Question 1

Figure 15-1
  
-Refer to Figure 15-1.Considering the relationship between average total cost and marginal cost,the marginal cost curve for this firm must

Accepted Answer

A)  lie entirely above the average total cost curve. 
B)  lie entirely below the average total cost curve. 
C)  be U-shaped. 
D)  be horizontal. 
A)  lie entirely above the average total cost curve. 
B)  lie entirely below the average total cost curve. 
C)  be U-shaped. 
D)  be horizontal.

Question 2

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

Accepted Answer

A)  Mighty Mitch's Mining Company owns a unique plot of land in Tanzania, under which lies the only large deposit of Tanzanite in the world. 
B)  A pharmaceutical company obtains a patent for a specific high blood pressure medication. 
C)  A musician obtains a copyright for her original song. 
D)  An entrepreneur opens a popular new restaurant. 
A)  Mighty Mitch's Mining Company owns a unique plot of land in Tanzania, under which lies the only large deposit of Tanzanite in the world. 
B)  A pharmaceutical company obtains a patent for a specific high blood pressure medication. 
C)  A musician obtains a copyright for her original song. 
D)  An entrepreneur opens a popular new restaurant.

Question 3

If the government deems a newly-invented drug to be truly original,the pharmaceutical company is given the exclusive right to manufacture and sell the drug for 50 years.

Accepted Answer

A) True 
 B)False

Question 4

Table 15-17
  
-Refer to Table 15-17.If a monopolist faces a constant marginal cost of $2,how much output should the firm produce?

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 5

Selling a good at a price determined by the intersection of the demand curve and the marginal cost curve is consistent with the
(i)socially-optimal level of output.
(ii)market solution for profit-maximizing competitive firms.
(iii)market solution for a profit-maximizing 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 6

Since natural monopolies have a declining average cost curve,regulating natural monopolies by setting price equal to marginal cost would

Accepted Answer

A)  cause the monopolist to operate at a loss. 
B)  result in a less than optimal total surplus. 
C)  maximize producer surplus. 
D)  result in higher profits for the monopoly. 
A)  cause the monopolist to operate at a loss. 
B)  result in a less than optimal total surplus. 
C)  maximize producer surplus. 
D)  result in higher profits for the monopoly.

Question 7

Scenario 15-5
An airline knows that there are two types of travelers: business travelers and vacationers. For a particular flight, there are 100 business travelers who will pay $600 for a ticket while there are 50 vacationers who will pay $300 for a ticket. There are 150 seats available on the plane. Suppose the cost to the airline of providing the flight is $20,000, which includes the cost of the pilots, flight attendants, fuel, etc.
-Refer to Scenario 15-5.How much profit will the airline earn if it sets the price of each ticket at $600?

Accepted Answer

A)  -$5,000 
B)  $15,000 
C)  $40,000 
D)  $60,000 
A)  -$5,000 
B)  $15,000 
C)  $40,000 
D)  $60,000

Question 8

When we compare economic welfare in a monopoly market to a competitive market,the profits earned by the monopolist represent

Accepted Answer

A)  a transfer of benefits from the consumer to the producer. 
B)  a loss in total welfare. 
C)  the higher marginal costs incurred by the monopolists in comparison to competitive firms. 
D)  the higher marginal revenues gained by the monopolists in comparison to competitive firms. 
A)  a transfer of benefits from the consumer to the producer. 
B)  a loss in total welfare. 
C)  the higher marginal costs incurred by the monopolists in comparison to competitive firms. 
D)  the higher marginal revenues gained by the monopolists in comparison to competitive firms.

Question 9

The laws governing patents and copyrights

Accepted Answer

A)  promote monopolies. 
B)  are intended to serve private interests, not the public's interest. 
C)  have costs but not benefits. 
D)  eliminate the need for firms to engage in research and development. 
A)  promote monopolies. 
B)  are intended to serve private interests, not the public's interest. 
C)  have costs but not benefits. 
D)  eliminate the need for firms to engage in research and development.

Question 10

Price discrimination

Accepted Answer

A)  is illegal in the United States and Europe. 
B)  can occur in both perfectly competitive and monopoly markets. 
C)  is illogical because it does not maximize profits. 
D)  can maximize profits if the seller can prevent the resale of goods between customers. 
A)  is illegal in the United States and Europe. 
B)  can occur in both perfectly competitive and monopoly markets. 
C)  is illogical because it does not maximize profits. 
D)  can maximize profits if the seller can prevent the resale of goods between customers.

Question 11

A monopolist's profit is equal to (Price - Marginal Cost)* Quantity.

Accepted Answer

A) True 
 B)False

Question 12

Government intervention always reduces monopoly deadweight loss.

Accepted Answer

A) True 
 B)False

Question 13

Perfect price discrimination

Accepted Answer

A)  eliminates deadweight loss. 
B)  reduces profits to the monopolist. 
C)  decreases the total quantity sold by the monopolist. 
D)  requires arbitrage in order for the monopolist to maximize profits. 
A)  eliminates deadweight loss. 
B)  reduces profits to the monopolist. 
C)  decreases the total quantity sold by the monopolist. 
D)  requires arbitrage in order for the monopolist to maximize profits.

Question 14

Figure 15-4
  
-Refer to Figure 15-4.A profit-maximizing monopoly's total cost is equal to

Accepted Answer

A)  P4 x Q3. 
B)  P2 x Q3. 
C)  P1 x Q3. 
D)  (P4-P1) x Q3. 
A)  P4 x Q3. 
B)  P2 x Q3. 
C)  P1 x Q3. 
D)  (P4-P1) x Q3.

Question 15

When we compare economic welfare in a monopoly market to a competitive market,the profits earned by the monopolist represent

Accepted Answer

A)  a loss in total welfare. 
B)  a transfer of benefits from the buyer to the seller. 
C)  the higher marginal costs incurred by the monopolists in comparison to competitive firms. 
D)  All of the above are correct. 
A)  a loss in total welfare. 
B)  a transfer of benefits from the buyer to the seller. 
C)  the higher marginal costs incurred by the monopolists in comparison to competitive firms. 
D)  All of the above are correct.

Question 16

During the life of a drug patent,the monopoly pharmaceutical firm maximizes profit by producing the quantity at which marginal revenue equals marginal cost.

Accepted Answer

A) True 
 B)False

Question 17

Suppose when a monopolist produces 75 units its average revenue is $10 per unit,its marginal revenue is $5 per unit,its marginal cost is $6 per unit,and its average total cost is $5 per unit.What can we conclude about this monopolist?

Accepted Answer

A)  The monopolist is currently maximizing profits, and its total profits are $375. 
B)  The monopolist is currently maximizing profits, and its total profits are $300. 
C)  The monopolist is not currently maximizing profits; it should produce more units and charge a lower price to maximize profits. 
D)  The monopolist is not currently maximizing profits; it should produce fewer units and charge a higher price to maximize profits. 
A)  The monopolist is currently maximizing profits, and its total profits are $375. 
B)  The monopolist is currently maximizing profits, and its total profits are $300. 
C)  The monopolist is not currently maximizing profits; it should produce more units and charge a lower price to maximize profits. 
D)  The monopolist is not currently maximizing profits; it should produce fewer units and charge a higher price to maximize profits.

Question 18

Figure 15-3
  
-Refer to Figure 15-3.Profit can always be increased by increasing the level of output by one unit if the monopolist is currently operating at
(i)Q0.
(ii)Q1.
(iii)Q2.
(iv)Q3.

Accepted Answer

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

Question 19

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 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 = $25; profit = $575,000 
B)  price = $25; profit = $475,000 
C)  price = $150; profit = $450,000 
D)  price = $150; profit = $350,000 
A)  price = $25; profit = $575,000 
B)  price = $25; profit = $475,000 
C)  price = $150; profit = $450,000 
D)  price = $150; profit = $350,000

Question 20

A monopolist maximizes profits by

Accepted Answer

A)  producing an output level where marginal revenue equals marginal cost. 
B)  charging a price equal to marginal revenue and marginal cost. 
C)  charging a price where marginal cost equals average total cost. 
D)  Both a and b are correct. 
A)  producing an output level where marginal revenue equals marginal cost. 
B)  charging a price equal to marginal revenue and marginal cost. 
C)  charging a price where marginal cost equals average total cost. 
D)  Both a and b are correct.

Figure 15-1 -Refer to Figure 15-1.Considering the relationship between average total cost and marginal cost,the marginal cost curve for this firm must

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

If the government deems a newly-invented drug to be truly original,the pharmaceutical company is given the exclusive right to manufacture and sell the drug for 50 years.

Table 15-17 -Refer to Table 15-17.If a monopolist faces a constant marginal cost of $2,how much output should the firm produce?

Selling a good at a price determined by the intersection of the demand curve and the marginal cost curve is consistent with the (i)socially-optimal level of output. (ii)market solution for profit-maximizing competitive firms. (iii)market solution for a profit-maximizing monopoly.

Since natural monopolies have a declining average cost curve,regulating natural monopolies by setting price equal to marginal cost would

When we compare economic welfare in a monopoly market to a competitive market,the profits earned by the monopolist represent

The laws governing patents and copyrights

Price discrimination

A monopolist's profit is equal to (Price - Marginal Cost)* Quantity.

Government intervention always reduces monopoly deadweight loss.

Perfect price discrimination

Figure 15-4 -Refer to Figure 15-4.A profit-maximizing monopoly's total cost is equal to

When we compare economic welfare in a monopoly market to a competitive market,the profits earned by the monopolist represent

During the life of a drug patent,the monopoly pharmaceutical firm maximizes profit by producing the quantity at which marginal revenue equals marginal cost.

Suppose when a monopolist produces 75 units its average revenue is $10 per unit,its marginal revenue is $5 per unit,its marginal cost is $6 per unit,and its average total cost is $5 per unit.What can we conclude about this monopolist?

Figure 15-3 -Refer to Figure 15-3.Profit can always be increased by increasing the level of output by one unit if the monopolist is currently operating at (i)Q0. (ii)Q1. (iii)Q2. (iv)Q3.

A monopolist maximizes profits by

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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Exam 15: Monopoly.

Figure 15-1 -Refer to Figure 15-1.Considering the relationship between average total cost and marginal cost,the marginal cost curve for this firm must

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

If the government deems a newly-invented drug to be truly original,the pharmaceutical company is given the exclusive right to manufacture and sell the drug for 50 years.

Table 15-17 -Refer to Table 15-17.If a monopolist faces a constant marginal cost of $2,how much output should the firm produce?

Selling a good at a price determined by the intersection of the demand curve and the marginal cost curve is consistent with the (i)socially-optimal level of output. (ii)market solution for profit-maximizing competitive firms. (iii)market solution for a profit-maximizing monopoly.

Since natural monopolies have a declining average cost curve,regulating natural monopolies by setting price equal to marginal cost would

When we compare economic welfare in a monopoly market to a competitive market,the profits earned by the monopolist represent

The laws governing patents and copyrights

Price discrimination

A monopolist's profit is equal to (Price - Marginal Cost)* Quantity.

Government intervention always reduces monopoly deadweight loss.

Perfect price discrimination

Figure 15-4 -Refer to Figure 15-4.A profit-maximizing monopoly's total cost is equal to

When we compare economic welfare in a monopoly market to a competitive market,the profits earned by the monopolist represent

During the life of a drug patent,the monopoly pharmaceutical firm maximizes profit by producing the quantity at which marginal revenue equals marginal cost.

Suppose when a monopolist produces 75 units its average revenue is $10 per unit,its marginal revenue is $5 per unit,its marginal cost is $6 per unit,and its average total cost is $5 per unit.What can we conclude about this monopolist?

Figure 15-3 -Refer to Figure 15-3.Profit can always be increased by increasing the level of output by one unit if the monopolist is currently operating at (i)Q0. (ii)Q1. (iii)Q2. (iv)Q3.

A monopolist maximizes profits by

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