Question 1

The market demand curve for a monopolist is typically

Accepted Answer

A)  unit price elastic. 
B)  downward sloping. 
C)  horizontal. 
D)  vertical. 
A)  unit price elastic. 
B)  downward sloping. 
C)  horizontal. 
D)  vertical.

Question 2

For a monopolist,when does marginal revenue exceed average revenue?

Accepted Answer

A)  never 
B)  when output is less than the profit-maximizing level of output 
C)  when output is greater than the profit-maximizing level of output 
D)  for all levels of output greater than zero 
A)  never 
B)  when output is less than the profit-maximizing level of output 
C)  when output is greater than the profit-maximizing level of output 
D)  for all levels of output greater than zero

Question 3

If the government regulates the price that a natural monopolist can charge to be equal to the firm's average total cost,the firm will

Accepted Answer

A)  earn zero profits. 
B)  earn positive profits, causing other firms to enter the industry. 
C)  earn negative profits, causing the firm to exit the industry. 
D)  minimize costs in order to lower the price that it charges. 
A)  earn zero profits. 
B)  earn positive profits, causing other firms to enter the industry. 
C)  earn negative profits, causing the firm to exit the industry. 
D)  minimize costs in order to lower the price that it charges.

Question 4

Scenario 15-1
Consider a transportation corporation named C.R. Evans that has just completed the development of a new subway system in a medium-sized town in the Northwest. Currently, there are plenty of seats on the subway, and it is never crowded. Its capacity far exceeds the needs of the city. After just a few years of operation, the shareholders of C.R. Evans experienced incredible rates of return on their investment due to the profitability of the corporation.
-Refer to Scenario 15-1.Which of the following statements is most likely to be true?
(i)New entrants to the market know they will have a smaller market share than C.R.Evans currently has.
(ii)C.R.Evans is most likely experiencing increasing average total cost.
(iii)C.R.Evans is a natural monopoly.

Accepted Answer

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

Question 5

Policymakers are discussing various proposals regarding how to deal with natural monopolies.Senator Huff wants to regulate natural monopolies by equating price with average total cost.Huff contends that such a policy will ensure that monopolies make every effort to reduce costs.Senator Puff wants the government to own natural monopolies.Puff argues that government-owned monopolies usually do a better job of holding down costs than privately owned monopolies.Which senator's argument is correct?

Accepted Answer

A)  Senator Huff 
B)  Senator Puff 
C)  both senators 
D)  neither senator 
A)  Senator Huff 
B)  Senator Puff 
C)  both senators 
D)  neither senator

Question 6

Which of the following statements is not correct?

Accepted Answer

A)  The competitive firm produces where P = MC. 
B)  The monopolist produces where P = MC. 
C)  The competitive firm produces where MR = MC. 
D)  The monopolist produces where MR = MC. 
A)  The competitive firm produces where P = MC. 
B)  The monopolist produces where P = MC. 
C)  The competitive firm produces where MR = MC. 
D)  The monopolist produces where MR = MC.

Question 7

Which of the following statements is correct for a monopolist? i)
The firm maximizes profits by equating marginal revenue with marginal cost.
Ii)
The firm maximizes profits by equating price with marginal cost.
Iii)
Demand equals marginal revenue.
Iv)
Average revenue equals price.

Accepted Answer

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

Question 8

Table 15-18
Tommy's Tie Company, a monopolist, has the following cost and revenue information. Assume that Tommy's is able to engage in perfect price discrimination.
  
-Refer to Table 15-18.If the monopolist can engage in perfect price discrimination,what is the quantity that maximizes economic profit?

Accepted Answer

A)  5 ties 
B)  6 ties 
C)  7 ties 
D)  8 ties 
A)  5 ties 
B)  6 ties 
C)  7 ties 
D)  8 ties

Question 9

Figure 15-16
  
-Refer to Figure 15-16.If the monopoly firm is not allowed to price discriminate,then consumer surplus amounts to

Accepted Answer

A)  $0. 
B)  $1,562.50. 
C)  $3,125. 
D)  $6,250. 
A)  $0. 
B)  $1,562.50. 
C)  $3,125. 
D)  $6,250.

Question 10

For a typical natural monopoly,average total cost is

Accepted Answer

A)  falling, and marginal cost is above average total cost. 
B)  falling, and marginal cost is below average total cost. 
C)  rising, and marginal cost is below average total cost. 
D)  rising, and marginal cost is above average total cost. 
A)  falling, and marginal cost is above average total cost. 
B)  falling, and marginal cost is below average total cost. 
C)  rising, and marginal cost is below average total cost. 
D)  rising, and marginal cost is above average total cost.

Question 11

If a pharmaceutical company discovers a new drug and successfully patents it,patent law gives the firm

Accepted Answer

A)  partial ownership of the right to sell the drug for a limited number of years. 
B)  partial ownership of the right to sell the drug for an unlimited number of years. 
C)  sole ownership of the right to sell the drug for a limited number of years. 
D)  sole ownership of the right to sell the drug for an unlimited number of years. 
A)  partial ownership of the right to sell the drug for a limited number of years. 
B)  partial ownership of the right to sell the drug for an unlimited number of years. 
C)  sole ownership of the right to sell the drug for a limited number of years. 
D)  sole ownership of the right to sell the drug for an unlimited number of years.

Question 12

What is the deadweight loss due to profit-maximizing monopoly pricing under the following conditions: The price charged for goods produced is $10.The intersection of the marginal revenue and marginal cost curves occurs where output is 100 units and marginal revenue is $5.The socially efficient level of production is 110 units.The demand curve is linear and downward sloping,and the marginal cost curve is constant.

Accepted Answer

1/2*(110-1

Question 13

Movie theatres charge different prices to different groups of people based on the differing marginal costs that exist from group to group.

Accepted Answer

A) True 
 B)False

Question 14

A monopolist's profits with price discrimination will be

Accepted Answer

A)  lower than if the firm charged a single, profit-maximizing price 
B)  the same as if the firm charged a single, profit-maximizing price. 
C)  higher than if the firm charged just one price because the firm will capture more consumer surplus. 
D)  higher than if the firm charged a single price because the costs of selling the good will be lower. 
A)  lower than if the firm charged a single, profit-maximizing price 
B)  the same as if the firm charged a single, profit-maximizing price. 
C)  higher than if the firm charged just one price because the firm will capture more consumer surplus. 
D)  higher than if the firm charged a single price because the costs of selling the good will be lower.

Question 15

Scenario 15-3
A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $30, its average revenue is $60, and its average total cost is $34.
-Refer to Scenario 15-3.At Q = 500,the firm's total revenue is

Accepted Answer

A)  $13,000. 
B)  $15,000. 
C)  $17,000. 
D)  $30,000. 
A)  $13,000. 
B)  $15,000. 
C)  $17,000. 
D)  $30,000.

Question 16

Suppose when a monopolist produces 50 units its average revenue is $8 per unit,its marginal revenue is $4 per unit,its marginal cost is $4 per unit,and its average total cost is $3 per unit.What can we conclude about this monopolist?

Accepted Answer

A)  The monopolist is currently maximizing profits, and its total profits are $200. 
B)  The monopolist is currently maximizing profits, and its total profits are $250. 
C)  The monopolist is not currently maximizing its profits; it should produce more units and charge a lower price to maximize profit. 
D)  The monopolist is not currently maximizing its profits; it should produce fewer units and charger a higher price to maximize profit. 
A)  The monopolist is currently maximizing profits, and its total profits are $200. 
B)  The monopolist is currently maximizing profits, and its total profits are $250. 
C)  The monopolist is not currently maximizing its profits; it should produce more units and charge a lower price to maximize profit. 
D)  The monopolist is not currently maximizing its profits; it should produce fewer units and charger a higher price to maximize profit.

Question 17

A monopoly is an inefficient way to produce a product because

Accepted Answer

A)  it can earn both short-run and long-run profits. 
B)  it faces a downward-sloping demand curve. 
C)  the cost to the monopolist of producing one more unit exceeds the value of that unit to potential buyers. 
D)  it produces a smaller level of output than would be produced in a competitive market. 
A)  it can earn both short-run and long-run profits. 
B)  it faces a downward-sloping demand curve. 
C)  the cost to the monopolist of producing one more unit exceeds the value of that unit to potential buyers. 
D)  it produces a smaller level of output than would be produced in a competitive market.

Question 18

Figure 15-13
  
-Refer to Figure 15-13.A benevolent social planner would have the monopoly operate at an output level

Accepted Answer

A)  less than Q0. 
B)  greater than Q0. 
C)  equal to Q0. 
D)  equal to zero. 
A)  less than Q0. 
B)  greater than Q0. 
C)  equal to Q0. 
D)  equal to zero.

Question 19

"Monopolists do not worry about efficient production and minimizing costs since they can just pass along any increase in costs to their consumers." This statement is

Accepted Answer

A)  false; price increases will mean fewer sales, which may lower profits. 
B)  true; this is the primary reason why economists believe that monopolies result in economic inefficiency. 
C)  false; the monopolist is a price taker. 
D)  true; consumers in a monopoly market have no substitutes to turn to when the monopolist raises prices. 
A)  false; price increases will mean fewer sales, which may lower profits. 
B)  true; this is the primary reason why economists believe that monopolies result in economic inefficiency. 
C)  false; the monopolist is a price taker. 
D)  true; consumers in a monopoly market have no substitutes to turn to when the monopolist raises prices.

Question 20

Customers who purchase an audio CD from Sally's Sounds are charged 20% more than customers who purchase the audio CD from the Sally's Sounds website.This is an example of

Accepted Answer

A)  perfect price discrimination. 
B)  price discrimination. 
C)  deadweight loss. 
D)  socially inefficient output. 
A)  perfect price discrimination. 
B)  price discrimination. 
C)  deadweight loss. 
D)  socially inefficient output.

The market demand curve for a monopolist is typically

For a monopolist,when does marginal revenue exceed average revenue?

If the government regulates the price that a natural monopolist can charge to be equal to the firm's average total cost,the firm will

Which of the following statements is not correct?

Which of the following statements is correct for a monopolist? i) The firm maximizes profits by equating marginal revenue with marginal cost. Ii) The firm maximizes profits by equating price with marginal cost. Iii) Demand equals marginal revenue. Iv) Average revenue equals price.

Figure 15-16 -Refer to Figure 15-16.If the monopoly firm is not allowed to price discriminate,then consumer surplus amounts to

For a typical natural monopoly,average total cost is

If a pharmaceutical company discovers a new drug and successfully patents it,patent law gives the firm

Movie theatres charge different prices to different groups of people based on the differing marginal costs that exist from group to group.

A monopolist's profits with price discrimination will be

Scenario 15-3 A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $30, its average revenue is $60, and its average total cost is $34. -Refer to Scenario 15-3.At Q = 500,the firm's total revenue is

Suppose when a monopolist produces 50 units its average revenue is $8 per unit,its marginal revenue is $4 per unit,its marginal cost is $4 per unit,and its average total cost is $3 per unit.What can we conclude about this monopolist?

A monopoly is an inefficient way to produce a product because

Figure 15-13 -Refer to Figure 15-13.A benevolent social planner would have the monopoly operate at an output level

"Monopolists do not worry about efficient production and minimizing costs since they can just pass along any increase in costs to their consumers." This statement is

Customers who purchase an audio CD from Sally's Sounds are charged 20% more than customers who purchase the audio CD from the Sally's Sounds website.This is an example of

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.

The market demand curve for a monopolist is typically

For a monopolist,when does marginal revenue exceed average revenue?

If the government regulates the price that a natural monopolist can charge to be equal to the firm's average total cost,the firm will

Which of the following statements is not correct?

Which of the following statements is correct for a monopolist? i) The firm maximizes profits by equating marginal revenue with marginal cost. Ii) The firm maximizes profits by equating price with marginal cost. Iii) Demand equals marginal revenue. Iv) Average revenue equals price.

Figure 15-16 -Refer to Figure 15-16.If the monopoly firm is not allowed to price discriminate,then consumer surplus amounts to

For a typical natural monopoly,average total cost is

If a pharmaceutical company discovers a new drug and successfully patents it,patent law gives the firm

Movie theatres charge different prices to different groups of people based on the differing marginal costs that exist from group to group.

A monopolist's profits with price discrimination will be

Scenario 15-3 A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $30, its average revenue is $60, and its average total cost is $34. -Refer to Scenario 15-3.At Q = 500,the firm's total revenue is

Suppose when a monopolist produces 50 units its average revenue is $8 per unit,its marginal revenue is $4 per unit,its marginal cost is $4 per unit,and its average total cost is $3 per unit.What can we conclude about this monopolist?

A monopoly is an inefficient way to produce a product because

Figure 15-13 -Refer to Figure 15-13.A benevolent social planner would have the monopoly operate at an output level

"Monopolists do not worry about efficient production and minimizing costs since they can just pass along any increase in costs to their consumers." This statement is

Customers who purchase an audio CD from Sally's Sounds are charged 20% more than customers who purchase the audio CD from the Sally's Sounds website.This is an example of

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