Question 1

When a monopoly price discriminates,it

Accepted Answer

A)  increases the amount of consumer surplus. 
B)  decreases its economic profit. 
C)  converts consumer surplus into economic profit. 
D)  converts economic profit into consumer surplus. 
E)  has no effect on the deadweight loss in the market. 
A)  increases the amount of consumer surplus. 
B)  decreases its economic profit. 
C)  converts consumer surplus into economic profit. 
D)  converts economic profit into consumer surplus. 
E)  has no effect on the deadweight loss in the market.

Question 2

Assume someone organizes all farms in the nation into a monopoly.As a result,consumer surplus will

Accepted Answer

A)  not change. 
B)  increase. 
C)  decrease. 
D)  either increase, decrease, or not change depending if the monopoly's marginal revenue curve lies below, above, or is the same as its demand curve. 
E)  None of the above answers is correct because the effect on consumer surplus depends on whether the monopoly is a single-price or a price-discriminating monopoly. 
A)  not change. 
B)  increase. 
C)  decrease. 
D)  either increase, decrease, or not change depending if the monopoly's marginal revenue curve lies below, above, or is the same as its demand curve. 
E)  None of the above answers is correct because the effect on consumer surplus depends on whether the monopoly is a single-price or a price-discriminating monopoly.

Question 3

With an average cost pricing rule,the quantity produced by the natural monopoly is ________ the quantity produced with a marginal cost pricing rule.

Accepted Answer

A)  greater than 
B)  less than 
C)  equal to 
D)  greater than in the long run and less than in the short run than 
E)  not comparable to 
A)  greater than 
B)  less than 
C)  equal to 
D)  greater than in the long run and less than in the short run than 
E)  not comparable to

Question 4

The outcome of regulating a natural monopoly using the marginal cost pricing rule is

Accepted Answer

A)  that the firm makes a normal profit. 
B)  that the firm maximizes its profit. 
C)  that consumer surplus is less than what it would be if the firm maximized its profit. 
D)  an efficient level of production. 
E)  that the firm makes an economic profit. 
A)  that the firm makes a normal profit. 
B)  that the firm maximizes its profit. 
C)  that consumer surplus is less than what it would be if the firm maximized its profit. 
D)  an efficient level of production. 
E)  that the firm makes an economic profit.

Question 5

A marginal cost pricing rule sets marginal cost equal to

Accepted Answer

A)  minimum average variable cost. 
B)  price. 
C)  average cost. 
D)  marginal revenue. 
E)  the smaller of price or marginal revenue. 
A)  minimum average variable cost. 
B)  price. 
C)  average cost. 
D)  marginal revenue. 
E)  the smaller of price or marginal revenue.

Question 6

Explain how a single-price monopoly determines its output and price.Compare this process to how a perfectly competitive firm determines its output and price.

Accepted Answer

Single-price monopolies follow the same

Question 7

-The above figure illustrates the market for electric power that is served by the one utility in Alberta,Canada.
a.If the government did not regulate this utility,what would be the price of a kilowatt hour in this region and how much power would be generated?
b.If the government regulates the utility and chooses an average cost pricing rule,what would be the price of a kilowatt hour and how much power would be generated?
c.If the government regulates the utility and chooses a marginal cost pricing rule,what would be the price of a kilowatt hour and how much power would be generated?

Accepted Answer

a.The price would be 12¢ a kilowatt hour

Question 8

If a monopoly wants to sell a greater quantity of output,it must

Accepted Answer

A)  lower its price. 
B)  raise its price. 
C)  tell consumers to buy more because it's a monopolist. 
D)  raise its marginal cost. 
E)  change its fixed costs. 
A)  lower its price. 
B)  raise its price. 
C)  tell consumers to buy more because it's a monopolist. 
D)  raise its marginal cost. 
E)  change its fixed costs.

Question 9

"A single-price monopoly will always charge a price that is on the elastic range of the demand for the monopoly's output." Explain why the previous statement is correct or incorrect.

Accepted Answer

The statement is correct.Only when the d

Question 10

Which of the following is NOT a requirement for a firm to be able to price discriminate?

Accepted Answer

A)  monopoly power 
B)  groups of customers with different willingness to pay for the good 
C)  economies of scale 
D)  ability to keep the members of different customer groups separate 
E)  ability to prevent resales of the product by customers 
A)  monopoly power 
B)  groups of customers with different willingness to pay for the good 
C)  economies of scale 
D)  ability to keep the members of different customer groups separate 
E)  ability to prevent resales of the product by customers

Question 11

When used with a natural monopoly,an average cost pricing rule results in

Accepted Answer

A)  the efficient level of output. 
B)  economic losses for the firm. 
C)  the need for government to subsidize the natural monopoly. 
D)  zero economic profit for the firm. 
E)  the firm making an economic profit. 
A)  the efficient level of output. 
B)  economic losses for the firm. 
C)  the need for government to subsidize the natural monopoly. 
D)  zero economic profit for the firm. 
E)  the firm making an economic profit.

Question 12

Which of the following statements is FALSE?

Accepted Answer

A)  A perfectly competitive market produces more output and charges a lower price than a monopoly. 
B)  A perfectly competitive firm produces where MR = MC but a monopoly produces where MR > MC. 
C)  In a perfectly competitive market, the price is equal to the marginal cost, but in a market with a single-price monopoly, price exceeds marginal cost. 
D)  The consumer surplus is smaller for a market with a monopoly than for a perfectly competitive market. 
E)  In the long run, a monopoly can earn a larger economic profit than can a perfectly competitive firm. 
A)  A perfectly competitive market produces more output and charges a lower price than a monopoly. 
B)  A perfectly competitive firm produces where MR = MC but a monopoly produces where MR > MC. 
C)  In a perfectly competitive market, the price is equal to the marginal cost, but in a market with a single-price monopoly, price exceeds marginal cost. 
D)  The consumer surplus is smaller for a market with a monopoly than for a perfectly competitive market. 
E)  In the long run, a monopoly can earn a larger economic profit than can a perfectly competitive firm.

Question 13

To encourage invention and innovation,the government provides

Accepted Answer

A)  patents. 
B)  public franchises. 
C)  government licenses. 
D)  natural monopolies. 
E)  easily obtained ownership barriers to entry. 
A)  patents. 
B)  public franchises. 
C)  government licenses. 
D)  natural monopolies. 
E)  easily obtained ownership barriers to entry.

Question 14

The figure above shows a monopoly's total revenue and total cost curves.
-Using the figure above,which of the following statements are correct?
i.MR = MC = $42 when 3 haircuts are produced.
ii.If the firm charges each customer the same price for a haircut,the price of a haircut is $14.
iii.The firm's economic profit is $12.

Accepted Answer

A)  i only 
B)  ii only 
C)  i and ii 
D)  i and iii 
E)  i, ii, and iii 
A)  i only 
B)  ii only 
C)  i and ii 
D)  i and iii 
E)  i, ii, and iii

Question 15

Which of the following goods is the best example of a natural monopoly?

Accepted Answer

A)  distribution of electricity 
B)  diamonds 
C)  first-class mail 
D)  a patented good 
E)  blouses 
A)  distribution of electricity 
B)  diamonds 
C)  first-class mail 
D)  a patented good 
E)  blouses

Question 16

A price-discriminating monopoly

Accepted Answer

A)  sells a larger quantity than it would if it were a single-price monopoly. 
B)  is illegal. 
C)  cannot offer discounts. 
D)  cannot control the price of its product. 
E)  makes a smaller economic profit than it would if it were a single-price monopoly. 
A)  sells a larger quantity than it would if it were a single-price monopoly. 
B)  is illegal. 
C)  cannot offer discounts. 
D)  cannot control the price of its product. 
E)  makes a smaller economic profit than it would if it were a single-price monopoly.

Question 17

A single-price monopoly has marginal revenue and marginal cost equal to $19 at 15 units of output where the price on the demand curve is $38.At what price will this firm sell the output?

Accepted Answer

A)  $19 
B)  $38 
C)  $285 
D)  $570 
E)  There is not enough information given to answer the question. 
A)  $19 
B)  $38 
C)  $285 
D)  $570 
E)  There is not enough information given to answer the question.

Question 18

-Suppose the grocery store market in Kansas City is perfectly competitive.Then one store buys all the others and becomes a single-price monopoly.The figure above shows the relevant demand and cost curves.When the market is perfectly competitive,the quantity of steak is ________ pounds,and when the market is a monopoly,the quantity of steak is ________ pounds.

Accepted Answer

A)  2,000; 4,000 
B)  3,000; 2,000 
C)  4,000; 4,000 
D)  5,000; 3,000 
E)  4,000; less than 2,000 pounds. 
A)  2,000; 4,000 
B)  3,000; 2,000 
C)  4,000; 4,000 
D)  5,000; 3,000 
E)  4,000; less than 2,000 pounds.

Question 19

The figure above shows a natural monopoly.
-In the figure above,if the firm is regulated using an average cost pricing rule,the firm

Accepted Answer

A)  avoids an economic loss, but produces less than the efficient quantity and creates a deadweight loss. 
B)  incurs an economic loss, but produces the efficient quantity and creates a deadweight loss. 
C)  avoids an economic loss, is able to produce the efficient quantity, and therefore avoids creating a deadweight loss. 
D)  avoids an economic loss, produces the efficient quantity, and creates a deadweight loss. 
E)  incurs an economic loss, produces the efficient quantity, and avoids creating a deadweight loss. 
A)  avoids an economic loss, but produces less than the efficient quantity and creates a deadweight loss. 
B)  incurs an economic loss, but produces the efficient quantity and creates a deadweight loss. 
C)  avoids an economic loss, is able to produce the efficient quantity, and therefore avoids creating a deadweight loss. 
D)  avoids an economic loss, produces the efficient quantity, and creates a deadweight loss. 
E)  incurs an economic loss, produces the efficient quantity, and avoids creating a deadweight loss.

Question 20

Monopolies are inefficient because,at the profit-maximizing output level,

Accepted Answer

A)  MC = MR. 
B)  MC does not equal MR. 
C)  MB = MC. 
D)  MB does not equal MC. 
E)  P = ATC. 
A)  MC = MR. 
B)  MC does not equal MR. 
C)  MB = MC. 
D)  MB does not equal MC. 
E)  P = ATC.

When a monopoly price discriminates,it

Assume someone organizes all farms in the nation into a monopoly.As a result,consumer surplus will

With an average cost pricing rule,the quantity produced by the natural monopoly is ________ the quantity produced with a marginal cost pricing rule.

The outcome of regulating a natural monopoly using the marginal cost pricing rule is

A marginal cost pricing rule sets marginal cost equal to

Explain how a single-price monopoly determines its output and price.Compare this process to how a perfectly competitive firm determines its output and price.

If a monopoly wants to sell a greater quantity of output,it must

"A single-price monopoly will always charge a price that is on the elastic range of the demand for the monopoly's output." Explain why the previous statement is correct or incorrect.

Which of the following is NOT a requirement for a firm to be able to price discriminate?

When used with a natural monopoly,an average cost pricing rule results in

Which of the following statements is FALSE?

To encourage invention and innovation,the government provides

Which of the following goods is the best example of a natural monopoly?

A price-discriminating monopoly

A single-price monopoly has marginal revenue and marginal cost equal to $19 at 15 units of output where the price on the demand curve is $38.At what price will this firm sell the output?

The figure above shows a natural monopoly. -In the figure above,if the firm is regulated using an average cost pricing rule,the firm

Monopolies are inefficient because,at the profit-maximizing output level,

Getting Started

The U.S.and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets with Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

Exam 16: Monopoly

When a monopoly price discriminates,it

Assume someone organizes all farms in the nation into a monopoly.As a result,consumer surplus will

With an average cost pricing rule,the quantity produced by the natural monopoly is ________ the quantity produced with a marginal cost pricing rule.

The outcome of regulating a natural monopoly using the marginal cost pricing rule is

A marginal cost pricing rule sets marginal cost equal to

Explain how a single-price monopoly determines its output and price.Compare this process to how a perfectly competitive firm determines its output and price.

If a monopoly wants to sell a greater quantity of output,it must

"A single-price monopoly will always charge a price that is on the elastic range of the demand for the monopoly's output." Explain why the previous statement is correct or incorrect.

Which of the following is NOT a requirement for a firm to be able to price discriminate?

When used with a natural monopoly,an average cost pricing rule results in

Which of the following statements is FALSE?

To encourage invention and innovation,the government provides

Which of the following goods is the best example of a natural monopoly?

A price-discriminating monopoly

A single-price monopoly has marginal revenue and marginal cost equal to $19 at 15 units of output where the price on the demand curve is $38.At what price will this firm sell the output?

The figure above shows a natural monopoly. -In the figure above,if the firm is regulated using an average cost pricing rule,the firm

Monopolies are inefficient because,at the profit-maximizing output level,

Getting Started

The U.S.and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets with Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters