Question 1

A monopolist is a price maker who will lose some business if the price is increased.

Accepted Answer

A) True 
 B)False

Question 2

Until recently, the drug maker Pfizer enjoyed a monopoly of the cholesterol-control drug Lipitor because of patent rights.

Accepted Answer

A) True 
 B)False

Question 3

A positive aspect of monopolies is that they may aid innovation in the marketplace.

Accepted Answer

A) True 
 B)False

Question 4

Figure 11-1
 
The Red Cross is virtually the only operator of blood banks in the United States. In Figure 11-1 are the demand and cost curves facing the Red Cross blood bank. If the Red Cross were to set price and quantity at the level that it would obtain in the long run in a competitive industry, how much blood would it sell?

Accepted Answer

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

Question 5

Unlike a perfectly competitive firm, a monopolist

Accepted Answer

A) can choose how much output to produce. 
B) cannot increase production without affecting the price he or she receives for his or her good. 
C) usually sells in a market with a downward-sloping demand curve. 
D) has an MR from increasing output by one unit equal to the price of his or her product. 
A) can choose how much output to produce. 
B) cannot increase production without affecting the price he or she receives for his or her good. 
C) usually sells in a market with a downward-sloping demand curve. 
D) has an MR from increasing output by one unit equal to the price of his or her product.

Question 6

At a given output level, a monopolist earns a profit only if the

Accepted Answer

A) slope of its TR curve exceeds the slope of his or her TC curve. 
B) height of its MR curve exceeds the height of his or her MC curve. 
C) height of its demand curve exceeds the height of his or her MR curve. 
D) height of its demand curve exceeds the height of his or her ATC curve. 
A) slope of its TR curve exceeds the slope of his or her TC curve. 
B) height of its MR curve exceeds the height of his or her MC curve. 
C) height of its demand curve exceeds the height of his or her MR curve. 
D) height of its demand curve exceeds the height of his or her ATC curve.

Question 7

Economists object to monopolies on the grounds of efficiency. Why is this? Explain.

Accepted Answer

Monopolies produce an inefficiently low

Question 8

The differences between a competitive market and a monopoly include all of these except

Accepted Answer

A) excess profits would be competed away in a competitive market, but persist in a monopolistic market. 
B) a competitive market would work toward production of the quantity consumers seek, while a monopolistic market may restrict output to raise short term prices. 
C) a competitive market's cost curves will shift with the market, while a monopoly's cost curves will remain stable. 
D) a competitive market would work toward production of the quantity consumers seek, while a monopolistic market may restrict output to raise long term prices. 
A) excess profits would be competed away in a competitive market, but persist in a monopolistic market. 
B) a competitive market would work toward production of the quantity consumers seek, while a monopolistic market may restrict output to raise short term prices. 
C) a competitive market's cost curves will shift with the market, while a monopoly's cost curves will remain stable. 
D) a competitive market would work toward production of the quantity consumers seek, while a monopolistic market may restrict output to raise long term prices.

Question 9

Monopolists may in the long run

Accepted Answer

A) earn positive economic profit. 
B) be protected by barriers to entry. 
C) grow wealthy at the expense of their consumers. 
D) All of these responses are correct. 
A) earn positive economic profit. 
B) be protected by barriers to entry. 
C) grow wealthy at the expense of their consumers. 
D) All of these responses are correct.

Question 10

A monopoly firm's supply curve

Accepted Answer

A) has a supply curve identical to that for a perfectly competitive firm. 
B) is always equal to marginal cost. 
C) does not exist. 
D) is determined by market demand. 
A) has a supply curve identical to that for a perfectly competitive firm. 
B) is always equal to marginal cost. 
C) does not exist. 
D) is determined by market demand.

Question 11

A monopolist is best described as a price

Accepted Answer

A) taker. 
B) searcher. 
C) maker. 
D) follower. 
A) taker. 
B) searcher. 
C) maker. 
D) follower.

Question 12

A monopolist's demand curve implies that

Accepted Answer

A) the monopolist is a price taker. 
B) the monopolist is a price maker. 
C) it has nothing to do with the amount a monopolist can sell. 
D) it can be downward sloping or horizontal depending on the price. 
A) the monopolist is a price taker. 
B) the monopolist is a price maker. 
C) it has nothing to do with the amount a monopolist can sell. 
D) it can be downward sloping or horizontal depending on the price.

Question 13

The existence of a natural monopoly stems from the size of the firm relative to the total market demand for the product of that firm.

Accepted Answer

A) True 
 B)False

Question 14

The presence of large sunk costs often serves as a naturally imposed barrier to entry.

Accepted Answer

A) True 
 B)False

Question 15

A natural monopoly is one that deliberately erects entry barriers.

Accepted Answer

A) True 
 B)False

Question 16

Price discrimination

Accepted Answer

A) may lead to greater output. 
B) always leads to a reduction of output. 
C) leads to lower profits for the firm. 
D) causes firms to operate at a higher cost. 
A) may lead to greater output. 
B) always leads to a reduction of output. 
C) leads to lower profits for the firm. 
D) causes firms to operate at a higher cost.

Question 17

What is true for monopoly that is not true for perfect competition?

Accepted Answer

A) The industry demand curve is downward sloping. 
B) Profit is maximized where MR = MC. 
C) The firm and the industry are exactly the same entity. 
D) Positive economic profits may be earned in the short run. 
A) The industry demand curve is downward sloping. 
B) Profit is maximized where MR = MC. 
C) The firm and the industry are exactly the same entity. 
D) Positive economic profits may be earned in the short run.

Question 18

Since a monopoly faces a downward-sloping demand curve,

Accepted Answer

A) then, as Adam Smith wrote, "the price of monopoly is upon every occasion the highest which can be got." 
B) price always exceeds average revenue. 
C) marginal revenue increases as output increases. 
D) the monopolist is a price maker. 
A) then, as Adam Smith wrote, "the price of monopoly is upon every occasion the highest which can be got." 
B) price always exceeds average revenue. 
C) marginal revenue increases as output increases. 
D) the monopolist is a price maker.

Question 19

What is a key criterion involved in deciding a natural monopoly?

Accepted Answer

A) Size of the firm relative to its competitors 
B) Size of the firm relative to the total market demand for a product 
C) Magnitude of profits generated by the company 
D) A firm's ability to adapt to market changes 
A) Size of the firm relative to its competitors 
B) Size of the firm relative to the total market demand for a product 
C) Magnitude of profits generated by the company 
D) A firm's ability to adapt to market changes

Question 20

The U.S. Postal Service engages in price discrimination.

Accepted Answer

A) True 
 B)False

Exam 12: Monopoly

A monopolist is a price maker who will lose some business if the price is increased.

Until recently, the drug maker Pfizer enjoyed a monopoly of the cholesterol-control drug Lipitor because of patent rights.

A positive aspect of monopolies is that they may aid innovation in the marketplace.

Unlike a perfectly competitive firm, a monopolist

At a given output level, a monopolist earns a profit only if the

Economists object to monopolies on the grounds of efficiency. Why is this? Explain.

The differences between a competitive market and a monopoly include all of these except

Monopolists may in the long run

A monopoly firm's supply curve

A monopolist is best described as a price

A monopolist's demand curve implies that

The existence of a natural monopoly stems from the size of the firm relative to the total market demand for the product of that firm.

The presence of large sunk costs often serves as a naturally imposed barrier to entry.

A natural monopoly is one that deliberately erects entry barriers.

Price discrimination

What is true for monopoly that is not true for perfect competition?

Since a monopoly faces a downward-sloping demand curve,

What is a key criterion involved in deciding a natural monopoly?

The U.S. Postal Service engages in price discrimination.

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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