Question 1

With perfect price discrimination the monopoly

Accepted Answer

A)  eliminates all price discrimination by charging each customer the same price. 
B)  charges each customer an amount equal to the monopolist's marginal cost of production. 
C)  eliminates deadweight loss. 
D)  eliminates profits and increases consumer surplus. 
A)  eliminates all price discrimination by charging each customer the same price. 
B)  charges each customer an amount equal to the monopolist's marginal cost of production. 
C)  eliminates deadweight loss. 
D)  eliminates profits and increases consumer surplus.

Question 2

Because a monopolist is the sole producer in its market,it can necessarily alter the price of its good
(i)without affecting the quantity sold.
(ii)without affecting its average total cost.
(iii)by adjusting the quantity it supplies to the market.

Accepted Answer

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

Question 3

Authors are allowed to be monopolists in the sale of their books in order to

Accepted Answer

A)  encourage authors to write more and better books. 
B)  correct for the negative externalities that the Internet and television impose. 
C)  satisfy literary advocacy groups that exercise their lobbying power. 
D)  promote a society in which people think for themselves and learn from whichever books they please. 
A)  encourage authors to write more and better books. 
B)  correct for the negative externalities that the Internet and television impose. 
C)  satisfy literary advocacy groups that exercise their lobbying power. 
D)  promote a society in which people think for themselves and learn from whichever books they please.

Question 4

The deadweight loss for a monopolist equals one-half of its profits for any given level of output.

Accepted Answer

A) True 
 B)False

Question 5

Scenario 15-4
Suppose a monopolist has a demand curve that can be expressed as P=90-Q. The monopolist's marginal revenue curve can be expressed as MR=90-2Q. The monopolist has constant marginal costs and average total costs of $10.
-Refer to Scenario 15-4.The profit-maximizing monopolist will earn profits of

Accepted Answer

A)  $6,400. 
B)  $3,200. 
C)  $1,600. 
D)  $800. 
A)  $6,400. 
B)  $3,200. 
C)  $1,600. 
D)  $800.

Question 6

Table 15-10
The monopolist faces the following demand curve:
  
-Refer to Table 15-10.If the monopolist has total fixed costs of $40 and a constant marginal cost of $5,what is the profit-maximizing level of output?

Accepted Answer

A)  7 units 
B)  16 units 
C)  23 units 
D)  31 units 
A)  7 units 
B)  16 units 
C)  23 units 
D)  31 units

Question 7

Patents,copyrights,and trademarks

Accepted Answer

A)  are examples of government-created monopolies. 
B)  are examples of barriers to entry. 
C)  allow their owners to charge higher prices. 
D)  All of the above are correct. 
A)  are examples of government-created monopolies. 
B)  are examples of barriers to entry. 
C)  allow their owners to charge higher prices. 
D)  All of the above are correct.

Question 8

The fundamental cause of monopolies is barriers to entry.

Accepted Answer

A) True 
 B)False

Question 9

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.The firm's profit-maximizing price is

Accepted Answer

A)  $30. 
B)  between $30 and $34. 
C)  between $34 and $60. 
D)  $60. 
A)  $30. 
B)  between $30 and $34. 
C)  between $34 and $60. 
D)  $60.

Question 10

The monopolist's profit-maximizing quantity of output is determined by the intersection of which of the following two curves?

Accepted Answer

A)  marginal cost and demand 
B)  marginal cost and marginal revenue 
C)  average total cost and marginal revenue 
D)  average variable cost and average revenue 
A)  marginal cost and demand 
B)  marginal cost and marginal revenue 
C)  average total cost and marginal revenue 
D)  average variable cost and average revenue

Question 11

A monopolist produces where P = MC = MR.

Accepted Answer

A) True 
 B)False

Question 12

Most markets are not monopolies in the real world because

Accepted Answer

A)  firms usually face downward-sloping demand curves. 
B)  supply curves slope upward. 
C)  firms usually equate price with marginal cost. 
D)  there are reasonable substitutes for most goods. 
A)  firms usually face downward-sloping demand curves. 
B)  supply curves slope upward. 
C)  firms usually equate price with marginal cost. 
D)  there are reasonable substitutes for most goods.

Question 13

Table 15-12
The following table provides information on the price, quantity, and average total cost for a monopoly.
  
-Refer to Table 15-12.In order to maximize profits,the firm should produce

Accepted Answer

A)  4 units of output. 
B)  8 units of output. 
C)  12 units of output. 
D)  16 units of output. 
A)  4 units of output. 
B)  8 units of output. 
C)  12 units of output. 
D)  16 units of output.

Question 14

The deadweight loss associated with a monopoly occurs because the monopolist

Accepted Answer

A)  maximizes profits. 
B)  produces an output level less than the socially optimal level. 
C)  produces an output level greater than the socially optimal level. 
D)  equates marginal revenue with marginal cost. 
A)  maximizes profits. 
B)  produces an output level less than the socially optimal level. 
C)  produces an output level greater than the socially optimal level. 
D)  equates marginal revenue with marginal cost.

Question 15

Table 15-7
Sally owns the only shoe store in town. She has the following cost and revenue information.
  
-Refer to Table 15-7.What is the total revenue from selling 8 pairs of shoes?

Accepted Answer

A)  $90 
B)  $695 
C)  $720 
D)  $800 
A)  $90 
B)  $695 
C)  $720 
D)  $800

Question 16

Scenario 15-7
Black Box Cable TV is able to purchase an exclusive right to sell a premium movie channel (PMC) in its market area. Let's assume that Black Box Cable pays $150,000 a year for the exclusive marketing rights to PMC. Since Black Box has already installed cable to all of the homes in its market area, the marginal cost of delivering PMC to subscribers is zero. The manager of Black Box needs to know what price to charge for the PMC service to maximize her profit. Before setting price, she hires an economist to estimate demand for the PMC service. The economist discovers that there are two types of subscribers who value premium movie channels. First are the 4,000 die-hard TV viewers who will pay as much as $150 a year for the new PMC premium channel. Second, the PMC channel will appeal to 20,000 occasional TV viewers who will pay as much as $20 a year for a subscription to PMC.
-Refer to Scenario 15-7.If Black Box Cable TV is unable to price discriminate,what price will it choose to maximize its profit,and what is the amount of the profit?

Accepted Answer

A)  price = $20; profit = $400,000 
B)  price = $20; profit = $330,000 
C)  price = $150; profit = $450,000 
D)  price = $150; profit = $600,000 
A)  price = $20; profit = $400,000 
B)  price = $20; profit = $330,000 
C)  price = $150; profit = $450,000 
D)  price = $150; profit = $600,000

Question 17

Which of the following statements is (are)true of a monopoly?
(i)A monopoly has the ability to set the price of its product at whatever level it desires.
(ii)A monopoly's total revenue will always increase when it increases the price of its product.
(iii)A monopoly can earn unlimited profits.

Accepted Answer

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

Question 18

In the majority of cases where there is a natural monopoly in the United States,the government usually deals with the problem

Accepted Answer

A)  by splitting the natural monopoly into smaller companies. 
B)  through regulation. 
C)  by turning the natural monopoly into a public enterprise. 
D)  by doing nothing. 
A)  by splitting the natural monopoly into smaller companies. 
B)  through regulation. 
C)  by turning the natural monopoly into a public enterprise. 
D)  by doing nothing.

Question 19

One problem with regulating a monopolist on the basis of cost is that

Accepted Answer

A)  by focusing on costs, the regulators ignore profits. 
B)  it does not provide an incentive for the monopolist to reduce its cost. 
C)  a monopolist's costs, by definition, are higher than costs of perfectly competitive firms. 
D)  a monopolist is still able to generate excessive economic profits. 
A)  by focusing on costs, the regulators ignore profits. 
B)  it does not provide an incentive for the monopolist to reduce its cost. 
C)  a monopolist's costs, by definition, are higher than costs of perfectly competitive firms. 
D)  a monopolist is still able to generate excessive economic profits.

Question 20

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 $150?

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

With perfect price discrimination the monopoly

Because a monopolist is the sole producer in its market,it can necessarily alter the price of its good (i)without affecting the quantity sold. (ii)without affecting its average total cost. (iii)by adjusting the quantity it supplies to the market.

Authors are allowed to be monopolists in the sale of their books in order to

The deadweight loss for a monopolist equals one-half of its profits for any given level of output.

Table 15-10 The monopolist faces the following demand curve: -Refer to Table 15-10.If the monopolist has total fixed costs of $40 and a constant marginal cost of $5,what is the profit-maximizing level of output?

Patents,copyrights,and trademarks

The fundamental cause of monopolies is barriers to entry.

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.The firm's profit-maximizing price is

The monopolist's profit-maximizing quantity of output is determined by the intersection of which of the following two curves?

A monopolist produces where P = MC = MR.

Most markets are not monopolies in the real world because

Table 15-12 The following table provides information on the price, quantity, and average total cost for a monopoly. -Refer to Table 15-12.In order to maximize profits,the firm should produce

The deadweight loss associated with a monopoly occurs because the monopolist

Table 15-7 Sally owns the only shoe store in town. She has the following cost and revenue information. -Refer to Table 15-7.What is the total revenue from selling 8 pairs of shoes?

Which of the following statements is (are)true of a monopoly? (i)A monopoly has the ability to set the price of its product at whatever level it desires. (ii)A monopoly's total revenue will always increase when it increases the price of its product. (iii)A monopoly can earn unlimited profits.

In the majority of cases where there is a natural monopoly in the United States,the government usually deals with the problem

One problem with regulating a monopolist on the basis of cost is that

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.

With perfect price discrimination the monopoly

Because a monopolist is the sole producer in its market,it can necessarily alter the price of its good (i)without affecting the quantity sold. (ii)without affecting its average total cost. (iii)by adjusting the quantity it supplies to the market.

Authors are allowed to be monopolists in the sale of their books in order to

The deadweight loss for a monopolist equals one-half of its profits for any given level of output.

Table 15-10 The monopolist faces the following demand curve: -Refer to Table 15-10.If the monopolist has total fixed costs of $40 and a constant marginal cost of $5,what is the profit-maximizing level of output?

Patents,copyrights,and trademarks

The fundamental cause of monopolies is barriers to entry.

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.The firm's profit-maximizing price is

The monopolist's profit-maximizing quantity of output is determined by the intersection of which of the following two curves?

A monopolist produces where P = MC = MR.

Most markets are not monopolies in the real world because

Table 15-12 The following table provides information on the price, quantity, and average total cost for a monopoly. -Refer to Table 15-12.In order to maximize profits,the firm should produce

The deadweight loss associated with a monopoly occurs because the monopolist

Table 15-7 Sally owns the only shoe store in town. She has the following cost and revenue information. -Refer to Table 15-7.What is the total revenue from selling 8 pairs of shoes?

Which of the following statements is (are)true of a monopoly? (i)A monopoly has the ability to set the price of its product at whatever level it desires. (ii)A monopoly's total revenue will always increase when it increases the price of its product. (iii)A monopoly can earn unlimited profits.

In the majority of cases where there is a natural monopoly in the United States,the government usually deals with the problem

One problem with regulating a monopolist on the basis of cost is that

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.

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