Question 1

Which of the following statements is true of a perfectly competitive market?

Accepted Answer

A)  Innovation is less likely in a competitive market because of the free entry and exit of firms. 
B)  Innovation is likely in a competitive market because of the free entry and exit of firms. 
C)  The firms in a competitive market invest more in research and development because they face an inelastic demand curve. 
D)  The firms in a competitive market invest more in research and development because their demand for resources is perfectly elastic. 
A)  Innovation is less likely in a competitive market because of the free entry and exit of firms. 
B)  Innovation is likely in a competitive market because of the free entry and exit of firms. 
C)  The firms in a competitive market invest more in research and development because they face an inelastic demand curve. 
D)  The firms in a competitive market invest more in research and development because their demand for resources is perfectly elastic.

Question 2

If a monopoly engages in first-degree price discrimination,________.

Accepted Answer

A)  social surplus is maximized 
B)  consumer surplus is maximized 
C)  producer surplus is minimized 
D)  deadweight loss is maximized 
A)  social surplus is maximized 
B)  consumer surplus is maximized 
C)  producer surplus is minimized 
D)  deadweight loss is maximized

Question 3

Which of the following correctly identifies a problem with price regulation?

Accepted Answer

A)  It minimizes social surplus. 
B)  It minimizes consumer surplus. 
C)  Sellers do not have an incentive to cut costs. 
D)  Government intervention increases deadweight loss. 
A)  It minimizes social surplus. 
B)  It minimizes consumer surplus. 
C)  Sellers do not have an incentive to cut costs. 
D)  Government intervention increases deadweight loss.

Question 4

The following figure shows the marginal revenue (MR) and demand curves faced by a monopolist.
  
-Refer to the figure above.If the monopolist faces a constant marginal cost of $10,at what price should it sell its output?

Accepted Answer

A)  $2 
B)  $10 
C)  $12 
D)  $14 
A)  $2 
B)  $10 
C)  $12 
D)  $14

Question 5

The following figure shows the demand curve and the marginal revenue curve (MR)faced by a monopolist.The monopolist has a constant marginal cost of $3.
   
Calculate consumer surplus,monopoly's surplus,and deadweight loss.

Accepted Answer

Consumer surplus = 0.5 × (9 ‒

Question 6

Which of the following is true of an increase in product prices?

Accepted Answer

A)  The quantity effect always dominates the price effect. 
B)  The price effect always dominates the quantity effect. 
C)  When the quantity effect dominates the price effect, total revenue increases. 
D)  When the quantity effect dominates the price effect, total revenue decreases. 
A)  The quantity effect always dominates the price effect. 
B)  The price effect always dominates the quantity effect. 
C)  When the quantity effect dominates the price effect, total revenue increases. 
D)  When the quantity effect dominates the price effect, total revenue decreases.

Question 7

The following figure shows the market demand curve for penicillin, an antibiotic medicine. Initially, the market was supplied by perfectly competitive firms. Later, the government granted the exclusive right to produce and sell penicillin to one firm. The figure also shows the marginal revenue curve (MR) of the firm once it begins to operate as a monopoly. The marginal cost is constant at $3, irrespective of the market structure.
  
-Refer to the figure above.What is the price that the monopolistic firm would charge?

Accepted Answer

A)  $0 
B)  $3 
C)  $6 
D)  $9 
A)  $0 
B)  $3 
C)  $6 
D)  $9

Question 8

When firms charge different prices to different consumers for the same good or service,it is referred to as ________.

Accepted Answer

A)  a price bias 
B)  shadow pricing 
C)  predatory pricing 
D)  price discrimination 
A)  a price bias 
B)  shadow pricing 
C)  predatory pricing 
D)  price discrimination

Question 9

Suppose that a fire-fighting service is offered by private firms and property owners can purchase the service for a fee (or not purchase the service).Does fire-fighting service have network externalities?

Accepted Answer

It does not.A product or service has a n

Question 10

Firms with market power ________.

Accepted Answer

A)  are price takers 
B)  have constant marginal costs 
C)  always earn positive economic profits 
D)  have the ability to affect price 
A)  are price takers 
B)  have constant marginal costs 
C)  always earn positive economic profits 
D)  have the ability to affect price

Question 11

The following figure shows the costs and revenue curves of a firm in a monopoly market.
  
-Refer to the figure above.If the government decides to regulate this market at the socially optimal price level,the monopolist will ________.

Accepted Answer

A)  make zero profit 
B)  make a positive profit 
C)  make a negative profit 
D)  exit this market 
A)  make zero profit 
B)  make a positive profit 
C)  make a negative profit 
D)  exit this market

Question 12

Which of the following firms is most likely to have a constant marginal cost?

Accepted Answer

A)  A firm that is a price-taker 
B)  A firm that has extremely high fixed costs 
C)  A firm that has extremely high variable costs 
D)  A firm that faces a horizontal demand curve 
A)  A firm that is a price-taker 
B)  A firm that has extremely high fixed costs 
C)  A firm that has extremely high variable costs 
D)  A firm that faces a horizontal demand curve

Question 13

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.If the quantity sold is 150 million packs,the firm's profit is ________.

Accepted Answer

A)  $100 million 
B)  $50 million 
C)  $0 
D)  -$50 million 
A)  $100 million 
B)  $50 million 
C)  $0 
D)  -$50 million

Question 14

How does a monopoly decide the optimal amount of a good that it produces? How does it set the price for its product?

Accepted Answer

A monopoly determines the optimal output

Question 15

What are the problems associated with price regulation?

Accepted Answer

The main problem with price regulation i

Question 16

A monopolist faces an average total cost of $6 when it produces 200 units of its product.If it sells the 200 units at $8 per unit,the monopolist ________.

Accepted Answer

A)  incurs a loss of $200 
B)  incurs a loss of $400 
C)  makes a profit of $200 
D)  makes a profit of $400 
A)  incurs a loss of $200 
B)  incurs a loss of $400 
C)  makes a profit of $200 
D)  makes a profit of $400

Question 17

A monopolist faces a linear,downward-sloping demand curve.If the slope of the demand curve is 2 (where price is on the y-axis and quantity on the x-axis)and the monopolist can sell four units of output at a price of $16.What is the marginal revenue from selling the fourth unit of output?

Accepted Answer

A)  $1 
B)  $4 
C)  $10 
D)  $18 
A)  $1 
B)  $4 
C)  $10 
D)  $18

Question 18

In the United States,the ________ is a law that keeps markets open and competitive.

Accepted Answer

A)  Sherman Act 
B)  Samuelson Act 
C)  Monopoly Act 
D)  Pro-competition Act 
A)  Sherman Act 
B)  Samuelson Act 
C)  Monopoly Act 
D)  Pro-competition Act

Question 19

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.What is Tobac Co.'s total revenue when it sells 50 million packs of cigarettes?

Accepted Answer

A)  $100 million 
B)  $200 million 
C)  $300 million 
D)  $400 million 
A)  $100 million 
B)  $200 million 
C)  $300 million 
D)  $400 million

Question 20

A monopolist faces an average total cost of $10 when it produces 400 units of its product.If it sells the 400 units at $6 per unit,the monopolist ________.

Accepted Answer

A)  makes a profit of $600 
B)  incurs a loss of $600 
C)  makes a profit of $1,600 
D)  incurs a loss of $1,600 
A)  makes a profit of $600 
B)  incurs a loss of $600 
C)  makes a profit of $1,600 
D)  incurs a loss of $1,600

Which of the following statements is true of a perfectly competitive market?

If a monopoly engages in first-degree price discrimination,________.

Which of the following correctly identifies a problem with price regulation?

The following figure shows the marginal revenue (MR) and demand curves faced by a monopolist. -Refer to the figure above.If the monopolist faces a constant marginal cost of $10,at what price should it sell its output?

The following figure shows the demand curve and the marginal revenue curve (MR)faced by a monopolist.The monopolist has a constant marginal cost of $3. Calculate consumer surplus,monopoly's surplus,and deadweight loss.

Which of the following is true of an increase in product prices?

When firms charge different prices to different consumers for the same good or service,it is referred to as ________.

Suppose that a fire-fighting service is offered by private firms and property owners can purchase the service for a fee (or not purchase the service).Does fire-fighting service have network externalities?

Firms with market power ________.

The following figure shows the costs and revenue curves of a firm in a monopoly market. -Refer to the figure above.If the government decides to regulate this market at the socially optimal price level,the monopolist will ________.

Which of the following firms is most likely to have a constant marginal cost?

How does a monopoly decide the optimal amount of a good that it produces? How does it set the price for its product?

What are the problems associated with price regulation?

A monopolist faces an average total cost of $6 when it produces 200 units of its product.If it sells the 200 units at $8 per unit,the monopolist ________.

A monopolist faces a linear,downward-sloping demand curve.If the slope of the demand curve is 2 (where price is on the y-axis and quantity on the x-axis)and the monopolist can sell four units of output at a price of $16.What is the marginal revenue from selling the fourth unit of output?

In the United States,the ________ is a law that keeps markets open and competitive.

A monopolist faces an average total cost of $10 when it produces 400 units of its product.If it sells the 400 units at $6 per unit,the monopolist ________.

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

Which of the following statements is true of a perfectly competitive market?

If a monopoly engages in first-degree price discrimination,________.

Which of the following correctly identifies a problem with price regulation?

The following figure shows the marginal revenue (MR) and demand curves faced by a monopolist. -Refer to the figure above.If the monopolist faces a constant marginal cost of $10,at what price should it sell its output?

The following figure shows the demand curve and the marginal revenue curve (MR)faced by a monopolist.The monopolist has a constant marginal cost of $3. Calculate consumer surplus,monopoly's surplus,and deadweight loss.

Which of the following is true of an increase in product prices?

When firms charge different prices to different consumers for the same good or service,it is referred to as ________.

Suppose that a fire-fighting service is offered by private firms and property owners can purchase the service for a fee (or not purchase the service).Does fire-fighting service have network externalities?

Firms with market power ________.

The following figure shows the costs and revenue curves of a firm in a monopoly market. -Refer to the figure above.If the government decides to regulate this market at the socially optimal price level,the monopolist will ________.

Which of the following firms is most likely to have a constant marginal cost?

How does a monopoly decide the optimal amount of a good that it produces? How does it set the price for its product?

What are the problems associated with price regulation?

A monopolist faces an average total cost of $6 when it produces 200 units of its product.If it sells the 200 units at $8 per unit,the monopolist ________.

A monopolist faces a linear,downward-sloping demand curve.If the slope of the demand curve is 2 (where price is on the y-axis and quantity on the x-axis)and the monopolist can sell four units of output at a price of $16.What is the marginal revenue from selling the fourth unit of output?

In the United States,the ________ is a law that keeps markets open and competitive.

A monopolist faces an average total cost of $10 when it produces 400 units of its product.If it sells the 400 units at $6 per unit,the monopolist ________.

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