Question 1

As a monopolist expands its output,________.

Accepted Answer

A)  the difference between the demand curve and the marginal revenue curve decreases 
B)  the difference between the demand curve and the marginal revenue curve increases 
C)  the slope of the demand curve decreases, while the slope of the marginal revenue curve increases 
D)  the slope of the demand curve increases, while the slope of the marginal revenue curve decreases 
A)  the difference between the demand curve and the marginal revenue curve decreases 
B)  the difference between the demand curve and the marginal revenue curve increases 
C)  the slope of the demand curve decreases, while the slope of the marginal revenue curve increases 
D)  the slope of the demand curve increases, while the slope of the marginal revenue curve decreases

Question 2

Scenario: When a monopolist charges $10 for its product, it sells 500 units of the product. When it lowers the price to $6, it sells 1,400 units of the product.
-Refer to the scenario above.What is the quantity effect of the price change?

Accepted Answer

A)  $1,400 
B)  $2,700 
C)  $5,400 
D)  $6,750 
A)  $1,400 
B)  $2,700 
C)  $5,400 
D)  $6,750

Question 3

Which of the following statements correctly differentiates between a monopoly and a perfectly competitive firm?

Accepted Answer

A)  A perfectly competitive firm faces an upward-sloping demand curve, whereas a monopoly faces a horizontal demand curve. 
B)  A perfectly competitive firm sets its product price at its marginal cost, whereas a monopoly sets the price above its marginal cost. 
C)  A perfectly competitive firm faces a horizontal demand curve, whereas a monopoly faces an upward sloping-demand curve. 
D)  A perfectly competitive firm sets its product price above its marginal cost, whereas a monopoly sets its product price equal to its marginal cost. 
A)  A perfectly competitive firm faces an upward-sloping demand curve, whereas a monopoly faces a horizontal demand curve. 
B)  A perfectly competitive firm sets its product price at its marginal cost, whereas a monopoly sets the price above its marginal cost. 
C)  A perfectly competitive firm faces a horizontal demand curve, whereas a monopoly faces an upward sloping-demand curve. 
D)  A perfectly competitive firm sets its product price above its marginal cost, whereas a monopoly sets its product price equal to its marginal cost.

Question 4

The figure below shows the demand curve in a monopoly market.
  
-Refer to the figure above.Which of the four dashed lines represent the marginal revenue of this monopoly firm?

Accepted Answer

A)  Line 1 
B)  Line 2 
C)  Line 3 
D)  Line 4 
A)  Line 1 
B)  Line 2 
C)  Line 3 
D)  Line 4

Question 5

Scenario: Mr. Olivander has a monopoly on supplying magic wands. The table below shows the demand schedule for magic wands per day.
  
-Refer to the scenario above.If the marginal cost of a magic wand is $10,what price should Mr.Olivander charge to maximize his profit?

Accepted Answer

A)  $65 
B)  $55 
C)  $35 
D)  $20 
A)  $65 
B)  $55 
C)  $35 
D)  $20

Question 6

Scenario: Tobac Co. is a monopolist in cigarette market in Nicotiana Republic, where the U.S. dollar is used as the official currency. The firm has a constant marginal cost of $2.00 per pack and the fixed cost is $20 million. Through market research, the firm has found that there are two types of customer, Type 1 and Type 2. The demand curves of the two types of customers, and the total market demand curve, along with respective marginal revenue curves, are shown in the following figure.

-Refer to the scenario above.If Tobac Co.could not carry out price discrimination,the firm's maximum profit would be ________.

Accepted Answer

A)  $246.4 million 
B)  $266.4 million 
C)  $406.4 million 
D)  $426.4 million 
A)  $246.4 million 
B)  $266.4 million 
C)  $406.4 million 
D)  $426.4 million

Question 7

The following figure shows the marginal revenue (MR), marginal cost (MC), and demand (D) curves for a firm operating as a monopoly.
  
-Refer to the figure above.Compared to the competitive market outcome,when the monopolists sets its price to the optimal price,by how much is the quantity traded diminished?

Accepted Answer

A)  By Q₁ 
B)  By Q₃ 
C)  By Q₃ Q₁ 
D)  By Q₁ Q₂ 
A)  By Q₁ 
B)  By Q₃ 
C)  By Q₃ Q₁ 
D)  By Q₁ Q₂

Question 8

For a firm with market power,the price effect is the ________.

Accepted Answer

A)  increase in revenue from selling one more unit of output 
B)  decrease in revenue from selling one more unit of output 
C)  decrease in revenue arising from the reduction in price necessary to sell another unit of output 
D)  increase in revenue arising from the reduction in price necessary to sell another unit of output 
A)  increase in revenue from selling one more unit of output 
B)  decrease in revenue from selling one more unit of output 
C)  decrease in revenue arising from the reduction in price necessary to sell another unit of output 
D)  increase in revenue arising from the reduction in price necessary to sell another unit of output

Question 9

The following table shows the quantities of a good sold by a monopolist at different prices.
  
-Refer to the table above.What is the total revenue of the monopolist when it charges a price of $3?

Accepted Answer

A)  $1,050 
B)  $1,350 
C)  $1,750 
D)  $2,750 
A)  $1,050 
B)  $1,350 
C)  $1,750 
D)  $2,750

Question 10

When the price of the same product varies based on locational attributes,it is an example of ________.

Accepted Answer

A)  fair-returns pricing 
B)  first-degree price discrimination 
C)  second-degree price discrimination 
D)  third-degree price discrimination 
A)  fair-returns pricing 
B)  first-degree price discrimination 
C)  second-degree price discrimination 
D)  third-degree price discrimination

Question 11

The following figure shows the demand curve and the marginal revenue (MR)curve of a monopolist supplying petroleum.
   
a)If the monopolist faces a constant marginal cost of $3,what is the optimal output that it should produce?
b)If the monopolist faces a constant marginal cost of $3,at what price should it sell the optimal output?
c)If the average total cost of the monopolist is $4 per gallon when it produces the optimal output,determine its profit or loss.

Accepted Answer

a) The optimal output of a monopolist is

Question 12

Natural monopolies are characterized by facing a(n)________.

Accepted Answer

A)  horizontal demand curve 
B)  constant average cost curve 
C)  declining average cost curve 
D)  increasing average cost curve 
A)  horizontal demand curve 
B)  constant average cost curve 
C)  declining average cost curve 
D)  increasing average cost curve

Question 13

A certain amusement park offers a 50 percent discount to kids between the ages of 8 and 14 years.This is an example of ________.

Accepted Answer

A)  fair-returns pricing 
B)  first-degree price discrimination 
C)  third-degree price discrimination 
D)  second-degree price discrimination 
A)  fair-returns pricing 
B)  first-degree price discrimination 
C)  third-degree price discrimination 
D)  second-degree price discrimination

Question 14

Scenario: Tobac Co. is a monopolist in the cigarette market in Nicotiana Republic, where the U.S. dollar is used as the official currency. The firm faces the demand curve shown below. The firm has a constant marginal cost of $2.00 per pack. The fixed cost of the firm is $50 million. To answer the questions below, it is useful to know that the equation of the (inverse) demand curve is P = 8 - 0.04Q, where Q is the quantity demanded (in millions of packs) and P is the price per pack (in $). Also, you should draw in the marginal revenue curve.
  
-Refer to the scenario above.The firm's maximum profit is ________.

Accepted Answer

A)  $200 million 
B)  $175 million 
C)  $150 million 
D)  $125 million 
A)  $200 million 
B)  $175 million 
C)  $150 million 
D)  $125 million

Question 15

Which of the following statements is true?

Accepted Answer

A)  A monopolist faces an upward-sloping demand curve. 
B)  A perfectly competitive firm faces an upward-sloping demand curve. 
C)  A monopolist can increase the price of its product and not lose all of its business. 
D)  A perfectly competitive firm can increase the price of its product without losing its business. 
A)  A monopolist faces an upward-sloping demand curve. 
B)  A perfectly competitive firm faces an upward-sloping demand curve. 
C)  A monopolist can increase the price of its product and not lose all of its business. 
D)  A perfectly competitive firm can increase the price of its product without losing its business.

Question 16

As a firm increases its output,its average total cost decreases.This is an outcome of ________.

Accepted Answer

A)  the law of demand 
B)  economies of scale 
C)  diseconomies of scale 
D)  the law of diminishing returns 
A)  the law of demand 
B)  economies of scale 
C)  diseconomies of scale 
D)  the law of diminishing returns

Question 17

If a new seller enters a market to compete with an existing natural monopoly,it will ________.

Accepted Answer

A)  decrease costs for both sellers 
B)  increase the costs of production for both sellers 
C)  increase the production costs for the existing seller, and decrease the production costs for the new entrant 
D)  decrease the production costs for the existing seller, and increase the production costs for the new entrant 
A)  decrease costs for both sellers 
B)  increase the costs of production for both sellers 
C)  increase the production costs for the existing seller, and decrease the production costs for the new entrant 
D)  decrease the production costs for the existing seller, and increase the production costs for the new entrant

Question 18

Which of the following is not a barrier to entry?

Accepted Answer

A)  Economies of scale 
B)  Patent laws 
C)  Decreasing marginal costs 
D)  Licensing 
A)  Economies of scale 
B)  Patent laws 
C)  Decreasing marginal costs 
D)  Licensing

Question 19

The following figure shows the demand (D), marginal cost (MC), and marginal revenue (MR) for a monopolist firm.
  
-Refer to the figure above.How much of the loss in consumer surplus generated by the single-price profit-maximizing monopoly remains part of social surplus?

Accepted Answer

A)  (P₁ P₄) Q₁ + (Q₃ Q₁) (P₁ P₄)/2 
B)  (P₁ P₃) Q₁ + (Q₃ Q₁) (P₁ P₃)/2 
C)  (P₁ P₂) Q₁ + (Q₃ Q₁) (P₁ P₂)/2 
D)  (Q₃ Q₁) (P₁ P₄)/2 
A)  (P₁ P₄) Q₁ + (Q₃ Q₁) (P₁ P₄)/2 
B)  (P₁ P₃) Q₁ + (Q₃ Q₁) (P₁ P₃)/2 
C)  (P₁ P₂) Q₁ + (Q₃ Q₁) (P₁ P₂)/2 
D)  (Q₃ Q₁) (P₁ P₄)/2

Question 20

Differentiate between the quantity effect and price effect of a price cut by a monopoly.

Accepted Answer

When a monopoly cuts the price of its pr

As a monopolist expands its output,________.

Scenario: When a monopolist charges $10 for its product, it sells 500 units of the product. When it lowers the price to $6, it sells 1,400 units of the product. -Refer to the scenario above.What is the quantity effect of the price change?

Which of the following statements correctly differentiates between a monopoly and a perfectly competitive firm?

The figure below shows the demand curve in a monopoly market. -Refer to the figure above.Which of the four dashed lines represent the marginal revenue of this monopoly firm?

Scenario: Mr. Olivander has a monopoly on supplying magic wands. The table below shows the demand schedule for magic wands per day. -Refer to the scenario above.If the marginal cost of a magic wand is $10,what price should Mr.Olivander charge to maximize his profit?

For a firm with market power,the price effect is the ________.

The following table shows the quantities of a good sold by a monopolist at different prices. -Refer to the table above.What is the total revenue of the monopolist when it charges a price of $3?

When the price of the same product varies based on locational attributes,it is an example of ________.

Natural monopolies are characterized by facing a(n)________.

A certain amusement park offers a 50 percent discount to kids between the ages of 8 and 14 years.This is an example of ________.

Which of the following statements is true?

As a firm increases its output,its average total cost decreases.This is an outcome of ________.

If a new seller enters a market to compete with an existing natural monopoly,it will ________.

Which of the following is not a barrier to entry?

The following figure shows the demand (D), marginal cost (MC), and marginal revenue (MR) for a monopolist firm. -Refer to the figure above.How much of the loss in consumer surplus generated by the single-price profit-maximizing monopoly remains part of social surplus?

Differentiate between the quantity effect and price effect of a price cut by a monopoly.

The Principles and Practice of Economics

Economic Methods and Economic Questions

Optimization: Doing the Best You Can

Demand, supply, and Equilibrium

Consumers and Incentives

Sellers and Incentives

Perfect Competition and the Invisible Hand

Trade

Externalities and Public Goods

The Government in the Economy: Taxation and Regulation

Markets for Factors of Production

Game Theory and Strategic Play

Oligopoly and Monopolistic Competition

Trade-Offs Involving Time and Risk

The Economics of Information

Auctions and Bargaining

Social Economics

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Exam 12: Monopoly

As a monopolist expands its output,________.

Scenario: When a monopolist charges $10 for its product, it sells 500 units of the product. When it lowers the price to $6, it sells 1,400 units of the product. -Refer to the scenario above.What is the quantity effect of the price change?

Which of the following statements correctly differentiates between a monopoly and a perfectly competitive firm?

The figure below shows the demand curve in a monopoly market. -Refer to the figure above.Which of the four dashed lines represent the marginal revenue of this monopoly firm?

Scenario: Mr. Olivander has a monopoly on supplying magic wands. The table below shows the demand schedule for magic wands per day. -Refer to the scenario above.If the marginal cost of a magic wand is $10,what price should Mr.Olivander charge to maximize his profit?

For a firm with market power,the price effect is the ________.

The following table shows the quantities of a good sold by a monopolist at different prices. -Refer to the table above.What is the total revenue of the monopolist when it charges a price of $3?

When the price of the same product varies based on locational attributes,it is an example of ________.

Natural monopolies are characterized by facing a(n)________.

A certain amusement park offers a 50 percent discount to kids between the ages of 8 and 14 years.This is an example of ________.

Which of the following statements is true?

As a firm increases its output,its average total cost decreases.This is an outcome of ________.

If a new seller enters a market to compete with an existing natural monopoly,it will ________.

Which of the following is not a barrier to entry?

The following figure shows the demand (D), marginal cost (MC), and marginal revenue (MR) for a monopolist firm. -Refer to the figure above.How much of the loss in consumer surplus generated by the single-price profit-maximizing monopoly remains part of social surplus?

Differentiate between the quantity effect and price effect of a price cut by a monopoly.

The Principles and Practice of Economics

Economic Methods and Economic Questions

Optimization: Doing the Best You Can

Demand, supply, and Equilibrium

Consumers and Incentives

Sellers and Incentives

Perfect Competition and the Invisible Hand

Trade

Externalities and Public Goods

The Government in the Economy: Taxation and Regulation

Markets for Factors of Production

Game Theory and Strategic Play

Oligopoly and Monopolistic Competition

Trade-Offs Involving Time and Risk

The Economics of Information

Auctions and Bargaining

Social Economics

Filters