Question 1

If a monopoly is able to perfectly price discriminate,then consumer surplus is

Accepted Answer

A)  equal to zero. 
B)  maximized. 
C)  unchanged from what it is with a single-price monopoly. 
D)  unchanged from what it is in a perfectly competitive industry. 
E)  not zero but is less than with a single-price monopoly. 
A)  equal to zero. 
B)  maximized. 
C)  unchanged from what it is with a single-price monopoly. 
D)  unchanged from what it is in a perfectly competitive industry. 
E)  not zero but is less than with a single-price monopoly.

Question 2

The capture theory of regulation is defined as

Accepted Answer

A)  the use of regulations to assure the efficient use of resources. 
B)  the constant reapplication of regulation on the cable TV industry. 
C)  the use of regulation to assist producers to maximize profits. 
D)  the removal of regulations on business activities. 
E)  regulation that focuses on consumers' interests and ignores producers' interests. 
A)  the use of regulations to assure the efficient use of resources. 
B)  the constant reapplication of regulation on the cable TV industry. 
C)  the use of regulation to assist producers to maximize profits. 
D)  the removal of regulations on business activities. 
E)  regulation that focuses on consumers' interests and ignores producers' interests.

Question 3

Assume someone organizes all farms in the nation into a monopoly.Which of the following occurs?
i.Consumer surplus decreases.
ii.Economic profit increases.
iii.A deadweight loss is created.

Accepted Answer

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

Question 4

-The above figure represents the market for cable television in Oakland,Florida.Time Warner Communications (TWC)is the sole provider of cable television to the residents of this Central Florida community.If TWC is left unregulated,what is the price of cable television in Oakland?

Accepted Answer

A)  $40 
B)  $30 
C)  $20 
D)  $10 
E)  $50 
A)  $40 
B)  $30 
C)  $20 
D)  $10 
E)  $50

Question 5

-Suppose the Busy Bee Café is the monopoly producer of hamburgers in Hugo,Oklahoma.The above figure represents the demand,marginal revenue,and marginal cost curves for this establishment.What price will the Busy Bee charge to maximize its profit?

Accepted Answer

A)  $5.00 for a hamburger 
B)  $3.00 for a hamburger 
C)  $2.00 for a hamburger 
D)  $1.00 for a hamburger 
E)  $4.00 for a hamburger 
A)  $5.00 for a hamburger 
B)  $3.00 for a hamburger 
C)  $2.00 for a hamburger 
D)  $1.00 for a hamburger 
E)  $4.00 for a hamburger

Question 6

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

Accepted Answer

A)  ownership of the only ferry across Puget Sound for twenty miles 
B)  the United States Postal Service 
C)  the cable television company in your hometown 
D)  owning the only licensed taxicab in town 
E)  producing a patented drug 
A)  ownership of the only ferry across Puget Sound for twenty miles 
B)  the United States Postal Service 
C)  the cable television company in your hometown 
D)  owning the only licensed taxicab in town 
E)  producing a patented drug

Question 7

-The above figure represents the market for cable television in Oakland,Florida.Time Warner Communications (TWC)is the sole provider of cable television to the residents of this Central Florida community.If TWC operated under a marginal cost pricing rule,what is the price of cable television in Oakland?

Accepted Answer

A)  $40 
B)  $30 
C)  $20 
D)  $10 
E)  $0 
A)  $40 
B)  $30 
C)  $20 
D)  $10 
E)  $0

Question 8

For a natural monopoly,economies of scale

Accepted Answer

A)  exist along the long-run average cost curve at least until it crosses the market demand curve. 
B)  and diseconomies of scale exist along the long-run average cost curve at least until it crosses the market demand curve. 
C)  lead to a legal barrier to entry. 
D)  as well as constant returns to scale and diseconomies of scale exist along the long-run average cost curve at least until it crosses the market demand curve. 
E)  are totally absent. 
A)  exist along the long-run average cost curve at least until it crosses the market demand curve. 
B)  and diseconomies of scale exist along the long-run average cost curve at least until it crosses the market demand curve. 
C)  lead to a legal barrier to entry. 
D)  as well as constant returns to scale and diseconomies of scale exist along the long-run average cost curve at least until it crosses the market demand curve. 
E)  are totally absent.

Question 9

To maximize its profit,a single-price monopoly produces the amount of output so that its marginal revenue

Accepted Answer

A)  equals zero. 
B)  equals its marginal cost. 
C)  exceeds its marginal cost but not necessarily by as much as possible. 
D)  is less than its marginal cost. 
E)  exceeds its marginal cost by as much as possible. 
A)  equals zero. 
B)  equals its marginal cost. 
C)  exceeds its marginal cost but not necessarily by as much as possible. 
D)  is less than its marginal cost. 
E)  exceeds its marginal cost by as much as possible.

Question 10

Assume someone organizes all farms in the nation into a monopoly.What is the monopoly's marginal cost curve?

Accepted Answer

A)  It is a horizontal line at the competitive industry's price. 
B)  It is a vertical line at the formerly competitive industry's quantity. 
C)  It is a vertical line at the monopoly's chosen output level. 
D)  It is the formerly competitive industry's supply curve. 
E)  It is the same as the formally competitive industry's average total cost curve. 
A)  It is a horizontal line at the competitive industry's price. 
B)  It is a vertical line at the formerly competitive industry's quantity. 
C)  It is a vertical line at the monopoly's chosen output level. 
D)  It is the formerly competitive industry's supply curve. 
E)  It is the same as the formally competitive industry's average total cost curve.

Question 11

Suppose a single-price monopoly sells 3 units of a good at $20 per unit.If the monopoly sells 4 units,the total revenue increases to $72.What price is being charged for 4 units?

Accepted Answer

A)  $52 each 
B)  $18 each 
C)  $60 each 
D)  $12 each 
E)  $20 each 
A)  $52 each 
B)  $18 each 
C)  $60 each 
D)  $12 each 
E)  $20 each

Question 12

What problem is caused by subsidizing a natural monopoly regulated using a marginal cost pricing rule?

Accepted Answer

A)  The regulated firm ends up earning an economic profit. 
B)  Consumers pay too much for the product of the monopoly. 
C)  This policy is a two-part tariff, which creates inefficiency. 
D)  The taxes required to gain the revenue used as the subsidy result in a deadweight loss that subtracts from gains in efficiency which result from use of the marginal cost pricing rule. 
E)  The regulated firm goes out of business if it is subsidized. 
A)  The regulated firm ends up earning an economic profit. 
B)  Consumers pay too much for the product of the monopoly. 
C)  This policy is a two-part tariff, which creates inefficiency. 
D)  The taxes required to gain the revenue used as the subsidy result in a deadweight loss that subtracts from gains in efficiency which result from use of the marginal cost pricing rule. 
E)  The regulated firm goes out of business if it is subsidized.

Question 13

A natural monopoly

Accepted Answer

A)  sells to a single buyer. 
B)  sets price equal to marginal revenue. 
C)  is a firm than can supply the market at lower average total cost than two or more firms. 
D)  produces a natural resource. 
E)  faces a horizontal demand curve. 
A)  sells to a single buyer. 
B)  sets price equal to marginal revenue. 
C)  is a firm than can supply the market at lower average total cost than two or more firms. 
D)  produces a natural resource. 
E)  faces a horizontal demand curve.

Question 14

-The figure above shows the demand,marginal revenue,and marginal cost curves for Paul's Parrot pillows,a single-price monopoly producer of pillows stuffed with parrot feathers.When Paul maximizes his profit,his total economic profit is

Accepted Answer

A)  $60. 
B)  $405. 
C)  $0. 
D)  $210,000. 
E)  unknown because more information is needed to determine Paul's profit. 
A)  $60. 
B)  $405. 
C)  $0. 
D)  $210,000. 
E)  unknown because more information is needed to determine Paul's profit.

Question 15

$$\begin{array} { c c c } 
\begin{array} { c } 
\text { Quantity } \
\text { (units) }
\end{array} & \begin{array} { c } 
\text { Price } \
\text { (dollars) }
\end{array} & \begin{array} { c } 
\text { Marginal cost } \
\text { (dollars) }
\end{array} \
\hline 1 & 22 & 9 \
2 & 20 & 10 \
3 & 18 & 12 \
4 & 16 & 16 \
5 & 14 & 22 \
6 & 12 & 30 \
7 & 10 & 40 \
8 & 8 & 52 \
\hline
\end{array}$$
-The above figure represents the cost,market demand,and marginal revenue curves for a monopoly.
a.Indicate the price and quantity a single-price monopoly selects by labeling the price Pm and the quantity Qm.
b.In the figure,lightly shade in the area that represents the single-price monopoly's economic profit.
c.Indicate the quantity a perfectly price-discriminating monopoly selects by labeling it Qppd.
d.In the figure,more darkly shade in the area that represents the additional economic profit the monopoly earns as a result of the perfect price discrimination.

Accepted Answer

@#IMG-DLM& 
a.The price is labeled Pm and the quan

Question 16

A price-discriminating monopoly charges

Accepted Answer

A)  the same price to every buyer for the same product. 
B)  a different price to different types of buyers for the same product, even though there are no differences in costs. 
C)  a different price to different buyers, because the costs are different. 
D)  different prices to buyers for different products. 
E)  each customer a price that equals the marginal cost of serving that customer. 
A)  the same price to every buyer for the same product. 
B)  a different price to different types of buyers for the same product, even though there are no differences in costs. 
C)  a different price to different buyers, because the costs are different. 
D)  different prices to buyers for different products. 
E)  each customer a price that equals the marginal cost of serving that customer.

Question 17

When marginal revenue is positive,total revenue ________ when output increases and demand is ________.

Accepted Answer

A)  decreases; elastic 
B)  decreases; inelastic 
C)  increases; elastic 
D)  increases; inelastic 
E)  does not change; unit elastic 
A)  decreases; elastic 
B)  decreases; inelastic 
C)  increases; elastic 
D)  increases; inelastic 
E)  does not change; unit elastic

Question 18

Allegiant Air holds a natural monopoly on most of the routes it serves in the United States.Allegiant Air ________ operate on the ________ portion of its demand curve when total revenue is ________.

Accepted Answer

A)  will always; elastic; increasing 
B)  will usually; elastic; decreasing 
C)  will never; elastic; increasing 
D)  will always; inelastic; increasing 
E)  will never; inelastic; increasing 
A)  will always; elastic; increasing 
B)  will usually; elastic; decreasing 
C)  will never; elastic; increasing 
D)  will always; inelastic; increasing 
E)  will never; inelastic; increasing

Question 19

"Price discrimination allows a monopoly to increase its economic profit by capturing part of the consumer surplus and turning it into economic profit." Is the previous statement correct or incorrect? If the statement is correct,why is it important in understanding firms' behaviors? If it is incorrect,why is it incorrect?

Accepted Answer

The statement is correct.The statement i

Question 20

A single-price monopoly

Accepted Answer

A)  must practice price discrimination. 
B)  can lower its price for only a few select consumers if it wants to increase its sales. 
C)  will set its price equal to a consumer's willingness to pay. 
D)  must lower the price for all customers if it wants to increase its sales. 
E)  is able to raise its price as high as it wants and consumers must still buy from it because it is a monopoly. 
A)  must practice price discrimination. 
B)  can lower its price for only a few select consumers if it wants to increase its sales. 
C)  will set its price equal to a consumer's willingness to pay. 
D)  must lower the price for all customers if it wants to increase its sales. 
E)  is able to raise its price as high as it wants and consumers must still buy from it because it is a monopoly.

If a monopoly is able to perfectly price discriminate,then consumer surplus is

The capture theory of regulation is defined as

Assume someone organizes all farms in the nation into a monopoly.Which of the following occurs? i.Consumer surplus decreases. ii.Economic profit increases. iii.A deadweight loss is created.

-The above figure represents the market for cable television in Oakland,Florida.Time Warner Communications (TWC)is the sole provider of cable television to the residents of this Central Florida community.If TWC is left unregulated,what is the price of cable television in Oakland?

-Suppose the Busy Bee Café is the monopoly producer of hamburgers in Hugo,Oklahoma.The above figure represents the demand,marginal revenue,and marginal cost curves for this establishment.What price will the Busy Bee charge to maximize its profit?

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

For a natural monopoly,economies of scale

To maximize its profit,a single-price monopoly produces the amount of output so that its marginal revenue

Assume someone organizes all farms in the nation into a monopoly.What is the monopoly's marginal cost curve?

Suppose a single-price monopoly sells 3 units of a good at $20 per unit.If the monopoly sells 4 units,the total revenue increases to $72.What price is being charged for 4 units?

What problem is caused by subsidizing a natural monopoly regulated using a marginal cost pricing rule?

A natural monopoly

-The figure above shows the demand,marginal revenue,and marginal cost curves for Paul's Parrot pillows,a single-price monopoly producer of pillows stuffed with parrot feathers.When Paul maximizes his profit,his total economic profit is

A price-discriminating monopoly charges

When marginal revenue is positive,total revenue when output increases and demand is .

Allegiant Air holds a natural monopoly on most of the routes it serves in the United States.Allegiant Air operate on the portion of its demand curve when total revenue is .

A single-price monopoly

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

If a monopoly is able to perfectly price discriminate,then consumer surplus is

The capture theory of regulation is defined as

Assume someone organizes all farms in the nation into a monopoly.Which of the following occurs? i.Consumer surplus decreases. ii.Economic profit increases. iii.A deadweight loss is created.

-The above figure represents the market for cable television in Oakland,Florida.Time Warner Communications (TWC)is the sole provider of cable television to the residents of this Central Florida community.If TWC is left unregulated,what is the price of cable television in Oakland?

-Suppose the Busy Bee Café is the monopoly producer of hamburgers in Hugo,Oklahoma.The above figure represents the demand,marginal revenue,and marginal cost curves for this establishment.What price will the Busy Bee charge to maximize its profit?

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

For a natural monopoly,economies of scale

To maximize its profit,a single-price monopoly produces the amount of output so that its marginal revenue

Assume someone organizes all farms in the nation into a monopoly.What is the monopoly's marginal cost curve?

Suppose a single-price monopoly sells 3 units of a good at $20 per unit.If the monopoly sells 4 units,the total revenue increases to $72.What price is being charged for 4 units?

What problem is caused by subsidizing a natural monopoly regulated using a marginal cost pricing rule?

A natural monopoly

-The figure above shows the demand,marginal revenue,and marginal cost curves for Paul's Parrot pillows,a single-price monopoly producer of pillows stuffed with parrot feathers.When Paul maximizes his profit,his total economic profit is

A price-discriminating monopoly charges

When marginal revenue is positive,total revenue ________ when output increases and demand is ________.

Allegiant Air holds a natural monopoly on most of the routes it serves in the United States.Allegiant Air ________ operate on the ________ portion of its demand curve when total revenue is ________.

A single-price monopoly

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

When marginal revenue is positive,total revenue when output increases and demand is .

Allegiant Air holds a natural monopoly on most of the routes it serves in the United States.Allegiant Air operate on the portion of its demand curve when total revenue is .