Question 1

For a monopolist, marginal revenue is always:

Accepted Answer

A)  below market price. 
B)  equal to market price. 
C)  greater than market price. 
D)  equal to total revenue. 
E)  equal to total cost. 
A)  below market price. 
B)  equal to market price. 
C)  greater than market price. 
D)  equal to total revenue. 
E)  equal to total cost. A

Question 2

Exhibit 8-8  Profit maximizing for a monopolist   The profit-maximizing output for the monopolist in Exhibit 8-8 is:

Accepted Answer

A)  zero. 
B)  OQ1. 
C)  OQ2 
D)  OQ3. 
A)  zero. 
B)  OQ1. 
C)  OQ2 
D)  OQ3. C

Question 3

Exhibit 8-7  Monopolist   According to the information provided in Exhibit 8-7, if the Rudd Ice Company was a monopoly and is currently charging a price of $8, 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 increase output. 
C)  Decrease price and increase output. 
D)  Increase output and hold price constant. 
E)  Increase price and hold output constant. 
A)  Stay where he is currently operating because he is charging the profit maximizing price. 
B)  Increase price and increase output. 
C)  Decrease price and increase output. 
D)  Increase output and hold price constant. 
E)  Increase price and hold output constant. A

Question 4

A monopoly can be created when a firm gains sole control of the entire supply of a strategic input.

Accepted Answer

A) True 
 B)False

Question 5

Under what conditions might a monopoly lose money?

Accepted Answer

Any firm could incur

Question 6

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)  always earns a pure economic profit. 
E)  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)  always earns a pure economic profit. 
E)  sets marginal cost equal to marginal revenue.

Question 7

A natural monopoly maximizes profits at the point at which price equals minimum average total cost.

Accepted Answer

A) True 
 B)False

Question 8

Suppose a monopolist and a perfectly competitive firm have the same cost curves. The monopolistic firm would:

Accepted Answer

A)  charge a lower price than the perfectly competitive firm. 
B)  charge a higher price than the perfectly competitive firm. 
C)  charge the same price as the perfectly competitive firm. 
D)  refuse to operate in the short run unless an economic profit could be made. 
E)  refuse to operate in the short run if an economic loss was present. 
A)  charge a lower price than the perfectly competitive firm. 
B)  charge a higher price than the perfectly competitive firm. 
C)  charge the same price as the perfectly competitive firm. 
D)  refuse to operate in the short run unless an economic profit could be made. 
E)  refuse to operate in the short run if an economic loss was present.

Question 9

Under both perfect competition and monopoly, a firm:

Accepted Answer

A)  is a price taker. 
B)  maximizes profit by setting marginal cost equal to marginal revenue. 
C)  will shut down in the short-run if price falls short of average total cost. 
D)  always earns a pure economic profit. 
A)  is a price taker. 
B)  maximizes profit by setting marginal cost equal to marginal revenue. 
C)  will shut down in the short-run if price falls short of average total cost. 
D)  always earns a pure economic profit.

Question 10

A monopolist always faces a demand curve that is:

Accepted Answer

A)  perfectly inelastic. 
B)  perfectly elastic. 
C)  unit elastic. 
D)  the same as the entire market demand curve. 
A)  perfectly inelastic. 
B)  perfectly elastic. 
C)  unit elastic. 
D)  the same as the entire market demand curve.

Question 11

At the point where the marginal revenue equals zero for a monopolist facing a straight-line demand curve, total revenue is:

Accepted Answer

A)  greater than 1. 
B)  maximum. 
C)  less than 1. 
D)  equal to zero. 
A)  greater than 1. 
B)  maximum. 
C)  less than 1. 
D)  equal to zero.

Question 12

In a natural monopoly, the long-run average cost curve declines and therefore average cost is lower when there is only one seller.

Accepted Answer

A) True 
 B)False

Question 13

One necessary condition for effective price discrimination is:

Accepted Answer

A)  identical tastes among buyers. 
B)  difference in the price elasticity of demand among buyers. 
C)  a single, homogeneous market. 
D)  two or more markets with easy resale of products between them. 
A)  identical tastes among buyers. 
B)  difference in the price elasticity of demand among buyers. 
C)  a single, homogeneous market. 
D)  two or more markets with easy resale of products between them.

Question 14

Assume a monopolist's marginal cost and marginal revenue curves intersect and the demand curve passes above its average total cost curve. The firm will:

Accepted Answer

A)  make an economic profit. 
B)  stay in operation in the short run, but shut down in the long run. 
C)  shut down in the short run. 
D)  lower the price. 
A)  make an economic profit. 
B)  stay in operation in the short run, but shut down in the long run. 
C)  shut down in the short run. 
D)  lower the price.

Question 15

The strategy underlying price discrimination is to:

Accepted Answer

A)  charge higher prices to customers who have better access to substitutes. 
B)  charge everyone the same price but limit the quantity they are allowed to buy. 
C)  increase total revenue by charging higher prices to those with the most inelastic demand for the product and lower prices to those with the most elastic demand. 
D)  reduce per-unit costs by charging higher prices to those with the most elastic demand and lower prices to those with the most inelastic demand. 
A)  charge higher prices to customers who have better access to substitutes. 
B)  charge everyone the same price but limit the quantity they are allowed to buy. 
C)  increase total revenue by charging higher prices to those with the most inelastic demand for the product and lower prices to those with the most elastic demand. 
D)  reduce per-unit costs by charging higher prices to those with the most elastic demand and lower prices to those with the most inelastic demand.

Question 16

Which of the following is true under natural monopoly?

Accepted Answer

A)  The marginal cost curve will be above the average cost curve. 
B)  The monopolist will set price equal to marginal cost and will earn economic profits. 
C)  Economies of scale exist. 
D)  Output is produced under conditions of constant cost. 
A)  The marginal cost curve will be above the average cost curve. 
B)  The monopolist will set price equal to marginal cost and will earn economic profits. 
C)  Economies of scale exist. 
D)  Output is produced under conditions of constant cost.

Question 17

The demand curve for a monopolist is:

Accepted Answer

A)  the demand curve for the industry. 
B)  less than the market demand curve. 
C)  below the marginal revenue curve. 
D)  nonexistent. 
E)  the sum of the demand curves of the perfectly competitive firms in the industry. 
A)  the demand curve for the industry. 
B)  less than the market demand curve. 
C)  below the marginal revenue curve. 
D)  nonexistent. 
E)  the sum of the demand curves of the perfectly competitive firms in the industry.

Question 18

Exhibit 8-1  Monopolist's demand curve   In Exhibit 8-1, 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 C. 
C)  A to D. 
D)  C to B. 
E)  C to D. 
A)  A to B. 
B)  A to C. 
C)  A to D. 
D)  C to B. 
E)  C to D.

Question 19

What are the conditions for price discrimination?

Accepted Answer

The firm must possess some ability to co

Question 20

Which of the following correctly describes price discrimination?

Accepted Answer

A)  Selling different products to different people for the same price. 
B)  Selling different products to identical people for different prices. 
C)  Selling the same product to different people for different prices. 
D)  Selling the same product to the same person for the same price. 
A)  Selling different products to different people for the same price. 
B)  Selling different products to identical people for different prices. 
C)  Selling the same product to different people for different prices. 
D)  Selling the same product to the same person for the same price.

Exam 8: Monopoly

For a monopolist, marginal revenue is always:

Exhibit 8-8 Profit maximizing for a monopolist The profit-maximizing output for the monopolist in Exhibit 8-8 is:

Exhibit 8-7 Monopolist According to the information provided in Exhibit 8-7, if the Rudd Ice Company was a monopoly and is currently charging a price of $8, what would you advise Rudd to do?

A monopoly can be created when a firm gains sole control of the entire supply of a strategic input.

Under what conditions might a monopoly lose money?

Under both perfect competition and monopoly, a firm:

A natural monopoly maximizes profits at the point at which price equals minimum average total cost.

Suppose a monopolist and a perfectly competitive firm have the same cost curves. The monopolistic firm would:

Under both perfect competition and monopoly, a firm:

A monopolist always faces a demand curve that is:

At the point where the marginal revenue equals zero for a monopolist facing a straight-line demand curve, total revenue is:

In a natural monopoly, the long-run average cost curve declines and therefore average cost is lower when there is only one seller.

One necessary condition for effective price discrimination is:

Assume a monopolist's marginal cost and marginal revenue curves intersect and the demand curve passes above its average total cost curve. The firm will:

The strategy underlying price discrimination is to:

Which of the following is true under natural monopoly?

The demand curve for a monopolist is:

Exhibit 8-1 Monopolist's demand curve In Exhibit 8-1, the marginal revenue curve corresponding to the monopolist's demand curve would be a straight line drawn between points:

What are the conditions for price discrimination?

Which of the following correctly describes price discrimination?

Introducing the Economic Way of Thinking

Production Possibilities, Opportunity Cost, and Economic Growth

Market Demand and Supply

Markets in Action

Price Elasticity of Demand

Production Costs

Perfect Competition

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Gross Domestic Product

Business Cycles and Unemployment

Inflation

Aggregate Demand and Supply

Fiscal Policy

The Public Sector

Federal Deficits, Surpluses, and the National Debt

Money and the Federal Reserve System

Money Creation

Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

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