Question 1

A monopoly:

Accepted Answer

A)  can increase price and increase output at the same time. 
B)  can charge any price it wants and still sell all of its output. 
C)  can sell any output it produces provided it accepts the market price. 
D)  must lower price in order to increase output. 
E)  faces a perfectly elastic demand curve. 
A)  can increase price and increase output at the same time. 
B)  can charge any price it wants and still sell all of its output. 
C)  can sell any output it produces provided it accepts the market price. 
D)  must lower price in order to increase output. 
E)  faces a perfectly elastic demand curve.

Question 2

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

Accepted Answer

A)  Monopolists charge too high a price. 
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. 
E)  Monopolists could use their resources better elsewhere. 
A)  Monopolists charge too high a price. 
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. 
E)  Monopolists could use their resources better elsewhere.

Question 3

Compared to a perfectly competitive industry, a monopolist with the same marginal cost and demand curve will charge:

Accepted Answer

A)  a higher price and produce a higher volume of output. 
B)  a lower price and produce a higher volume of output. 
C)  a lower price and produce a lower volume of output. 
D)  a higher price and produce a lower volume of output. 
E)  the same price and produce the same volume of output. 
A)  a higher price and produce a higher volume of output. 
B)  a lower price and produce a higher volume of output. 
C)  a lower price and produce a lower volume of output. 
D)  a higher price and produce a lower volume of output. 
E)  the same price and produce the same volume of output.

Question 4

Which of the following is a necessary condition for price discrimination?

Accepted Answer

A)  The seller must be able to divide the markets according to the different price elasticities of demand. 
B)  It must be difficult for one buyer to resell to another buyer. 
C)  Both a and b. 
D)  Neither a nor b. 
A)  The seller must be able to divide the markets according to the different price elasticities of demand. 
B)  It must be difficult for one buyer to resell to another buyer. 
C)  Both a and b. 
D)  Neither a nor b.

Question 5

Exhibit 8-2  Demand and cost information for a monopoly   Refer to Exhibit 8-2. 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)  $0. 
D)  $10. 
E)  $30. 
A)  $40. 
B)  $20. 
C)  $0. 
D)  $10. 
E)  $30.

Question 6

The goal of any monopolist is to maximize:

Accepted Answer

A)  economic profits. 
B)  normal profits. 
C)  price. 
D)  consumer welfare. 
E)  output. 
A)  economic profits. 
B)  normal profits. 
C)  price. 
D)  consumer welfare. 
E)  output.

Question 7

Exhibit 8-6  Monopoly   Exhibit 8-6 indicates that a monopolist maximizes profits at output equal to:

Accepted Answer

A)  0. 
B)  6. 
C)  8. 
D)  9. 
E)  10. 
A)  0. 
B)  6. 
C)  8. 
D)  9. 
E)  10.

Question 8

A monopolist will operate in the short run if which of the following is above average variable cost?

Accepted Answer

A)  Marginal cost. 
B)  Marginal revenue. 
C)  Price. 
D)  All of the above. 
A)  Marginal cost. 
B)  Marginal revenue. 
C)  Price. 
D)  All of the above.

Question 9

At a price of $5, 24 units of the good would be sold; at a price of $7, 25 units of output would be sold. The marginal revenue of the 25th unit of output is:

Accepted Answer

A)  $14. 
B)  $55. 
C)  $6. 
D)  $168. 
E)  $175. 
A)  $14. 
B)  $55. 
C)  $6. 
D)  $168. 
E)  $175.

Question 10

A monopoly will price its product:

Accepted Answer

A)  where total revenue is maximized. 
B)  where total costs are minimized. 
C)  at that point on the market demand curve corresponding to an output level in which marginal revenue equals marginal cost. 
D)  at that point on the market demand curve which intersects the marginal cost curve. 
A)  where total revenue is maximized. 
B)  where total costs are minimized. 
C)  at that point on the market demand curve corresponding to an output level in which marginal revenue equals marginal cost. 
D)  at that point on the market demand curve which intersects the marginal cost curve.

Question 11

A monopolist will charge a lower price and produce more output than if it was operating in a competitive market.

Accepted Answer

A) True 
 B)False

Question 12

Although a monopoly can charge any price it wishes, it chooses:

Accepted Answer

A)  the highest price. 
B)  price equal to marginal cost. 
C)  the price that maximizes profit. 
D)  competitive prices. 
E)  a fair price. 
A)  the highest price. 
B)  price equal to marginal cost. 
C)  the price that maximizes profit. 
D)  competitive prices. 
E)  a fair price.

Question 13

Exhibit 8-4  Demand and cost curves for a monopolist   As shown in Exhibit 8-4, in order to maximize its profit (or minimize its loss), how much output should the monopoly produce?

Accepted Answer

A)  2 units per hour. 
B)  4 units per hour. 
C)  6 units per hour. 
D)  8 units per hour. 
A)  2 units per hour. 
B)  4 units per hour. 
C)  6 units per hour. 
D)  8 units per hour.

Question 14

Compared to a perfectly competitive firm, a monopolist:

Accepted Answer

A)  charges a higher price. 
B)  produces lower output. 
C)  fails to achieve an efficient allocation of resources. 
D)  all of the above. 
A)  charges a higher price. 
B)  produces lower output. 
C)  fails to achieve an efficient allocation of resources. 
D)  all of the above.

Question 15

Both a perfectly competitive firm and a monopolist:

Accepted Answer

A)  always earn an economic profit. 
B)  maximize profit by setting marginal cost equal to marginal revenue. 
C)  maximize profit by setting marginal cost equal to average total cost. 
D)  are price takers. 
A)  always earn an economic profit. 
B)  maximize profit by setting marginal cost equal to marginal revenue. 
C)  maximize profit by setting marginal cost equal to average total cost. 
D)  are price takers.

Question 16

A monopolist that maximizes total revenue earns maximum economic profit.

Accepted Answer

A) True 
 B)False

Question 17

A monopoly sets a market price that is higher than the marginal cost of production. This fact implies that a monopoly's allocation of resources is:

Accepted Answer

A)  unfair. 
B)  inefficient. 
C)  discriminatory. 
D)  excessive. 
A)  unfair. 
B)  inefficient. 
C)  discriminatory. 
D)  excessive.

Question 18

When marginal revenue is zero for a monopolist facing a downward-sloping straight-line demand curve, the price elasticity of demand is:

Accepted Answer

A)  greater than 1. 
B)  equal to 1. 
C)  less than 2. 
D)  equal to 0. 
A)  greater than 1. 
B)  equal to 1. 
C)  less than 2. 
D)  equal to 0.

Question 19

A monopoly:

Accepted Answer

A)  faces the market demand curve which is downward sloping. 
B)  has a marginal revenue curve which slopes downward and lies below its demand curve. 
C)  will maximize profits by producing an output level where MR = MC. 
D)  all of the above. 
A)  faces the market demand curve which is downward sloping. 
B)  has a marginal revenue curve which slopes downward and lies below its demand curve. 
C)  will maximize profits by producing an output level where MR = MC. 
D)  all of the above.

Question 20

Which of the following factors is not a barrier to entry?

Accepted Answer

A)  legally enforced patent rights 
B)  an inelastic demand for a product 
C)  licensing 
D)  control over an essential resource 
A)  legally enforced patent rights 
B)  an inelastic demand for a product 
C)  licensing 
D)  control over an essential resource

Exam 8: Monopoly

A monopoly:

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

Compared to a perfectly competitive industry, a monopolist with the same marginal cost and demand curve will charge:

Which of the following is a necessary condition for price discrimination?

Exhibit 8-2 Demand and cost information for a monopoly Refer to Exhibit 8-2. Using the rule that focuses on the marginal approach to maximizing profits, the monopolist maximizes profit by choosing price equal to:

The goal of any monopolist is to maximize:

Exhibit 8-6 Monopoly Exhibit 8-6 indicates that a monopolist maximizes profits at output equal to:

A monopolist will operate in the short run if which of the following is above average variable cost?

At a price of $5, 24 units of the good would be sold; at a price of $7, 25 units of output would be sold. The marginal revenue of the 25th unit of output is:

A monopoly will price its product:

A monopolist will charge a lower price and produce more output than if it was operating in a competitive market.

Although a monopoly can charge any price it wishes, it chooses:

Exhibit 8-4 Demand and cost curves for a monopolist As shown in Exhibit 8-4, in order to maximize its profit (or minimize its loss), how much output should the monopoly produce?

Compared to a perfectly competitive firm, a monopolist:

Both a perfectly competitive firm and a monopolist:

A monopolist that maximizes total revenue earns maximum economic profit.

A monopoly sets a market price that is higher than the marginal cost of production. This fact implies that a monopoly's allocation of resources is:

When marginal revenue is zero for a monopolist facing a downward-sloping straight-line demand curve, the price elasticity of demand is:

A monopoly:

Which of the following factors is not a barrier to entry?

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

Filters