Question 1

The following figure shows the demand curve faced by a monopolist.
  
-Refer to the figure above.What is the change in total revenue due to a price reduction from $6 to $4?

Accepted Answer

A)  Total revenue increases by $300. 
B)  Total revenue decreases by $600. 
C)  Total revenue increases by $200. 
D)  Total revenue increases by $600. 
A)  Total revenue increases by $300. 
B)  Total revenue decreases by $600. 
C)  Total revenue increases by $200. 
D)  Total revenue increases by $600.

Question 2

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 100 million packs,then the firm's total revenue is ________ and the total cost is ________.

Accepted Answer

A)  $400 million; $250 million 
B)  $300 million; $150 million 
C)  $250 million; $100 million 
D)  $200 million; $50 million 
A)  $400 million; $250 million 
B)  $300 million; $150 million 
C)  $250 million; $100 million 
D)  $200 million; $50 million

Question 3

The following figure shows the demand (D), marginal revenue (MR), and marginal cost (MC) curves for a monopolist.
  
-Refer to the figure above.The monopolist can freely set its price,but the government agreed to compensate consumers for their loss in consumer surplus in comparison to the competitive outcome.What is the amount of compensation per unit of output traded?

Accepted Answer

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

Question 4

The following figure shows the costs and revenue curves of a firm in a monopoly market.
  
-Refer to the figure above.If this monopolist engages in the first-degree price discrimination,it will produce and sell ________ units of output.

Accepted Answer

A)  Q₅ 
B)  Q₂ 
C)  Q₃ 
D)  Q₄ 
A)  Q₅ 
B)  Q₂ 
C)  Q₃ 
D)  Q₄

Question 5

The figure below shows the cost and revenue curves of a firm in a monopoly market.The profit of this monopolist is represented by the area ________.

Accepted Answer

A)  AGRO 
B)  AGMD 
C)  BHJE 
D)  AGKF 
A)  AGRO 
B)  AGMD 
C)  BHJE 
D)  AGKF

Question 6

U.S.Code Title 18 § 1696 states
Whoever establishes any private express for the conveyance of letters or packets,or in any manner causes or provides for the conveyance of the same by regular trips or at stated periods over any post route which is or may be established by law,or from any city,town,or place to any other city,town,or place,between which the mail is regularly carried,shall be fined not more than $500 or imprisoned not more than six months,or both….
The Code of Federal Regulation (CFR)Title 39 Section 310.2 states
It is generally unlawful under the Private Express Statutes for any person other than the Postal Service in any manner to send or carry a letter on a post route or in any manner to cause or assist such activity.Violation may result in injunction,fine or imprisonment or both and payment of postage lost as a result of the illegal activity…
Under these laws,the U.S.Postal Service has ________.

Accepted Answer

A)  a legal market power in the private express mail market 
B)  a natural market power in the private express mail market 
C)  no market power in the private express mail market 
D)  no market power in the non-private express mail market 
A)  a legal market power in the private express mail market 
B)  a natural market power in the private express mail market 
C)  no market power in the private express mail market 
D)  no market power in the non-private express mail market

Question 7

A profit-maximizing monopolist ________.

Accepted Answer

A)  can set any price she chooses 
B)  produces until Marginal revenue = Marginal cost and reads the price off the demand curve at that quantity 
C)  takes the market price as given 
D)  produces the level of output at which Price = Average total cost 
A)  can set any price she chooses 
B)  produces until Marginal revenue = Marginal cost and reads the price off the demand curve at that quantity 
C)  takes the market price as given 
D)  produces the level of output at which Price = Average total cost

Question 8

Scenario: The following excerpt is from "Throwing the Book at Apple" (Wall Street Journal, Review and Outlook, June 12, 2013):
At the time, prior to the existence of the tablet device market that Jobs created with the iPad, Apple did not sell e-books. Amazon sold nine of every 10. Justice claims Jobs then forced Amazon and every other e-book distributor to adopt a new e-book pricing model that harmed consumers.
Yet the average retail price for "trade" e-books has since dropped to $7.34 from $7.97, and Amazon's Kindle is still the industry leader with Apple trailing in third. Over the same period readers bought 447% more e-books, and they can choose from dozens of tablets for titles and other media content.
-Refer to the scenario above.Is Apple Inc.a monopolist in the e-book market?

Accepted Answer

A)  Yes, because it is the only seller of e-books without actual or potential competitors. 
B)  Yes, because it has the power to affect the prices of e-books. 
C)  No, because it is not the only seller of e-books without actual or potential competitors. 
D)  No, because it does not have the power to affect the prices of e-books. 
A)  Yes, because it is the only seller of e-books without actual or potential competitors. 
B)  Yes, because it has the power to affect the prices of e-books. 
C)  No, because it is not the only seller of e-books without actual or potential competitors. 
D)  No, because it does not have the power to affect the prices of e-books.

Question 9

The following figure shows the demand curve, the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve of a monopolist.
  
-Refer to the figure above.If the monopolist is forced by regulation to charge the fair-returns price for the profit-maximizing output it produces,________.

Accepted Answer

A)  it makes a profit of $100 
B)  it makes a profit of $200 
C)  it incurs a loss of $100 
D)  it makes zero profit 
A)  it makes a profit of $100 
B)  it makes a profit of $200 
C)  it incurs a loss of $100 
D)  it makes zero profit

Question 10

The following figure shows price versus quantity for a market.
  
-Refer to the figure above.On what interval of quantity does total revenue decrease when quantity increases?

Accepted Answer

A)  From 0 to Q₂ 
B)  From Q₁ to Q₂ 
C)  From Q₂ to infinity 
D)  Total revenue never decreases when quantity increases 
A)  From 0 to Q₂ 
B)  From Q₁ to Q₂ 
C)  From Q₂ to infinity 
D)  Total revenue never decreases when quantity increases

Question 11

A network externality occurs when ________.

Accepted Answer

A)  the value of a product increases as more consumers start to use it 
B)  firms collude to sell products at a price higher than the equilibrium market price 
C)  a firm that has control over key resources auctions the resources off to other firms 
D)  the government interferes to prevent the concentration of market power in the hands of a few firms 
A)  the value of a product increases as more consumers start to use it 
B)  firms collude to sell products at a price higher than the equilibrium market price 
C)  a firm that has control over key resources auctions the resources off to other firms 
D)  the government interferes to prevent the concentration of market power in the hands of a few firms

Question 12

The following figure shows the demand curve, the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve of a monopolist.
  
-Refer to the figure above.When the monopolist is free to set the price,________.

Accepted Answer

A)  it makes a profit of $150 
B)  it incurs a loss of $150 
C)  it makes a profit of $300 
D)  it incurs a loss of $300 
A)  it makes a profit of $150 
B)  it incurs a loss of $150 
C)  it makes a profit of $300 
D)  it incurs a loss of $300

Question 13

Diet Coke ________ considered a product in a monopoly market,because ________.

Accepted Answer

A)  is; it has only one producer: CocaCola company 
B)  is not; it has many substitutes 
C)  is; the CocaCola company has market power 
D)  is not; because it is produced in factories around the world 
A)  is; it has only one producer: CocaCola company 
B)  is not; it has many substitutes 
C)  is; the CocaCola company has market power 
D)  is not; because it is produced in factories around the world

Question 14

Scenario: Tobac Co. is a monopolist in cigarette market in Nicotiana Republic where the U.S. dollar is used as its 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 market for cigarettes in Nicotiana Republic were perfectly competitive,________ cigarettes would be sold for ________ per pack.

Accepted Answer

A)  50 million; $6.00 
B)  75 million; $5.00 
C)  100 million; $4.00 
D)  150 million; $2.00 
A)  50 million; $6.00 
B)  75 million; $5.00 
C)  100 million; $4.00 
D)  150 million; $2.00

Question 15

The example of decoding the human genome through both a private effort (Celera)and an open-source effort (the Human Genome Project)illustrates that ________.

Accepted Answer

A)  monopolies are always inefficient 
B)  patent protection is necessary to provide firms an incentive to innovate 
C)  patent protection may sometimes hinder innovation 
D)  marginal cost pricing is the most efficient form of price regulation 
A)  monopolies are always inefficient 
B)  patent protection is necessary to provide firms an incentive to innovate 
C)  patent protection may sometimes hinder innovation 
D)  marginal cost pricing is the most efficient form of price regulation

Question 16

Economies of scale in production act as a source of ________ market power.

Accepted Answer

A)  legal 
B)  natural 
C)  competitive 
D)  regulated 
A)  legal 
B)  natural 
C)  competitive 
D)  regulated

Question 17

Which of the following statements is true?

Accepted Answer

A)  A monopolist has a vertical supply curve because it is a price-taker. 
B)  A monopolist's supply curve is the supply curve of the entire market. 
C)  A monopolist does not have a supply curve because its production decision is independent of price. 
D)  A monopolist has a horizontal supply curve because it is the only seller in the market. 
A)  A monopolist has a vertical supply curve because it is a price-taker. 
B)  A monopolist's supply curve is the supply curve of the entire market. 
C)  A monopolist does not have a supply curve because its production decision is independent of price. 
D)  A monopolist has a horizontal supply curve because it is the only seller in the market.

Question 18

The following table shows the quantities of a good sold by a monopolist at different prices.
  
-Refer to the table above.Which of the following statements is true of the monopolist's total revenue?

Accepted Answer

A)  As the monopolist reduces the price of its product from $9 to $3, its total revenue decreases. 
B)  As the monopolist reduces the price of its product from $9 to $3, its total revenue increases. 
C)  As the monopolist reduces the price of its product from $9 to $3, its total revenue increases and then decreases. 
D)  As the monopolist reduces the price of its product from $9 to $3, its total revenue decreases and then increases. 
A)  As the monopolist reduces the price of its product from $9 to $3, its total revenue decreases. 
B)  As the monopolist reduces the price of its product from $9 to $3, its total revenue increases. 
C)  As the monopolist reduces the price of its product from $9 to $3, its total revenue increases and then decreases. 
D)  As the monopolist reduces the price of its product from $9 to $3, its total revenue decreases and then increases.

Question 19

A firm with market power ________.

Accepted Answer

A)  faces a horizontal demand curve 
B)  faces a downward-sloping demand curve 
C)  has no ability to affect price 
D)  has long-run economic profits of zero 
A)  faces a horizontal demand curve 
B)  faces a downward-sloping demand curve 
C)  has no ability to affect price 
D)  has long-run economic profits of zero

Question 20

The following table shows the quantities of a good sold by a monopolist at different prices.
  
-Refer to the table above.What is the marginal revenue of the monopolist when it sells 400 units of its product?

Accepted Answer

A)  $2 
B)  ‒$2 
C)  $3 
D)  ‒$3 
A)  $2 
B)  ‒$2 
C)  $3 
D)  ‒$3

The following figure shows the demand curve faced by a monopolist. -Refer to the figure above.What is the change in total revenue due to a price reduction from $6 to $4?

The following figure shows the costs and revenue curves of a firm in a monopoly market. -Refer to the figure above.If this monopolist engages in the first-degree price discrimination,it will produce and sell ________ units of output.

The figure below shows the cost and revenue curves of a firm in a monopoly market.The profit of this monopolist is represented by the area ________.

A profit-maximizing monopolist ________.

The following figure shows price versus quantity for a market. -Refer to the figure above.On what interval of quantity does total revenue decrease when quantity increases?

A network externality occurs when ________.

The following figure shows the demand curve, the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve of a monopolist. -Refer to the figure above.When the monopolist is free to set the price,________.

Diet Coke considered a product in a monopoly market,because .

The example of decoding the human genome through both a private effort (Celera)and an open-source effort (the Human Genome Project)illustrates that ________.

Economies of scale in production act as a source of ________ market power.

Which of the following statements is true?

The following table shows the quantities of a good sold by a monopolist at different prices. -Refer to the table above.Which of the following statements is true of the monopolist's total revenue?

A firm with market power ________.

The following table shows the quantities of a good sold by a monopolist at different prices. -Refer to the table above.What is the marginal revenue of the monopolist when it sells 400 units of its product?

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

Exam 12: Monopoly

The following figure shows the demand curve faced by a monopolist. -Refer to the figure above.What is the change in total revenue due to a price reduction from $6 to $4?

The following figure shows the costs and revenue curves of a firm in a monopoly market. -Refer to the figure above.If this monopolist engages in the first-degree price discrimination,it will produce and sell ________ units of output.

The figure below shows the cost and revenue curves of a firm in a monopoly market.The profit of this monopolist is represented by the area ________.

A profit-maximizing monopolist ________.

The following figure shows price versus quantity for a market. -Refer to the figure above.On what interval of quantity does total revenue decrease when quantity increases?

A network externality occurs when ________.

The following figure shows the demand curve, the marginal revenue (MR) curve, the marginal cost (MC) curve, and the average total cost (ATC) curve of a monopolist. -Refer to the figure above.When the monopolist is free to set the price,________.

Diet Coke ________ considered a product in a monopoly market,because ________.

The example of decoding the human genome through both a private effort (Celera)and an open-source effort (the Human Genome Project)illustrates that ________.

Economies of scale in production act as a source of ________ market power.

Which of the following statements is true?

The following table shows the quantities of a good sold by a monopolist at different prices. -Refer to the table above.Which of the following statements is true of the monopolist's total revenue?

A firm with market power ________.

The following table shows the quantities of a good sold by a monopolist at different prices. -Refer to the table above.What is the marginal revenue of the monopolist when it sells 400 units of its product?

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

Diet Coke considered a product in a monopoly market,because .