherwise have. 
D)  higher profits than it would otherwise have.

At the profit-maximizing quantity of output for a monopolist,average revenue,marginal revenue,and price are all equal.

Which of the following is not an example of a barrier to entry?

The simplest way for a monopoly to arise is for a single firm to

A profit-maximizing monopolist will produce the level of output at which

The first major piece of antitrust legislation was the

When a certain monopoly sets its price at $8 it sells 64 units.When the monopoly sets its price at $10 it sells 60 units.The marginal revenue for the firm over this range is

Which of the following are necessary characteristics of a monopoly? (i)The firm is the sole seller of its product. (ii)The firm's product does not have close substitutes. (iii)The firm generates a large economic profit. (iv)The firm is located in a small geographic market.

After the patent runs out on a brand name drug,generic drugs enter the market.What happens next in the market?

A monopolist's average revenue is always

Even with market power,monopolists cannot achieve any level of profit they desire because they will sell lower quantities at higher prices.

Table 15-17 -Refer to Table 15-17.If a monopolist faces a constant marginal cost of $3,how much output should the firm produce in order to equate marginal revenue with marginal cost?

The defining characteristic of a natural monopoly is

A monopoly creates a deadweight loss to society because it earns both short-run and long-run positive economic profits.

Patent and copyright laws encourage

In theory,perfect price discrimination

In order for antitrust laws to raise social welfare,the government must

Suppose most people regard emeralds,rubies,and sapphires as close substitutes for diamonds.Then DeBeers,a large diamond company,has

Ten Principles of Economics.

Thinking Like an Economist.

Interdependence and the Gains from Trade.

The Market Forces of Supply and Demand.

Elasticity and Its Application

Supply, Demand, And Government Policies.

Consumers, Producers, and the Efficiency of Markets.

Application: The Costs of Taxation.

Application: International Trade.

Externalities.

Public Goods and Common Resources.

The Design of the Tax System.

The Costs of Production.

Firms in Competitive Markets.

Monopolistic Competition.

Oligopoly.

The Market For the Factors of Production.

Earnings and Discrimination.

Income Inequality and Poverty.

The Theory of Consumer Choice.

Frontiers in Microeconomics.

Filters

Exam 15: Monopoly.

At the profit-maximizing quantity of output for a monopolist,average revenue,marginal revenue,and price are all equal.

Which of the following is not an example of a barrier to entry?

The simplest way for a monopoly to arise is for a single firm to

A profit-maximizing monopolist will produce the level of output at which

The first major piece of antitrust legislation was the

When a certain monopoly sets its price at $8 it sells 64 units.When the monopoly sets its price at $10 it sells 60 units.The marginal revenue for the firm over this range is

Which of the following are necessary characteristics of a monopoly? (i)The firm is the sole seller of its product. (ii)The firm's product does not have close substitutes. (iii)The firm generates a large economic profit. (iv)The firm is located in a small geographic market.

After the patent runs out on a brand name drug,generic drugs enter the market.What happens next in the market?

A monopolist's average revenue is always

Even with market power,monopolists cannot achieve any level of profit they desire because they will sell lower quantities at higher prices.

Table 15-17 -Refer to Table 15-17.If a monopolist faces a constant marginal cost of $3,how much output should the firm produce in order to equate marginal revenue with marginal cost?

The defining characteristic of a natural monopoly is

A monopoly creates a deadweight loss to society because it earns both short-run and long-run positive economic profits.

Patent and copyright laws encourage

In theory,perfect price discrimination

In order for antitrust laws to raise social welfare,the government must

Suppose most people regard emeralds,rubies,and sapphires as close substitutes for diamonds.Then DeBeers,a large diamond company,has

Ten Principles of Economics.

Thinking Like an Economist.

Interdependence and the Gains from Trade.

The Market Forces of Supply and Demand.

Elasticity and Its Application

Supply, Demand, And Government Policies.

Consumers, Producers, and the Efficiency of Markets.

Application: The Costs of Taxation.

Application: International Trade.

Externalities.

Public Goods and Common Resources.

The Design of the Tax System.

The Costs of Production.

Firms in Competitive Markets.

Monopolistic Competition.

Oligopoly.

The Market For the Factors of Production.

Earnings and Discrimination.

Income Inequality and Poverty.

The Theory of Consumer Choice.

Frontiers in Microeconomics.

Filters