Question 1

Which barrier to entry results in the creation of a natural monopoly?

Accepted Answer

A)  legal barriers like government franchises 
B)  economies of scale 
C)  ownership of a vital resource 
D)  patents and copyrights 
A)  legal barriers like government franchises 
B)  economies of scale 
C)  ownership of a vital resource 
D)  patents and copyrights

Question 2

Exhibit 9-7 Monopolist
​
 
If the profit-maximizing monopoly in Exhibit 9-7 becomes a profit-maximizing perfectly competitive market, the price will go from

Accepted Answer

A)  $8 to $6. 
B)  $10 to $8. 
C)  $10 to $6. 
D)  $6 to $8. 
A)  $8 to $6. 
B)  $10 to $8. 
C)  $10 to $6. 
D)  $6 to $8.

Question 3

Exhibit 9-2 Demand and cost information for a monopoly
 
Refer to Exhibit 9-2. Using the rule that focuses on the marginal approach to maximizing profits, the monopolist maximizes profit by choosing price equal to:

Accepted Answer

A)  $40. 
B)  $20. 
C)  $10. 
D)  $30. 
A)  $40. 
B)  $20. 
C)  $10. 
D)  $30.

Question 4

For a monopolist with a downward-sloping demand curve,

Accepted Answer

A)  when the price is equal to zero, marginal revenue is equal to zero. 
B)  the coefficient of price elasticity of demand is zero. 
C)  as price increases, marginal revenue decreases. 
D)  as price decreases, marginal revenue decreases. 
A)  when the price is equal to zero, marginal revenue is equal to zero. 
B)  the coefficient of price elasticity of demand is zero. 
C)  as price increases, marginal revenue decreases. 
D)  as price decreases, marginal revenue decreases.

Question 5

The act of buying a commodity in one market at a lower price and selling it in another market at a higher price is known as:

Accepted Answer

A)  buying long. 
B)  selling short. 
C)  a tariff. 
D)  arbitrage. 
A)  buying long. 
B)  selling short. 
C)  a tariff. 
D)  arbitrage.

Question 6

If marginal cost exceeds marginal revenue, a profit-maximizing monopolist will:

Accepted Answer

A)  restrict output to increase the price even higher. 
B)  raise price and expand output to increase profit. 
C)  lower price and expand output to increase profit. 
D)  attempt to maintain this position because it is consistent with profit maximization. 
A)  restrict output to increase the price even higher. 
B)  raise price and expand output to increase profit. 
C)  lower price and expand output to increase profit. 
D)  attempt to maintain this position because it is consistent with profit maximization.

Question 7

Exhibit 3  Demand and cost curves for GeneTech, a monopolist  with a patented vaccine
 
Consider Exhibit 9-3. Suppose GeneTech's patent expires and the market for the vaccine becomes perfectly competitive. Which of the following price and quantity combinations would be most likely?

Accepted Answer

A)  $45 per dose and 100 doses per hour 
B)  $40 per dose and 200 doses per hour 
C)  $35 per dose and 300 doses per hour 
D)  $28 per dose and 450 doses per hour 
A)  $45 per dose and 100 doses per hour 
B)  $40 per dose and 200 doses per hour 
C)  $35 per dose and 300 doses per hour 
D)  $28 per dose and 450 doses per hour

Question 8

A monopoly firm can sell its fourth unit of output for a price of $250. To sell more than five units, it must expect to receive a price:

Accepted Answer

A)  equal to $250. 
B)  greater than $250. 
C)  less than $250. 
D)  equal to $340. 
A)  equal to $250. 
B)  greater than $250. 
C)  less than $250. 
D)  equal to $340.

Question 9

Under both perfect competition and monopoly, a firm:

Accepted Answer

A)  is a price taker. 
B)  is a price maker. 
C)  will shut down in the short-run if price falls short of average total cost. 
D)  sets marginal cost equal to marginal revenue. 
A)  is a price taker. 
B)  is a price maker. 
C)  will shut down in the short-run if price falls short of average total cost. 
D)  sets marginal cost equal to marginal revenue.

Question 10

Monopolists are criticized because they are inefficient. What is meant by this statement?

Accepted Answer

A)  Monopolists could use their resources better elsewhere. 
B)  Monopolists don't innovate enough to control pollution. 
C)  Monopolists produce a large quantity of waste. 
D)  Monopolists usually don't produce at the minimum of the ATC. 
A)  Monopolists could use their resources better elsewhere. 
B)  Monopolists don't innovate enough to control pollution. 
C)  Monopolists produce a large quantity of waste. 
D)  Monopolists usually don't produce at the minimum of the ATC.

Question 11

Which of the following distinguishes a natural monopoly from monopoly caused by ownership of a vital resource?

Accepted Answer

A)  The natural monopoly has a marginal cost curve above its average cost curve at all levels of output, whereas the marginal cost in other monopolies is above average cost. 
B)  The natural monopoly does not require any government intervention because it is only efficient to have one large firm supplying the market, but other monopolies do require government intervention to maintain efficiency. 
C)  The natural monopoly has a downward-sloping long-run average cost curve as opposed to a U-shaped long-run average cost curve. 
D)  The natural monopoly occurs with naturally occurring products like gold and diamonds, whereas other monopolies occur with man-made products. 
A)  The natural monopoly has a marginal cost curve above its average cost curve at all levels of output, whereas the marginal cost in other monopolies is above average cost. 
B)  The natural monopoly does not require any government intervention because it is only efficient to have one large firm supplying the market, but other monopolies do require government intervention to maintain efficiency. 
C)  The natural monopoly has a downward-sloping long-run average cost curve as opposed to a U-shaped long-run average cost curve. 
D)  The natural monopoly occurs with naturally occurring products like gold and diamonds, whereas other monopolies occur with man-made products.

Question 12

Exhibit 9-7 Monopolist
​
 
According to the information provided in Exhibit 9-7, if the Rudd Ice Company is a monopoly and is currently charging a price of $6, what would you advise Rudd to do?

Accepted Answer

A)  Stay where he is currently operating because he is charging the profit maximizing price. 
B)  Increase price and decrease output. 
C)  Decrease price and increase output. 
D)  Increase output and hold price constant. 
A)  Stay where he is currently operating because he is charging the profit maximizing price. 
B)  Increase price and decrease output. 
C)  Decrease price and increase output. 
D)  Increase output and hold price constant.

Question 13

Suppose a single firm can produce 100 units at an average cost of $15. If two firms produce 50 units each, the total cost rises to $2,500. Which of the following is true about this market?

Accepted Answer

A)  The demand for this product will be higher if there are two firms producing the product than if there is only one. 
B)  It is more efficient to have two firms so they each have a competitor. 
C)  Neither firm can make a profit. 
D)  It is a natural monopoly. 
A)  The demand for this product will be higher if there are two firms producing the product than if there is only one. 
B)  It is more efficient to have two firms so they each have a competitor. 
C)  Neither firm can make a profit. 
D)  It is a natural monopoly.

Question 14

A monopolist can earn an economic profit only when:

Accepted Answer

A)  marginal cost equals marginal revenue, and the same is true for a perfectly competitive firm. 
B)  marginal cost equals price, while a perfectly competitive firm earns a profit if average total cost is less than price. 
C)  average total cost is less than price and the same is true for a perfectly competitive firm. 
D)  average variable cost exceed marginal cost, while a perfectly competitive firm earns a profit if average total cost exceeds marginal cost. 
A)  marginal cost equals marginal revenue, and the same is true for a perfectly competitive firm. 
B)  marginal cost equals price, while a perfectly competitive firm earns a profit if average total cost is less than price. 
C)  average total cost is less than price and the same is true for a perfectly competitive firm. 
D)  average variable cost exceed marginal cost, while a perfectly competitive firm earns a profit if average total cost exceeds marginal cost.

Question 15

What are the conditions for price discrimination?

Accepted Answer

The firm must possess some ability to co

Question 16

What is a natural monopoly? Why is government justified in regulating a natural monopoly?

Accepted Answer

A natural monopoly is a monopoly that re

Question 17

A price-discriminating monopoly charges the lowest price to the group that:

Accepted Answer

A)  has the most elastic demand. 
B)  purchases the largest quantity. 
C)  engages in the most arbitrage. 
D)  is least responsive to price changes. 
A)  has the most elastic demand. 
B)  purchases the largest quantity. 
C)  engages in the most arbitrage. 
D)  is least responsive to price changes.

Question 18

An example of price discrimination is the price charged for:

Accepted Answer

A)  coffee. 
B)  college admission. 
C)  cashmere sweaters. 
D)  cough syrup. 
A)  coffee. 
B)  college admission. 
C)  cashmere sweaters. 
D)  cough syrup.

Question 19

Exhibit 9-1 Monopolist's demand curve
​
 
In Exhibit 9-1, the marginal revenue curve corresponding to the monopolist's demand curve would be a straight line drawn between points:

Accepted Answer

A)  A to B. 
B)  A to D. 
C)  C to B. 
D)  C to D. 
A)  A to B. 
B)  A to D. 
C)  C to B. 
D)  C to D.

Question 20

Ricky and Anita are 10 year-olds who have a lemonade stand on a busy beach and would like to practice price discrimination. They know that they are the only sellers of lemonade on the beach and that adults have a less elastic demand for lemonade than kids so they decide to sell their lemonade for $0.25 to kids and $0.50 to adults. Will their price discrimination be successful? Why or why not?

Accepted Answer

A)  Yes, they have all of the necessary criteria to successfully price discriminate. 
B)  Yes, the only necessary conditions is that they know the relative elasticities of the market segments. 
C)  No, the kids who buy their lemonade can practice arbitrage. 
D)  No, Ricky and Anita are price takers. 
A)  Yes, they have all of the necessary criteria to successfully price discriminate. 
B)  Yes, the only necessary conditions is that they know the relative elasticities of the market segments. 
C)  No, the kids who buy their lemonade can practice arbitrage. 
D)  No, Ricky and Anita are price takers.

Exam 9: Monopoly

Which barrier to entry results in the creation of a natural monopoly?

Exhibit 9-7 Monopolist ​ If the profit-maximizing monopoly in Exhibit 9-7 becomes a profit-maximizing perfectly competitive market, the price will go from

Exhibit 9-2 Demand and cost information for a monopoly Refer to Exhibit 9-2. Using the rule that focuses on the marginal approach to maximizing profits, the monopolist maximizes profit by choosing price equal to:

For a monopolist with a downward-sloping demand curve,

The act of buying a commodity in one market at a lower price and selling it in another market at a higher price is known as:

If marginal cost exceeds marginal revenue, a profit-maximizing monopolist will:

Exhibit 3 Demand and cost curves for GeneTech, a monopolist with a patented vaccine Consider Exhibit 9-3. Suppose GeneTech's patent expires and the market for the vaccine becomes perfectly competitive. Which of the following price and quantity combinations would be most likely?

A monopoly firm can sell its fourth unit of output for a price of $250. To sell more than five units, it must expect to receive a price:

Under both perfect competition and monopoly, a firm:

Monopolists are criticized because they are inefficient. What is meant by this statement?

Which of the following distinguishes a natural monopoly from monopoly caused by ownership of a vital resource?

Exhibit 9-7 Monopolist ​ According to the information provided in Exhibit 9-7, if the Rudd Ice Company is a monopoly and is currently charging a price of $6, what would you advise Rudd to do?

Suppose a single firm can produce 100 units at an average cost of $15. If two firms produce 50 units each, the total cost rises to $2,500. Which of the following is true about this market?

A monopolist can earn an economic profit only when:

What are the conditions for price discrimination?

What is a natural monopoly? Why is government justified in regulating a natural monopoly?

A price-discriminating monopoly charges the lowest price to the group that:

An example of price discrimination is the price charged for:

Exhibit 9-1 Monopolist's demand curve ​ In Exhibit 9-1, the marginal revenue curve corresponding to the monopolist's demand curve would be a straight line drawn between points:

Introducing the Economic Way of Thinking

Production Possibilities Opportunity Cost and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand and Supply

Consumer Choice Theory

Production Costs

Perfect Competition

Monopolistic Competition and Oligopoly

Labor Markets

Income Distribution Poverty and Discrimination

Antitrust and Regulation

Environmental Economics

Gross Domestic Product

Business Cycles and Unemployment

Inflation

The Keynesian Model

The Keynesian Model in Action

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits Surpluses and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

The Phillips Curve and Expectations Theory

International Trade and Finance

Economies in Transition

Growth and the Less Developed Countries

Understanding Direct and Inverse Relationships between Variables

Filters

Exhibit 9-7 Monopolist If the profit-maximizing monopoly in Exhibit 9-7 becomes a profit-maximizing perfectly competitive market, the price will go from

Exhibit 9-7 Monopolist According to the information provided in Exhibit 9-7, if the Rudd Ice Company is a monopoly and is currently charging a price of $6, what would you advise Rudd to do?

Exhibit 9-1 Monopolist's demand curve In Exhibit 9-1, the marginal revenue curve corresponding to the monopolist's demand curve would be a straight line drawn between points: