Question 1

Why does perfect competition shun advertising? Does advertising benefit a monopoly?

Accepted Answer

In perfect competition, advertising expe

Question 2

A profit-maximizing monopolist

Accepted Answer

A) engages in more research and development activity than a perfectly competitive firm. 
B) produces the output level where P = MC. 
C) produces less output than a perfectly competitive industry. 
D) produces at the unit elastic point on the market demand curve. 
A) engages in more research and development activity than a perfectly competitive firm. 
B) produces the output level where P = MC. 
C) produces less output than a perfectly competitive industry. 
D) produces at the unit elastic point on the market demand curve.

Question 3

A patent

Accepted Answer

A) is given only to government owned companies. 
B) is not a legal impediment to entry. 
C) is a privilege granted by a state to an inventor over his or her invention. 
D) does not give the holder a monopoly during the period it is in effect. 
A) is given only to government owned companies. 
B) is not a legal impediment to entry. 
C) is a privilege granted by a state to an inventor over his or her invention. 
D) does not give the holder a monopoly during the period it is in effect.

Question 4

Figure 11-6
 
At its optimal output level, the profit-maximizing monopolist in Figure 11-6 will earn a profit equal to

Accepted Answer

A) zero. 
B) (P2 − P3)Q. 
C) P > Q. 
D) (P5 − P6 )Q. 
A) zero. 
B) (P2 − P3)Q. 
C) P > Q. 
D) (P5 − P6 )Q.

Question 5

What is true for both a monopolist and a perfect competitor?

Accepted Answer

A) Both maximize profits by producing where MR = MC. 
B) Both have prices that are greater than marginal revenue 
C) Both minimize average total cost. 
D) Both face downward-sloping demand curve. 
A) Both maximize profits by producing where MR = MC. 
B) Both have prices that are greater than marginal revenue 
C) Both minimize average total cost. 
D) Both face downward-sloping demand curve.

Question 6

Explain why marginal revenue is less than price for a monopolist.

Accepted Answer

To sell additional units, a monopoly mus

Question 7

Which of the following can serve as an entry barrier?

Accepted Answer

A) Legal restrictions 
B) Patents 
C) Control of scarce resources or inputs 
D) All of these responses are correct. 
A) Legal restrictions 
B) Patents 
C) Control of scarce resources or inputs 
D) All of these responses are correct.

Question 8

Owning a patent can always provide a firm with monopoly control of a market.

Accepted Answer

A) True 
 B)False

Question 9

What is the equilibrium condition for price discriminating monopoly firm? Give some examples for price discrimination.

Accepted Answer

The equilibrium condition is: MC = MR_A =

Question 10

A natural monopoly market is characterized diseconomies of scale over the entire range of output.

Accepted Answer

A) True 
 B)False

Question 11

Under monopoly

Accepted Answer

A) too small a share of society's resources is used to produce the monopolized commodity. 
B) Adam Smith's invisible hand assures efficient resource allocation. 
C) too large a share of society's resources is being used to produce the monopolized commodity. 
D) MC > MU. 
A) too small a share of society's resources is used to produce the monopolized commodity. 
B) Adam Smith's invisible hand assures efficient resource allocation. 
C) too large a share of society's resources is being used to produce the monopolized commodity. 
D) MC > MU.

Question 12

The ability to control a scarce resource or input is a characteristic of perfect competition.

Accepted Answer

A) True 
 B)False

Question 13

Table 11-1   Table 11-1 shows demand and total cost schedules for Monopoliteria. At its profit-maximizing level of output, Monopoliteria's profit is

Accepted Answer

A) $10. 
B) $15. 
C) $22. 
D) $30. 
A) $10. 
B) $15. 
C) $22. 
D) $30.

Question 14

The demand curve of the monopoly firm is always the

Accepted Answer

A) average revenue curve. 
B) marginal revenue curve. 
C) total revenue curve. 
D) marginal cost curve above average variable cost. 
A) average revenue curve. 
B) marginal revenue curve. 
C) total revenue curve. 
D) marginal cost curve above average variable cost.

Question 15

Entry barriers are present in monopoly markets but are not in perfectly competitive markets.

Accepted Answer

A) True 
 B)False

Question 16

Figure 11-4
 
Physicians have two types of patients: private patients who pay directly or with insurance, and Medicaid patients whose care is paid for by the state. Physicians must lower prices to attract more private patients, but they can add unlimited Medicaid patients at a constant price. The situation facing Dr. Casey is depicted in Figure 11-4. Units of medical service (say, number of patients × number of visits)are measured on the horizontal axis. How many units of medical service will Dr. Casey deliver to Medicaid patients?

Accepted Answer

A) OA 
B) AC 
C) OC 
D) OD 
A) OA 
B) AC 
C) OC 
D) OD

Question 17

The average total cost curve of a natural monopoly is always

Accepted Answer

A) upward sloping. 
B) horizontal. 
C) downward sloping at all points. 
D) downward sloping where it crosses the market demand curve for the good. 
A) upward sloping. 
B) horizontal. 
C) downward sloping at all points. 
D) downward sloping where it crosses the market demand curve for the good.

Question 18

The two basic reasons why a monopoly exists are barriers to entry and cost advantages.

Accepted Answer

A) True 
 B)False

Question 19

Which of the following is not a barrier to entry?

Accepted Answer

A) Legal restrictions 
B) Patents 
C) Large sunk costs 
D) Survivor rights 
A) Legal restrictions 
B) Patents 
C) Large sunk costs 
D) Survivor rights

Question 20

Explain how each of the following industries practices price discrimination. 
a. Movie theaters 
b. Airlines 
c. Auto dealers 
d. U.S. Postal Service

Accepted Answer

a. Movie theaters charge different price

Exam 12: Monopoly

Why does perfect competition shun advertising? Does advertising benefit a monopoly?

A profit-maximizing monopolist

A patent

Figure 11-6 At its optimal output level, the profit-maximizing monopolist in Figure 11-6 will earn a profit equal to

What is true for both a monopolist and a perfect competitor?

Explain why marginal revenue is less than price for a monopolist.

Which of the following can serve as an entry barrier?

Owning a patent can always provide a firm with monopoly control of a market.

What is the equilibrium condition for price discriminating monopoly firm? Give some examples for price discrimination.

A natural monopoly market is characterized diseconomies of scale over the entire range of output.

Under monopoly

The ability to control a scarce resource or input is a characteristic of perfect competition.

Table 11-1 Table 11-1 shows demand and total cost schedules for Monopoliteria. At its profit-maximizing level of output, Monopoliteria's profit is

The demand curve of the monopoly firm is always the

Entry barriers are present in monopoly markets but are not in perfectly competitive markets.

The average total cost curve of a natural monopoly is always

The two basic reasons why a monopoly exists are barriers to entry and cost advantages.

Which of the following is not a barrier to entry?

Explain how each of the following industries practices price discrimination. a. Movie theaters b. Airlines c. Auto dealers d. U.S. Postal Service

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

The Financial Markets and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

The Case for Free Markets: the Price System

Between Competition and Monopoly

Limiting Market Power: Antitrust and Regulation

The Shortcomings of Free Markets

Externalities, Externaliteis, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

International Trade and Comparative Advantage

Contemporary Issues in the Us Economy

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