Question 1

In order for a monopolist to earn a pure economic profit in short-run equilibrium, price must exceed average total cost.

Accepted Answer

A) True 
 B)False

Question 2

____ is the act of buying a commodity in one market at a lower price and selling it in another market at a higher price.

Accepted Answer

A)  Buying short. 
B)  Discounting. 
C)  Tariffing. 
D)  Arbitrage. 
A)  Buying short. 
B)  Discounting. 
C)  Tariffing. 
D)  Arbitrage.

Question 3

One of the necessary conditions for price discrimination to occur is that:

Accepted Answer

A)  buyers in different markets have different elasticities of demand. 
B)  the demand curve is upward sloping. 
C)  buyers must be allowed to resell the good at a higher price elsewhere. 
D)  all of the above are necessary for price discrimination to occur. 
A)  buyers in different markets have different elasticities of demand. 
B)  the demand curve is upward sloping. 
C)  buyers must be allowed to resell the good at a higher price elsewhere. 
D)  all of the above are necessary for price discrimination to occur.

Question 4

What is the name of the monopolist having a declining long-run average cost throughout the market?

Accepted Answer

A)  Monopolistic competition. 
B)  Monopoly by legal barrier. 
C)  Natural monopoly. 
D)  Contrived monopoly. 
A)  Monopolistic competition. 
B)  Monopoly by legal barrier. 
C)  Natural monopoly. 
D)  Contrived monopoly.

Question 5

Exhibit 8-9  A monopolist   In Exhibit 8-9, 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 6

Price discrimination often permits some consumers who otherwise would be excluded from a market to buy a good or service.

Accepted Answer

A) True 
 B)False

Question 7

A profit-maximizing monopolist will continue expanding output as long as:

Accepted Answer

A)  marginal revenue exceeds marginal cost. 
B)  marginal revenue is positive. 
C)  the cost of producing an additional unit exceeds the marginal revenue derived from the unit. 
D)  economic profit is more than zero. 
A)  marginal revenue exceeds marginal cost. 
B)  marginal revenue is positive. 
C)  the cost of producing an additional unit exceeds the marginal revenue derived from the unit. 
D)  economic profit is more than zero.

Question 8

In contrast to a perfectly competitive firm, a monopolist operates in the long run at a quantity of output at which:

Accepted Answer

A)  P=MC. 
B)  MR=MC. 
C)  P=ATC. 
D)  P>MR. 
A)  P=MC. 
B)  MR=MC. 
C)  P=ATC. 
D)  P>MR.

Question 9

Which of the following best explains an economic criticism of unregulated monopolists?

Accepted Answer

A)  Monopolists do not try to minimize their costs of production. 
B)  Monopolists produce where marginal revenue is greater than marginal costs. 
C)  Monopolists attempt to produce too many products, and as a result, their prices are high, and consumer's waste time trying to choose between too many options. 
D)  Monopolists restrict output, and as a result, they fail to produce units that are valued more than the marginal cost of producing them. 
A)  Monopolists do not try to minimize their costs of production. 
B)  Monopolists produce where marginal revenue is greater than marginal costs. 
C)  Monopolists attempt to produce too many products, and as a result, their prices are high, and consumer's waste time trying to choose between too many options. 
D)  Monopolists restrict output, and as a result, they fail to produce units that are valued more than the marginal cost of producing them.

Question 10

In order for a monopolist to earn an economic profit in short-run equilibrium, marginal revenue must be equal to zero.

Accepted Answer

A) True 
 B)False

Question 11

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 $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. 
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 decrease output. 
C)  Decrease price and increase output. 
D)  Increase output and hold price constant. 
E)  Increase price and hold output constant.

Question 12

Price discrimination occurs when:

Accepted Answer

A)  firms maximize their profit by setting price equal to marginal cost. 
B)  a seller charges different prices to different consumers of the same product or service. 
C)  a seller charges the same price to consumers of a different product or service. 
D)  a seller charges different prices to consumers, discriminating by race or gender of the consumer. 
A)  firms maximize their profit by setting price equal to marginal cost. 
B)  a seller charges different prices to different consumers of the same product or service. 
C)  a seller charges the same price to consumers of a different product or service. 
D)  a seller charges different prices to consumers, discriminating by race or gender of the consumer.

Question 13

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 14

A monopolist is a price searcher because it has the ability to select the price along its demand curve of its product.

Accepted Answer

A) True 
 B)False

Question 15

Exhibit 8-7  Monopolist   As shown in Exhibit 8-7, in the short run, the monopoly will:

Accepted Answer

A)  earn an hourly profit of $240. 
B)  earn an hourly profit of $80. 
C)  break even (i.e., earn zero economic profit). 
D)  suffer an hourly loss of $160. 
A)  earn an hourly profit of $240. 
B)  earn an hourly profit of $80. 
C)  break even (i.e., earn zero economic profit). 
D)  suffer an hourly loss of $160.

Question 16

Exhibit 8-3  Demand and cost curves for GeneTech, a monopolist with a patented vaccine   In Exhibit 8-3, what is the maximum hourly profit that GeneTech can earn from its vaccine?

Accepted Answer

A)  $1,500. 
B)  $3,000. 
C)  $4,500. 
D)  $10,500. 
A)  $1,500. 
B)  $3,000. 
C)  $4,500. 
D)  $10,500.

Question 17

To maximize its profits, a monopoly should produce the quantity where its marginal cost equals its:

Accepted Answer

A)  average total cost. 
B)  average variable cost. 
C)  demand. 
D)  marginal revenue. 
A)  average total cost. 
B)  average variable cost. 
C)  demand. 
D)  marginal revenue.

Question 18

For a monopoly, price always equals marginal revenue.

Accepted Answer

A) True 
 B)False

Question 19

A monopolist faces a downward sloping demand curve that is equal to which of the following?

Accepted Answer

A)  The prevailing market price. 
B)  The market demand curve. 
C)  Its marginal cost curve. 
D)  Marginal revenue. 
A)  The prevailing market price. 
B)  The market demand curve. 
C)  Its marginal cost curve. 
D)  Marginal revenue.

Question 20

Exhibit 8-3  Demand and cost curves for GeneTech, a monopolist with a patented vaccine   In Exhibit 8-3, how much vaccine should GeneTech produce to maximize its profit?

Accepted Answer

A)  300 doses per hour. 
B)  400 doses per hour. 
C)  Between 400 and 500 doses per hour. 
D)  500 doses per hour. 
A)  300 doses per hour. 
B)  400 doses per hour. 
C)  Between 400 and 500 doses per hour. 
D)  500 doses per hour.

Exam 8: Monopoly

In order for a monopolist to earn a pure economic profit in short-run equilibrium, price must exceed average total cost.

____ is the act of buying a commodity in one market at a lower price and selling it in another market at a higher price.

One of the necessary conditions for price discrimination to occur is that:

What is the name of the monopolist having a declining long-run average cost throughout the market?

Exhibit 8-9 A monopolist In Exhibit 8-9, at the profit-maximizing or loss-minimizing output, the monopolist's total economic profit is:

Price discrimination often permits some consumers who otherwise would be excluded from a market to buy a good or service.

A profit-maximizing monopolist will continue expanding output as long as:

In contrast to a perfectly competitive firm, a monopolist operates in the long run at a quantity of output at which:

Which of the following best explains an economic criticism of unregulated monopolists?

In order for a monopolist to earn an economic profit in short-run equilibrium, marginal revenue must be equal to zero.

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 $6, what would you advise Rudd to do?

Price discrimination occurs when:

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

A monopolist is a price searcher because it has the ability to select the price along its demand curve of its product.

Exhibit 8-7 Monopolist As shown in Exhibit 8-7, in the short run, the monopoly will:

Exhibit 8-3 Demand and cost curves for GeneTech, a monopolist with a patented vaccine In Exhibit 8-3, what is the maximum hourly profit that GeneTech can earn from its vaccine?

To maximize its profits, a monopoly should produce the quantity where its marginal cost equals its:

For a monopoly, price always equals marginal revenue.

A monopolist faces a downward sloping demand curve that is equal to which of the following?

Exhibit 8-3 Demand and cost curves for GeneTech, a monopolist with a patented vaccine In Exhibit 8-3, how much vaccine should GeneTech produce to maximize its profit?

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