Question 1

A natural monopoly is a market where:

Accepted Answer

A)  a single firm has control over a vital natural resource. 
B)  many smaller firms can produce the entire market output at the same per-unit cost as could one large firm. 
C)  a single large firm can produce the entire market output at a lower per-unit cost than a group of smaller firms. 
D)  many smaller firms can produce the entire market output at a lower per-unit cost than could one large firm. 
A)  a single firm has control over a vital natural resource. 
B)  many smaller firms can produce the entire market output at the same per-unit cost as could one large firm. 
C)  a single large firm can produce the entire market output at a lower per-unit cost than a group of smaller firms. 
D)  many smaller firms can produce the entire market output at a lower per-unit cost than could one large firm.

Question 2

Exhibit 8-6  Monopoly   The maximum possible total monopoly profit in Exhibit 8-6 is:

Accepted Answer

A)  $60. 
B)  $36. 
C)  $24. 
D)  $18. 
E)  $12. 
A)  $60. 
B)  $36. 
C)  $24. 
D)  $18. 
E)  $12.

Question 3

There is only one gas station within hundreds of miles. The owner finds that when she charges $3 a gallon, she sells 199 gallons a day, and when she charges $2.99 a gallon, she sells 200 gallons a day. The marginal revenue of the 200th gallon of gas is:

Accepted Answer

A)  $.01. 
B)  $1. 
C)  $2.99. 
D)  $3. 
E)  $600. 
A)  $.01. 
B)  $1. 
C)  $2.99. 
D)  $3. 
E)  $600.

Question 4

An example of price discrimination is the price charged for:

Accepted Answer

A)  an economics textbook at a campus bookstore. 
B)  gasoline. 
C)  theater tickets that offer lower prices for children. 
D)  a postage stamp. 
A)  an economics textbook at a campus bookstore. 
B)  gasoline. 
C)  theater tickets that offer lower prices for children. 
D)  a postage stamp.

Question 5

When a monopoly price discriminates, it charges the highest price to the group of buyers with the least elastic demand.

Accepted Answer

A) True 
 B)False

Question 6

What should a profit maximizing monopolist do if she is currently producing where MC

Accepted Answer

A)  Increase output until MC = MR. 
B)  Decrease output until MC = MR. 
C)  Shut down in the long run. 
D)  Keep producing at this level. 
E)  Operate only in the short run. 
A)  Increase output until MC = MR. 
B)  Decrease output until MC = MR. 
C)  Shut down in the long run. 
D)  Keep producing at this level. 
E)  Operate only in the short run.

Question 7

Suppose a monopolist charges a price corresponding to the intersection of the marginal cost and marginal revenue curves. If this price is between its average variable cost and average total cost curves, the firm will:

Accepted Answer

A)  earn an economic profit. 
B)  stay in operation in the short-run, but shut down in the long run if demand remains the same. 
C)  shut down. 
D)  none of the above. 
A)  earn an economic profit. 
B)  stay in operation in the short-run, but shut down in the long run if demand remains the same. 
C)  shut down. 
D)  none of the above.

Question 8

Total revenue is maximized along what portion of a monopolist's demand curve?

Accepted Answer

A)  ​The elastic portion. 
B)  ​The unitary elastic point. 
C)  ​The inelastic portion. 
D)  ​The midpoint. 
A)  ​The elastic portion. 
B)  ​The unitary elastic point. 
C)  ​The inelastic portion. 
D)  ​The midpoint.

Question 9

Exhibit 8-10  A monopolist   In Exhibit 8-10, at the profit-maximizing or loss-minimizing output, the monopolist's total economic profit is:

Accepted Answer

A)  positive. 
B)  negative. 
C)  zero. 
D)  minimum. 
A)  positive. 
B)  negative. 
C)  zero. 
D)  minimum.

Question 10

An argument in favor of price discrimination is that this pricing strategy permits some consumers who otherwise would be excluded from a market to buy a good or service.

Accepted Answer

A) True 
 B)False

Question 11

Exhibit 8-8  Profit maximizing for a monopolist   As shown in Exhibit 8-8, if the monopolist produces the profit-maximizing output, total revenue is the rectangular area:

Accepted Answer

A)  OQAP1. 
B)  OQ2BP2. 
C)  OQ3CP3. 
D)  OQ2DP4. 
A)  OQAP1. 
B)  OQ2BP2. 
C)  OQ3CP3. 
D)  OQ2DP4.

Question 12

Marginal revenue equals zero at which point on the monopolist's demand curve? ​

Accepted Answer

A)  ​The elastic portion. 
B)  ​The unitary elastic point. 
C)  ​The inelastic portion. 
D)  ​Where demand equals zero. 
A)  ​The elastic portion. 
B)  ​The unitary elastic point. 
C)  ​The inelastic portion. 
D)  ​Where demand equals zero.

Question 13

A natural monopoly exists whenever economies of scale are very extensive.

Accepted Answer

A) True 
 B)False

Question 14

At the level of output where the marginal cost and marginal revenue curves intersect, a monopolist's demand curve passes above its average total cost curve. The firm will:

Accepted Answer

A)  be able to make a pure economic profit. 
B)  stay in operation in the short-run, but shut down. 
C)  shut down in the short-run. 
D)  increase its price. 
A)  be able to make a pure economic profit. 
B)  stay in operation in the short-run, but shut down. 
C)  shut down in the short-run. 
D)  increase its price.

Question 15

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 16

A monopolist always selects a price on the elastic portion of its demand curve.

Accepted Answer

A) True 
 B)False

Question 17

A monopolist will be able to earn positive pure economic profits regardless of the price elasticity of demand.

Accepted Answer

A) True 
 B)False

Question 18

A monopoly is:

Accepted Answer

A)  a seller of a highly advertised and differentiated product in a market with low barriers to entry in the long run. 
B)  the only seller of a good for which there are no good substitutes in a market with high barriers to entry. 
C)  the only buyer of a unique raw material. 
D)  the producer of a product subsidized by the government. 
A)  a seller of a highly advertised and differentiated product in a market with low barriers to entry in the long run. 
B)  the only seller of a good for which there are no good substitutes in a market with high barriers to entry. 
C)  the only buyer of a unique raw material. 
D)  the producer of a product subsidized by the government.

Question 19

What is the shut-down rule for any firm?

Accepted Answer

Any firm should shut down if losses are

Question 20

Regardless of the demand for its product, a monopolist will be able to earn positive economic profits.

Accepted Answer

A) True 
 B)False

Exam 8: Monopoly

A natural monopoly is a market where:

Exhibit 8-6 Monopoly The maximum possible total monopoly profit in Exhibit 8-6 is:

There is only one gas station within hundreds of miles. The owner finds that when she charges $3 a gallon, she sells 199 gallons a day, and when she charges $2.99 a gallon, she sells 200 gallons a day. The marginal revenue of the 200th gallon of gas is:

An example of price discrimination is the price charged for:

When a monopoly price discriminates, it charges the highest price to the group of buyers with the least elastic demand.

What should a profit maximizing monopolist do if she is currently producing where MC

Suppose a monopolist charges a price corresponding to the intersection of the marginal cost and marginal revenue curves. If this price is between its average variable cost and average total cost curves, the firm will:

Total revenue is maximized along what portion of a monopolist's demand curve?

Exhibit 8-10 A monopolist In Exhibit 8-10, at the profit-maximizing or loss-minimizing output, the monopolist's total economic profit is:

An argument in favor of price discrimination is that this pricing strategy permits some consumers who otherwise would be excluded from a market to buy a good or service.

Exhibit 8-8 Profit maximizing for a monopolist As shown in Exhibit 8-8, if the monopolist produces the profit-maximizing output, total revenue is the rectangular area:

Marginal revenue equals zero at which point on the monopolist's demand curve? ​

A natural monopoly exists whenever economies of scale are very extensive.

At the level of output where the marginal cost and marginal revenue curves intersect, a monopolist's demand curve passes above its average total cost curve. The firm will:

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

A monopolist always selects a price on the elastic portion of its demand curve.

A monopolist will be able to earn positive pure economic profits regardless of the price elasticity of demand.

A monopoly is:

What is the shut-down rule for any firm?

Regardless of the demand for its product, a monopolist will be able to earn positive economic profits.

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

Marginal revenue equals zero at which point on the monopolist's demand curve?