Question 1

Third-degree price discrimination occurs when ________.

Accepted Answer

A)  different groups of consumers are charged different prices 
B)  consumers are charged different prices at different times 
C)  consumers are charged different prices according to their willingness to pay 
D)  consumers are charged different prices based on the characteristics of their purchases 
A)  different groups of consumers are charged different prices 
B)  consumers are charged different prices at different times 
C)  consumers are charged different prices according to their willingness to pay 
D)  consumers are charged different prices based on the characteristics of their purchases

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.When the quantity sold goes up from 100 million to 150 million packs of cigarettes,the price effect on the firm's revenue is ________ and the quantity effect is ________.

Accepted Answer

A)  -$200 million; $100 million 
B)  -$100 million; $200 million 
C)  $200 million; -$100 million 
D)  $100 million; -$200 million 
A)  -$200 million; $100 million 
B)  -$100 million; $200 million 
C)  $200 million; -$100 million 
D)  $100 million; -$200 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 is forced to charge the competitive price,but the government agreed to compensate the monopolist for its loss in producer surplus,in comparison to the profit-maximizing outcome.What is the amount of compensation per unit of output traded?

Accepted Answer

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

Question 4

A ________ is an exclusive right granted by the government to an author's intellectual property.

Accepted Answer

A)  patent 
B)  blueprint 
C)  copyright 
D)  trademark 
A)  patent 
B)  blueprint 
C)  copyright 
D)  trademark

Question 5

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 quantity supplied in the market when the market is perfectly competitive?

Accepted Answer

A)  30 units 
B)  45 units 
C)  60 units 
D)  90 units 
A)  30 units 
B)  45 units 
C)  60 units 
D)  90 units

Question 6

Perfect price discrimination implies that ________.

Accepted Answer

A)  demand is perfectly elastic 
B)  demand is perfectly inelastic 
C)  the firm produces a smaller output than it would as a single-price monopolist 
D)  the firm produces a larger output than it would as a single-price monopolist 
A)  demand is perfectly elastic 
B)  demand is perfectly inelastic 
C)  the firm produces a smaller output than it would as a single-price monopolist 
D)  the firm produces a larger output than it would as a single-price monopolist

Question 7

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 successfully carry out the third-degree price discrimination,the firm would charge type 1 customers ________ per pack and type 2 customers ________ per pack.

Accepted Answer

A)  $5.00; $7.00 
B)  $7.00; $5.00 
C)  $2.00; $2.00 
D)  $12.00; $8.00 
A)  $5.00; $7.00 
B)  $7.00; $5.00 
C)  $2.00; $2.00 
D)  $12.00; $8.00

Question 8

A monopoly produces and sells 300 units of its product for $8 per unit.If the total cost incurred by the monopoly is $1,800,determine its profit or loss.

Accepted Answer

Profits = Total reve

Question 9

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 $2,what is the optimal quantity that it should produce?

Accepted Answer

A)  20 units 
B)  40 units 
C)  45 units 
D)  80 units 
A)  20 units 
B)  40 units 
C)  45 units 
D)  80 units

Question 10

The quantity effect of a price decrease by a monopolist is based on the law of ________.

Accepted Answer

A)  supply 
B)  demand 
C)  increasing returns 
D)  diminishing returns 
A)  supply 
B)  demand 
C)  increasing returns 
D)  diminishing returns

Question 11

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

Accepted Answer

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

Question 12

The following figure shows the marginal revenue (MR) and average total cost (ATC) and marginal cost (MC) curves of a monopolist.
  
-Refer to the figure above.The output produced in this market is ________ units,while the output produced under a comparable perfectly competitive market would have been ________ units.

Accepted Answer

A)  12; 17 
B)  10; 17 
C)  12; 24 
D)  10; 16 
A)  12; 17 
B)  10; 17 
C)  12; 24 
D)  10; 16

Question 13

For a monopolist,________.

Accepted Answer

A) Marginal revenue > Price B) Marginal revenue = Price C) Marginal revenue < Price D) Price = Marginal cost A) Marginal revenue > Price B) Marginal revenue = Price C) Marginal revenue < Price D) Price = Marginal cost

Question 14

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,how many wands should Mr.Olivander sell to maximize his profit?

Accepted Answer

A)  5 
B)  9 
C)  12 
D)  1 
A)  5 
B)  9 
C)  12 
D)  1

Question 15

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 change in consumer surplus when the market changes from perfect competition to a monopoly?

Accepted Answer

A)  Consumer surplus increases by 30 units. 
B)  Consumer surplus decreases by 45 units. 
C)  Consumer surplus increases by 90 units. 
D)  Consumer surplus decreases by 135 units. 
A)  Consumer surplus increases by 30 units. 
B)  Consumer surplus decreases by 45 units. 
C)  Consumer surplus increases by 90 units. 
D)  Consumer surplus decreases by 135 units.

Question 16

Which of the following statements is true?

Accepted Answer

A)  Network effects arise because of economies of scale. 
B)  Economies of scale arise because of network effects. 
C)  Economies of scale act as barriers to entry into a market. 
D)  Network effects provide incentives for new sellers to enter the market. 
A)  Network effects arise because of economies of scale. 
B)  Economies of scale arise because of network effects. 
C)  Economies of scale act as barriers to entry into a market. 
D)  Network effects provide incentives for new sellers to enter the market.

Question 17

Perfect price discrimination is also referred to as ________ price discrimination.

Accepted Answer

A)  first-degree 
B)  second-degree 
C)  third-degree 
D)  fourth-degree 
A)  first-degree 
B)  second-degree 
C)  third-degree 
D)  fourth-degree

Question 18

The outcome of first-degree price discrimination is ________.

Accepted Answer

A)  Pareto efficient with equity 
B)  Pareto efficient with inequity 
C)  Pareto inefficient with inequity 
D)  Pareto inefficient with equity 
A)  Pareto efficient with equity 
B)  Pareto efficient with inequity 
C)  Pareto inefficient with inequity 
D)  Pareto inefficient with equity

Question 19

If a firm can sell 10 units of output for $15 each or 11 units at $14 each,the additional revenue from selling the eleventh unit is ________.

Accepted Answer

A)  $14 
B)  $4 
C)  $150 
D)  $154 
A)  $14 
B)  $4 
C)  $150 
D)  $154

Question 20

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 marginal revenue?

Accepted Answer

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

Third-degree price discrimination occurs when ________.

A ________ is an exclusive right granted by the government to an author's intellectual property.

Perfect price discrimination implies that ________.

A monopoly produces and sells 300 units of its product for $8 per unit.If the total cost incurred by the monopoly is $1,800,determine its profit or loss.

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 $2,what is the optimal quantity that it should produce?

The quantity effect of a price decrease by a monopolist is based on the law of ________.

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

The following figure shows the marginal revenue (MR) and average total cost (ATC) and marginal cost (MC) curves of a monopolist. -Refer to the figure above.The output produced in this market is units,while the output produced under a comparable perfectly competitive market would have been units.

For a monopolist,________.

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,how many wands should Mr.Olivander sell to maximize his profit?

Which of the following statements is true?

Perfect price discrimination is also referred to as ________ price discrimination.

The outcome of first-degree price discrimination is ________.

If a firm can sell 10 units of output for $15 each or 11 units at $14 each,the additional revenue from selling the eleventh unit is ________.

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 marginal revenue?

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

Third-degree price discrimination occurs when ________.

A ________ is an exclusive right granted by the government to an author's intellectual property.

Perfect price discrimination implies that ________.

A monopoly produces and sells 300 units of its product for $8 per unit.If the total cost incurred by the monopoly is $1,800,determine its profit or loss.

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 $2,what is the optimal quantity that it should produce?

The quantity effect of a price decrease by a monopolist is based on the law of ________.

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

For a monopolist,________.

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,how many wands should Mr.Olivander sell to maximize his profit?

Which of the following statements is true?

Perfect price discrimination is also referred to as ________ price discrimination.

The outcome of first-degree price discrimination is ________.

If a firm can sell 10 units of output for $15 each or 11 units at $14 each,the additional revenue from selling the eleventh unit is ________.

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 marginal revenue?

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