Question 1

Is a single-price monopoly efficient?

Accepted Answer

A)  Yes, because it creates a deadweight loss. 
B)  No, because it creates a deadweight loss. 
C)  Yes, because consumers gain and producers lose some of their surpluses. 
D)  Yes, because consumers lose and producers gain some of their surpluses. 
E)  Yes, because it produces the quantity at which MR=MC. 
A)  Yes, because it creates a deadweight loss. 
B)  No, because it creates a deadweight loss. 
C)  Yes, because consumers gain and producers lose some of their surpluses. 
D)  Yes, because consumers lose and producers gain some of their surpluses. 
E)  Yes, because it produces the quantity at which MR=MC.

Question 2

If a perfectly competitive industry becomes a monopoly and the costs do not change,which of the following allocation of costs and benefits applies?

Accepted Answer

A)  The producer benefits, but consumers and society are harmed. 
B)  The producer and society are harmed, but consumers benefit. 
C)  The producer and society benefit, but consumers are harmed. 
D)  The producer is harmed, but consumers and society benefit. 
E)  The producer, consumers, and society all benefit. 
A)  The producer benefits, but consumers and society are harmed. 
B)  The producer and society are harmed, but consumers benefit. 
C)  The producer and society benefit, but consumers are harmed. 
D)  The producer is harmed, but consumers and society benefit. 
E)  The producer, consumers, and society all benefit.

Question 3

Compared to a similar perfectly competitive industry,a single-price monopoly

Accepted Answer

A)  creates a deadweight loss and decreases economic profit. 
B)  produces more output. 
C)  creates a deadweight loss and decreases consumer surplus. 
D)  is more efficient because there is no wasteful competition. 
E)  sets a lower price because there is less competition. 
A)  creates a deadweight loss and decreases economic profit. 
B)  produces more output. 
C)  creates a deadweight loss and decreases consumer surplus. 
D)  is more efficient because there is no wasteful competition. 
E)  sets a lower price because there is less competition.

Question 4

Suppose a single-price monopoly sells 3 units of a good at $20 per unit.If the monopoly sells 4 units,the total revenue increases to $72.What price is being charged for 4 units?

Accepted Answer

A)  $52 each 
B)  $18 each 
C)  $60 each 
D)  $12 each 
E)  $20 each 
A)  $52 each 
B)  $18 each 
C)  $60 each 
D)  $12 each 
E)  $20 each

Question 5

Compared to the situation in which it sets a single price,a monopoly that price discriminates ________ its economic profit and ________ its output.

Accepted Answer

A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases 
E)  increases; does not change 
A)  increases; increases 
B)  increases; decreases 
C)  decreases; increases 
D)  decreases; decreases 
E)  increases; does not change

Question 6

For a single-price monopolist,why is marginal revenue less than price?

Accepted Answer

A)  Because the firm is a price taker 
B)  To sell another unit, the price must be lowered. 
C)  Demand is elastic when another unit is sold. 
D)  Demand is inelastic when another unit is sold. 
E)  The question is false because marginal revenue is always equal to price. 
A)  Because the firm is a price taker 
B)  To sell another unit, the price must be lowered. 
C)  Demand is elastic when another unit is sold. 
D)  Demand is inelastic when another unit is sold. 
E)  The question is false because marginal revenue is always equal to price.

Question 7

For a natural monopoly,the efficient quantity is produced when the firm is regulated so that

Accepted Answer

A) P = ATC. B) P > ATC. C) P = MC. D) P > MC. E) P < MC. A) P = ATC. B) P > ATC. C) P = MC. D) P > MC. E) P < MC.

Question 8

The makers of the movie Titanic have some monopoly power over this film because the

Accepted Answer

A)  movie is patented. 
B)  name Titanic is trademarked. 
C)  movie is protected by copyright law. 
D)  government has issued the maker of this movie a public franchise. 
E)  owner never price discriminated in marketing the movie. 
A)  movie is patented. 
B)  name Titanic is trademarked. 
C)  movie is protected by copyright law. 
D)  government has issued the maker of this movie a public franchise. 
E)  owner never price discriminated in marketing the movie.

Question 9

In equilibrium,rent seeking eliminates the

Accepted Answer

A)  deadweight loss. 
B)  economic profit. 
C)  consumer surplus. 
D)  demand for the product. 
E)  opportunity to price discriminate. 
A)  deadweight loss. 
B)  economic profit. 
C)  consumer surplus. 
D)  demand for the product. 
E)  opportunity to price discriminate.

Question 10

What problem is caused by subsidizing a natural monopoly regulated using a marginal cost pricing rule?

Accepted Answer

A)  The regulated firm ends up earning an economic profit. 
B)  Consumers pay too much for the product of the monopoly. 
C)  This policy is a two-part tariff, which creates inefficiency. 
D)  The taxes required to gain the revenue used as the subsidy result in a deadweight loss that subtracts from gains in efficiency which result from use of the marginal cost pricing rule. 
E)  The regulated firm goes out of business if it is subsidized. 
A)  The regulated firm ends up earning an economic profit. 
B)  Consumers pay too much for the product of the monopoly. 
C)  This policy is a two-part tariff, which creates inefficiency. 
D)  The taxes required to gain the revenue used as the subsidy result in a deadweight loss that subtracts from gains in efficiency which result from use of the marginal cost pricing rule. 
E)  The regulated firm goes out of business if it is subsidized.

Question 11

How should a natural monopoly be regulated under the social interest theory of regulation?

Accepted Answer

A)  by setting price equal to the average cost of production 
B)  by allowing a price that maximizes the profit of the natural monopoly 
C)  by using a marginal cost pricing rule 
D)  by subsidizing other producers to compete with the monopoly 
E)  by using rate of return regulation 
A)  by setting price equal to the average cost of production 
B)  by allowing a price that maximizes the profit of the natural monopoly 
C)  by using a marginal cost pricing rule 
D)  by subsidizing other producers to compete with the monopoly 
E)  by using rate of return regulation

Question 12

For a monopoly,marginal revenue is equal to

Accepted Answer

A)  the amount people buy at a given price. 
B)  the amount people buy between two prices. 
C)  the change in total revenue brought about by a one-unit increase in quantity sold. 
D)  the price multiplied by the quantity sold. 
E)  the price of the product. 
A)  the amount people buy at a given price. 
B)  the amount people buy between two prices. 
C)  the change in total revenue brought about by a one-unit increase in quantity sold. 
D)  the price multiplied by the quantity sold. 
E)  the price of the product.

Question 13

The long-run average cost curve of a natural monopoly

Accepted Answer

A)  is positively sloped until it crosses the demand curve. 
B)  intersects the demand curve while it is negative sloped. 
C)  intersects the demand curve while it is positively sloped. 
D)  is the natural monopoly's supply curve. 
E)  is the same as the natural monopoly's demand curve. 
A)  is positively sloped until it crosses the demand curve. 
B)  intersects the demand curve while it is negative sloped. 
C)  intersects the demand curve while it is positively sloped. 
D)  is the natural monopoly's supply curve. 
E)  is the same as the natural monopoly's demand curve.

Question 14

The capture theory of regulation predicts that regulations bring ________ to producers and impose ________ on any individual consumer.

Accepted Answer

A)  small benefits; small costs 
B)  small benefits; large costs 
C)  large benefits; small costs 
D)  large benefits; large costs 
E)  large benefits; no costs 
A)  small benefits; small costs 
B)  small benefits; large costs 
C)  large benefits; small costs 
D)  large benefits; large costs 
E)  large benefits; no costs

Question 15

Which of the following firms is most likely to be a monopoly?

Accepted Answer

A)  local restaurant 
B)  local distributor of natural gas 
C)  local book store 
D)  clothing store 
E)  local bank 
A)  local restaurant 
B)  local distributor of natural gas 
C)  local book store 
D)  clothing store 
E)  local bank

Question 16

The relationship between marginal revenue and elasticity is

Accepted Answer

A)  when demand is elastic, marginal revenue is positive and when demand is inelastic, marginal revenue is negative. 
B)  whenever the elasticity is positive, marginal revenue is positive. 
C)  whenever the elasticity is negative, marginal revenue is positive. 
D)  when demand is elastic, marginal revenue is negative and when demand is inelastic, marginal revenue is positive. 
E)  that total revenue equals zero at the quantity for which the demand is unit elastic. 
A)  when demand is elastic, marginal revenue is positive and when demand is inelastic, marginal revenue is negative. 
B)  whenever the elasticity is positive, marginal revenue is positive. 
C)  whenever the elasticity is negative, marginal revenue is positive. 
D)  when demand is elastic, marginal revenue is negative and when demand is inelastic, marginal revenue is positive. 
E)  that total revenue equals zero at the quantity for which the demand is unit elastic.

Question 17

The figure above shows a natural monopoly regulated using a marginal cost pricing rule.
-In the figure above,an

Accepted Answer

A)  efficient output results, but the firm incurs a loss per household which must be subsidized in some way. 
B)  inefficient output results, though the firm covers its costs. 
C)  an efficient output results, though marginal costs exceed average total costs. 
D)  an inefficient output results, because the firm cannot cover its costs. 
E)  an efficient output results, because consumer surplus is maximized. 
A)  efficient output results, but the firm incurs a loss per household which must be subsidized in some way. 
B)  inefficient output results, though the firm covers its costs. 
C)  an efficient output results, though marginal costs exceed average total costs. 
D)  an inefficient output results, because the firm cannot cover its costs. 
E)  an efficient output results, because consumer surplus is maximized.

Question 18

The figure above shows a natural monopoly.
-In the figure above,if the firm is regulated using a marginal cost pricing rule,the deadweight loss created is equal to the area of

Accepted Answer

A)  ABG. 
B)  BEFG. 
C)  BCFG. 
D)  BCE. 
E)  None of the above because there is no deadweight loss created. 
A)  ABG. 
B)  BEFG. 
C)  BCFG. 
D)  BCE. 
E)  None of the above because there is no deadweight loss created.

Question 19

-The above figure represents a perfectly competitive industry that is taken over by a single firm and operated as a monopoly.
a.What was the competitive price and quantity?
b.What is the monopoly price and quantity?
c.What area represents consumer surplus under perfect competition?
d.What area represents consumer surplus under monopoly?
e.What area represents the deadweight loss of monopoly?

Accepted Answer

a.The competitive price was P₂ and the c

Question 20

A monopolist can make an economic profit in the long run because of

Accepted Answer

A)  the relatively elastic demand for its product. 
B)  the relatively inelastic demand for its product. 
C)  the firm's price setting behavior. 
D)  barriers to entry. 
E)  the fact that the firm produces where MR = MC. 
A)  the relatively elastic demand for its product. 
B)  the relatively inelastic demand for its product. 
C)  the firm's price setting behavior. 
D)  barriers to entry. 
E)  the fact that the firm produces where MR = MC.

Is a single-price monopoly efficient?

If a perfectly competitive industry becomes a monopoly and the costs do not change,which of the following allocation of costs and benefits applies?

Compared to a similar perfectly competitive industry,a single-price monopoly

Suppose a single-price monopoly sells 3 units of a good at $20 per unit.If the monopoly sells 4 units,the total revenue increases to $72.What price is being charged for 4 units?

Compared to the situation in which it sets a single price,a monopoly that price discriminates its economic profit and its output.

For a single-price monopolist,why is marginal revenue less than price?

For a natural monopoly,the efficient quantity is produced when the firm is regulated so that

The makers of the movie Titanic have some monopoly power over this film because the

In equilibrium,rent seeking eliminates the

What problem is caused by subsidizing a natural monopoly regulated using a marginal cost pricing rule?

How should a natural monopoly be regulated under the social interest theory of regulation?

For a monopoly,marginal revenue is equal to

The long-run average cost curve of a natural monopoly

The capture theory of regulation predicts that regulations bring to producers and impose on any individual consumer.

Which of the following firms is most likely to be a monopoly?

The relationship between marginal revenue and elasticity is

The figure above shows a natural monopoly regulated using a marginal cost pricing rule. -In the figure above,an

The figure above shows a natural monopoly. -In the figure above,if the firm is regulated using a marginal cost pricing rule,the deadweight loss created is equal to the area of

A monopolist can make an economic profit in the long run because of

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets With Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

Exam 16: Monopoly

Is a single-price monopoly efficient?

If a perfectly competitive industry becomes a monopoly and the costs do not change,which of the following allocation of costs and benefits applies?

Compared to a similar perfectly competitive industry,a single-price monopoly

Suppose a single-price monopoly sells 3 units of a good at $20 per unit.If the monopoly sells 4 units,the total revenue increases to $72.What price is being charged for 4 units?

Compared to the situation in which it sets a single price,a monopoly that price discriminates ________ its economic profit and ________ its output.

For a single-price monopolist,why is marginal revenue less than price?

For a natural monopoly,the efficient quantity is produced when the firm is regulated so that

The makers of the movie Titanic have some monopoly power over this film because the

In equilibrium,rent seeking eliminates the

What problem is caused by subsidizing a natural monopoly regulated using a marginal cost pricing rule?

How should a natural monopoly be regulated under the social interest theory of regulation?

For a monopoly,marginal revenue is equal to

The long-run average cost curve of a natural monopoly

The capture theory of regulation predicts that regulations bring ________ to producers and impose ________ on any individual consumer.

Which of the following firms is most likely to be a monopoly?

The relationship between marginal revenue and elasticity is

The figure above shows a natural monopoly regulated using a marginal cost pricing rule. -In the figure above,an

The figure above shows a natural monopoly. -In the figure above,if the firm is regulated using a marginal cost pricing rule,the deadweight loss created is equal to the area of

A monopolist can make an economic profit in the long run because of

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets With Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

Compared to the situation in which it sets a single price,a monopoly that price discriminates its economic profit and its output.

The capture theory of regulation predicts that regulations bring to producers and impose on any individual consumer.