Question 1

Exhibit 8-9  A monopolist   In Exhibit 8-9, the monopolist would charge which of the following prices to maximize profit or minimize its loss?

Accepted Answer

A)  $20. 
B)  $40. 
C)  $60. 
D)  $70. 
E)  $100. 
A)  $20. 
B)  $40. 
C)  $60. 
D)  $70. 
E)  $100.

Question 2

Suppose a monopolist's demand curve lies below its average variable cost curve. The firm will:

Accepted Answer

A)  stay in operation in the short-run. 
B)  earn an economic profit. 
C)  earn an economic profit in the long run. 
D)  shut down. 
A)  stay in operation in the short-run. 
B)  earn an economic profit. 
C)  earn an economic profit in the long run. 
D)  shut down.

Question 3

A profit maximizing monopolist sets price and output so that it always operates on the elastic portion of its straight-line demand curve when in equilibrium.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following statements accurately describes a difference between a firm that is a monopolist and one that is a competitive price taker?

Accepted Answer

A)  Marginal revenue and market price are equal for the competitive price taker but not for the monopolist. 
B)  The monopolist does not always produce the output that equates marginal cost and marginal revenue; the competitive price taker does. 
C)  The monopolist charges the highest price possible; the competitive price taker charges a price equal to its per-unit cost. 
D)  A monopolist can earn economic profit in the short run; a competitive price taker cannot. 
A)  Marginal revenue and market price are equal for the competitive price taker but not for the monopolist. 
B)  The monopolist does not always produce the output that equates marginal cost and marginal revenue; the competitive price taker does. 
C)  The monopolist charges the highest price possible; the competitive price taker charges a price equal to its per-unit cost. 
D)  A monopolist can earn economic profit in the short run; a competitive price taker cannot.

Question 5

Exhibit 8-1  Monopolist's demand curve   Which of the following points in Exhibit 8-1 would not lie on the marginal revenue curve corresponding to the monopolist's straight-line demand curve?

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  C and B. 
A)  A. 
B)  B. 
C)  C. 
D)  C and B.

Question 6

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 7

Exhibit 8-8  Profit maximizing for a monopolist   As shown in Exhibit 8-8, the monopolist's total cost is which of the following areas?

Accepted Answer

A)  P1AEP5. 
B)  P2BDP4. 
C)  P3CDP5. 
D)  P4DEP5. 
E)  P3FQ2O. 
A)  P1AEP5. 
B)  P2BDP4. 
C)  P3CDP5. 
D)  P4DEP5. 
E)  P3FQ2O.

Question 8

Under 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 9

The profit-maximizing output level for a monopolist is where the:

Accepted Answer

A)  price is maximized. 
B)  output sold is maximized. 
C)  ATC curve is minimized. 
D)  maximum efficiency is achieved. 
E)  MR = MC. 
A)  price is maximized. 
B)  output sold is maximized. 
C)  ATC curve is minimized. 
D)  maximum efficiency is achieved. 
E)  MR = MC.

Question 10

A monopolist will maximize profits by:

Accepted Answer

A)  setting his price as high as possible. 
B)  setting his price at the level that will maximize per-unit profit. 
C)  producing the output where marginal revenue equals marginal cost. 
D)  producing the output where price equals marginal cost. 
A)  setting his price as high as possible. 
B)  setting his price at the level that will maximize per-unit profit. 
C)  producing the output where marginal revenue equals marginal cost. 
D)  producing the output where price equals marginal cost.

Question 11

The monopolist's demand curve is:

Accepted Answer

A)  identical to the market demand curve. 
B)  identical to the marginal revenue curve. 
C)  below the marginal revenue curve. 
D)  a horizontal line at the market price. 
E)  a U-shaped curve. 
A)  identical to the market demand curve. 
B)  identical to the marginal revenue curve. 
C)  below the marginal revenue curve. 
D)  a horizontal line at the market price. 
E)  a U-shaped curve.

Question 12

For a monopolist to practice price discrimination, one necessary condition is that the product offered for sale must be:

Accepted Answer

A)  high quality. 
B)  expensive. 
C)  cheap. 
D)  impossible or difficult to resell. 
A)  high quality. 
B)  expensive. 
C)  cheap. 
D)  impossible or difficult to resell.

Question 13

A monopolist can earn an economic profit only when:

Accepted Answer

A)  marginal cost equals marginal revenue. 
B)  marginal cost equals price. 
C)  average total cost is less than price. 
D)  all of the above. 
A)  marginal cost equals marginal revenue. 
B)  marginal cost equals price. 
C)  average total cost is less than price. 
D)  all of the above.

Question 14

For a monopolist with a downward-sloping demand curve,

Accepted Answer

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

Question 15

Price discrimination requires:

Accepted Answer

A)  a firm to be a competitive firm. 
B)  a firm to be able to segment its customers based on different price elasticities of demand. 
C)  arbitrage. 
D)  that the product can be easily resold. 
A)  a firm to be a competitive firm. 
B)  a firm to be able to segment its customers based on different price elasticities of demand. 
C)  arbitrage. 
D)  that the product can be easily resold.

Question 16

A monopolist earning economic profit in the short run determines that at its present level of output, marginal revenue is $23 and marginal cost is $30. Which of the following should the firm do to increase profit?

Accepted Answer

A)  Raise price and lower output. 
B)  Lower price and lower output. 
C)  Raise price and raise output. 
D)  Lower price and raise output. 
E)  Lower output, but leave price unchanged. 
A)  Raise price and lower output. 
B)  Lower price and lower output. 
C)  Raise price and raise output. 
D)  Lower price and raise output. 
E)  Lower output, but leave price unchanged.

Question 17

Which of the following is true for the monopolist?

Accepted Answer

A)  Marginal revenue is less than the price charged. 
B)  Economic profit is possible in the long-run. 
C)  Profit maximizing or loss minimizing occurs when marginal revenue equals marginal cost. 
D)  All of the above. 
E)  None of the above. 
A)  Marginal revenue is less than the price charged. 
B)  Economic profit is possible in the long-run. 
C)  Profit maximizing or loss minimizing occurs when marginal revenue equals marginal cost. 
D)  All of the above. 
E)  None of the above.

Question 18

Exhibit 8-6  Monopoly   The monopoly price that maximizes profits in Exhibit 8-6 is:

Accepted Answer

A)  $4. 
B)  $6. 
C)  $7. 
D)  $8. 
E)  $10. 
A)  $4. 
B)  $6. 
C)  $7. 
D)  $8. 
E)  $10.

Question 19

Exhibit 8-8  Profit maximizing for a monopolist   As shown in Exhibit 8-8, the profit-maximizing price for the monopolist is:

Accepted Answer

A)  OP1. 
B)  OP2. 
C)  OP3. 
D)  OP4. 
E)  OP5. 
A)  OP1. 
B)  OP2. 
C)  OP3. 
D)  OP4. 
E)  OP5.

Question 20

A monopolized market is characterized by:

Accepted Answer

A)  a sole seller of a product for which there are few suitable substitutes. 
B)  very strong barriers to entry. 
C)  a single firm facing the market demand curve. 
D)  all of the above. 
A)  a sole seller of a product for which there are few suitable substitutes. 
B)  very strong barriers to entry. 
C)  a single firm facing the market demand curve. 
D)  all of the above.

Exam 8: Monopoly

Exhibit 8-9 A monopolist In Exhibit 8-9, the monopolist would charge which of the following prices to maximize profit or minimize its loss?

Suppose a monopolist's demand curve lies below its average variable cost curve. The firm will:

A profit maximizing monopolist sets price and output so that it always operates on the elastic portion of its straight-line demand curve when in equilibrium.

Which of the following statements accurately describes a difference between a firm that is a monopolist and one that is a competitive price taker?

Exhibit 8-1 Monopolist's demand curve Which of the following points in Exhibit 8-1 would not lie on the marginal revenue curve corresponding to the monopolist's straight-line demand curve?

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

Exhibit 8-8 Profit maximizing for a monopolist As shown in Exhibit 8-8, the monopolist's total cost is which of the following areas?

Under monopoly, a firm:

The profit-maximizing output level for a monopolist is where the:

A monopolist will maximize profits by:

The monopolist's demand curve is:

For a monopolist to practice price discrimination, one necessary condition is that the product offered for sale must be:

A monopolist can earn an economic profit only when:

For a monopolist with a downward-sloping demand curve,

Price discrimination requires:

A monopolist earning economic profit in the short run determines that at its present level of output, marginal revenue is $23 and marginal cost is $30. Which of the following should the firm do to increase profit?

Which of the following is true for the monopolist?

Exhibit 8-6 Monopoly The monopoly price that maximizes profits in Exhibit 8-6 is:

Exhibit 8-8 Profit maximizing for a monopolist As shown in Exhibit 8-8, the profit-maximizing price for the monopolist is:

A monopolized market is characterized by:

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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