Question 1

Which of the following statements is true?

Accepted Answer

A)  A monopoly is characterized by no entry barriers. 
B)  Perfect competition is characterized by high entry barriers. 
C)  Firms in a market with entry barriers are likely to have more market power than firms in a market with no entry barriers. 
D)  Firms in a market with no entry barriers are likely to have more market power than firms in a market with entry barriers. 
A)  A monopoly is characterized by no entry barriers. 
B)  Perfect competition is characterized by high entry barriers. 
C)  Firms in a market with entry barriers are likely to have more market power than firms in a market with no entry barriers. 
D)  Firms in a market with no entry barriers are likely to have more market power than firms in a market with entry barriers.

Question 2

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 faces the demand curve shown below. The firm has a constant marginal cost of $2.00 per pack and a fixed cost of $50 million.
  
-Refer to the scenario above.Tobac Co.is forced by the government to charge the fair-return price,the producer surplus would be ________.

Accepted Answer

A)  more than $50 million 
B)  $50 million 
C)  $0 
D)  negative 
A)  more than $50 million 
B)  $50 million 
C)  $0 
D)  negative

Question 3

If the marginal revenue of a producer exceeds his marginal cost,________.

Accepted Answer

A)  profit is maximized 
B)  profit is minimized 
C)  additional production enhances profits 
D)  additional production reduces profits 
A)  profit is maximized 
B)  profit is minimized 
C)  additional production enhances profits 
D)  additional production reduces profits

Question 4

For a profit-maximizing monopolist,profits are given by ________.

Accepted Answer

A)  [Price - Marginal cost] Quantity 
B)  [Price - Average total cost] Quantity 
C)  Marginal revenue - Total cost 
D)  Total revenue - Marginal cost 
A)  [Price - Marginal cost] Quantity 
B)  [Price - Average total cost] Quantity 
C)  Marginal revenue - Total cost 
D)  Total revenue - Marginal cost

Question 5

The figure below shows the demand curve in a monopoly market.
  
-Refer to the figure above.This monopolist initially produced 6 units and now has a new plan to produce 8 units of this good.The price effect of this plan on the revenue of the monopolist is ________.

Accepted Answer

A)  $3 
B)  +$6 
C)  $1 
D)  +$7 
A)  $3 
B)  +$6 
C)  $1 
D)  +$7

Question 6

When price discrimination does not increase output,it increases a monopoly's profits because it ________.

Accepted Answer

A)  increases the willingness of households to pay for a good 
B)  allows the firm to capture some consumer surplus 
C)  allows the firm to exploit economies of scale more fully 
D)  shifts the demand curve the firm faces 
A)  increases the willingness of households to pay for a good 
B)  allows the firm to capture some consumer surplus 
C)  allows the firm to exploit economies of scale more fully 
D)  shifts the demand curve the firm faces

Question 7

The supply curve for a monopolist is ________.

Accepted Answer

A)  the marginal cost curve 
B)  the marginal cost curve above average total cost 
C)  the increasing portion of the average total cost curve 
D)  nonexistent 
A)  the marginal cost curve 
B)  the marginal cost curve above average total cost 
C)  the increasing portion of the average total cost curve 
D)  nonexistent

Question 8

At the profit-maximizing level of output and price determined above,the monopolist's profits are ________.

Accepted Answer

A)  $750 
B)  $1,200 
C)  $1,350 
D)  $0 
A)  $750 
B)  $1,200 
C)  $1,350 
D)  $0

Question 9

What are the types of market power? How do they arise?

Accepted Answer

There are two types of market power:
i)L

Question 10

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 change in total revenue due to the price change?

Accepted Answer

A)  Total revenue increases by $350. 
B)  Total revenue increases by $3,400. 
C)  Total revenue decreases by $1,650. 
D)  Total revenue decreases by $2,275. 
A)  Total revenue increases by $350. 
B)  Total revenue increases by $3,400. 
C)  Total revenue decreases by $1,650. 
D)  Total revenue decreases by $2,275.

Question 11

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 surplus enjoyed by the firm when it is the sole supplier of the medicine?

Accepted Answer

A)  $30 
B)  $60 
C)  $90 
D)  $180 
A)  $30 
B)  $60 
C)  $90 
D)  $180

Question 12

Fair-returns pricing describes a situation in which government regulation of price sets the monopolist's price at ________.

Accepted Answer

A)  marginal cost 
B)  minimum average variable cost 
C)  minimum average total cost 
D)  average total cost 
A)  marginal cost 
B)  minimum average variable cost 
C)  minimum average total cost 
D)  average total cost

Question 13

Which of the following is not an example of economies of scale?

Accepted Answer

A)  To produce tap water, the water companies had to invest in a huge network of water pipes. 
B)  Supermarkets can benefit from economies of scale, because they can buy food in bulk and get lower average costs. 
C)  Producing oil from tar sands in Alberta can generate profits only when the world price of a barrel of oil is high. 
D)  A bigger financial firm gets a lower rate of interest when borrowing. 
A)  To produce tap water, the water companies had to invest in a huge network of water pipes. 
B)  Supermarkets can benefit from economies of scale, because they can buy food in bulk and get lower average costs. 
C)  Producing oil from tar sands in Alberta can generate profits only when the world price of a barrel of oil is high. 
D)  A bigger financial firm gets a lower rate of interest when borrowing.

Question 14

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,what is the optimal quantity that it should produce?

Accepted Answer

A)  20 units 
B)  30 units 
C)  40 units 
D)  80 units 
A)  20 units 
B)  30 units 
C)  40 units 
D)  80 units

Question 15

Which of the following statements is true?

Accepted Answer

A)  A natural monopoly always arises from government intervention in the market. 
B)  An increase in consumer demand can change a natural monopoly into a multiseller market. 
C)  A natural monopoly earns higher profits than a monopolistically competitive firm because it faces an upward-sloping market demand curve. 
D)  A natural monopoly earns higher profits than a monopolistically competitive firm because it faces a horizontal market demand curve. 
A)  A natural monopoly always arises from government intervention in the market. 
B)  An increase in consumer demand can change a natural monopoly into a multiseller market. 
C)  A natural monopoly earns higher profits than a monopolistically competitive firm because it faces an upward-sloping market demand curve. 
D)  A natural monopoly earns higher profits than a monopolistically competitive firm because it faces a horizontal market demand curve.

Question 16

A key resource is a material that is ________.

Accepted Answer

A)  unlimited in supply 
B)  rationed by the government 
C)  available only to monopolies 
D)  essential for the production of a good 
A)  unlimited in supply 
B)  rationed by the government 
C)  available only to monopolies 
D)  essential for the production of a good

Question 17

A socially optimal price regulation will NOT work if marginal cost is ________.

Accepted Answer

A)  less than average total cost 
B)  less than average fixed cost 
C)  greater than average total cost 
D)  greater than average fixed cost 
A)  less than average total cost 
B)  less than average fixed cost 
C)  greater than average total cost 
D)  greater than average fixed cost

Question 18

The main source of natural market power for a monopoly firm is ________.

Accepted Answer

A)  the existence of economies of scale in production 
B)  patents and copyrights 
C)  government-regulated pricing policy 
D)  the price elasticity of demand for the product produced by the firm 
A)  the existence of economies of scale in production 
B)  patents and copyrights 
C)  government-regulated pricing policy 
D)  the price elasticity of demand for the product produced by the firm

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.Compared to the competitive market outcome,the single-price profit-maximizing monopoly reduces consumer surplus by ________.

Accepted Answer

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

Question 20

Second-degree price discrimination occurs when ________.

Accepted Answer

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

Which of the following statements is true?

If the marginal revenue of a producer exceeds his marginal cost,________.

For a profit-maximizing monopolist,profits are given by ________.

The figure below shows the demand curve in a monopoly market. -Refer to the figure above.This monopolist initially produced 6 units and now has a new plan to produce 8 units of this good.The price effect of this plan on the revenue of the monopolist is ________.

When price discrimination does not increase output,it increases a monopoly's profits because it ________.

The supply curve for a monopolist is ________.

At the profit-maximizing level of output and price determined above,the monopolist's profits are ________.

What are the types of market power? How do they arise?

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 change in total revenue due to the price change?

Fair-returns pricing describes a situation in which government regulation of price sets the monopolist's price at ________.

Which of the following is not an example of economies of scale?

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,what is the optimal quantity that it should produce?

Which of the following statements is true?

A key resource is a material that is ________.

A socially optimal price regulation will NOT work if marginal cost is ________.

The main source of natural market power for a monopoly firm is ________.

The following figure shows the demand (D), marginal cost (MC), and marginal revenue (MR) for a monopolist firm. -Refer to the figure above.Compared to the competitive market outcome,the single-price profit-maximizing monopoly reduces consumer surplus by ________.

Second-degree price discrimination occurs when ________.

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?

If the marginal revenue of a producer exceeds his marginal cost,________.

For a profit-maximizing monopolist,profits are given by ________.

The figure below shows the demand curve in a monopoly market. -Refer to the figure above.This monopolist initially produced 6 units and now has a new plan to produce 8 units of this good.The price effect of this plan on the revenue of the monopolist is ________.

When price discrimination does not increase output,it increases a monopoly's profits because it ________.

The supply curve for a monopolist is ________.

At the profit-maximizing level of output and price determined above,the monopolist's profits are ________.

What are the types of market power? How do they arise?

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 change in total revenue due to the price change?

Fair-returns pricing describes a situation in which government regulation of price sets the monopolist's price at ________.

Which of the following is not an example of economies of scale?

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,what is the optimal quantity that it should produce?

Which of the following statements is true?

A key resource is a material that is ________.

A socially optimal price regulation will NOT work if marginal cost is ________.

The main source of natural market power for a monopoly firm is ________.

The following figure shows the demand (D), marginal cost (MC), and marginal revenue (MR) for a monopolist firm. -Refer to the figure above.Compared to the competitive market outcome,the single-price profit-maximizing monopoly reduces consumer surplus by ________.

Second-degree price discrimination occurs when ________.

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