Question 1

If a social planner were running a monopoly,that planner could achieve an efficient outcome by charging the price that is determined by the

Accepted Answer

A) minimum point on the average total cost curve. 
B) intersection of the average total cost curve and the demand curve. 
C) intersection of the marginal cost curve and the demand curve. 
D) intersection of the marginal cost curve and the marginal revenue curve. 
A) minimum point on the average total cost curve. 
B) intersection of the average total cost curve and the demand curve. 
C) intersection of the marginal cost curve and the demand curve. 
D) intersection of the marginal cost curve and the marginal revenue curve.

Question 2

Name brand drugs are able to continue capitalizing on their market power even after generic drugs enter the market because (i)	almost all people fear the generic drug companies are devoting too few resources to research and development.
(ii)	some people fear that generic drugs are inferior.
(iii)	some people are loyal to the name brand.

Accepted Answer

A) (i) and (ii) 
B) (ii) and (iii) 
C) (i) and (iii) 
D) (i), (ii), and (iii) 
A) (i) and (ii) 
B) (ii) and (iii) 
C) (i) and (iii) 
D) (i), (ii), and (iii)

Question 3

During the holiday season,high-end retailers frequently place a high price on merchandise on weekends and discount the price during the week.They do this because they believe that two groups of customers exist: shoppers with little free time and bargain hunters.Bargain hunters have time to shop around and frequently shop during the week.What do economists call this price strategy used by high-end retailers?

Accepted Answer

A) Oligopoly 
B) Price discrimination 
C) Compensating differential 
D) In-kind transfers 
A) Oligopoly 
B) Price discrimination 
C) Compensating differential 
D) In-kind transfers

Question 4

Figure 15-2
The figure below illustrates the cost and revenue structure for a monopoly firm.
  
-Refer to Figure 15-2.The average total cost curve for a monopoly firm is depicted by curve

Accepted Answer

A) a. 
B) B. 
C) C. 
D) D. 
A) a. 
B) B. 
C) C. 
D) D.

Question 5

Let's assume that a monopolist decides to maximize revenue,rather than profit.How does this operating objective change the size of the deadweight loss? If you are a "benevolent" manager of a monopoly firm and are interested in reducing the deadweight loss of monopoly,should you maximize profits or maximize revenue? Carefully explain your answer.

Accepted Answer

A revenue maximizer operates where MR =

Question 6

Monopolies use their market power to

Accepted Answer

A) charge prices that equal minimum average total cost. 
B) attain normal profits in the long run. 
C) charge a price that is higher than marginal cost. 
D) dump excess supplies of their product on the market. 
A) charge prices that equal minimum average total cost. 
B) attain normal profits in the long run. 
C) charge a price that is higher than marginal cost. 
D) dump excess supplies of their product on the market.

Question 7

Table 15-5
Dreher's Designer Shirt Company, a monopolist, has the following cost and revenue information. Assume that Dreher's is able to engage in perfect price discrimination.
  
-Refer to Table 15-5.What is the marginal revenue from selling the 8th shirt?

Accepted Answer

A) $45 
B) $60 
C) $80 
D) $95 
A) $45 
B) $60 
C) $80 
D) $95

Question 8

Table 15-1
  
-Refer to Table 15-1.If the monopolist wants to maximize its revenue,how many units of its product should it sell?

Accepted Answer

A) 4 
B) 5 
C) 6 
D) 8 
A) 4 
B) 5 
C) 6 
D) 8

Question 9

The economic inefficiency of a monopolist can be measured by the

Accepted Answer

A) number of consumers who are unable to purchase the product because of its high price. 
B) excess profit generated by monopoly firms. 
C) poor quality of service offered by monopoly firms. 
D) deadweight loss. 
A) number of consumers who are unable to purchase the product because of its high price. 
B) excess profit generated by monopoly firms. 
C) poor quality of service offered by monopoly firms. 
D) deadweight loss.

Question 10

Scenario 15-3
Black Box Cable TV is able to purchase an exclusive right to sell a premium movie channel (PMC) in its market area. Let's assume that Black Box Cable pays $150,000 a year for the exclusive marketing rights to PMC. Since Black Box has already installed cable to all of the homes in its market area, the marginal cost of delivering PMC to subscribers is zero. The manager of Black Box needs to know what price to charge for the PMC service to maximize her profit. Before setting price, she hires an economist to estimate demand for the PMC service. The economist discovers that there are two types of subscribers who value premium movie channels. First are the 4,000 die-hard TV viewers who will pay as much as $150 a year for the new PMC premium channel. Second, the PMC channel will appeal to about 20,000 occasional TV viewers who will pay as much as $20 a year for a subscription to PMC.
-Refer to Scenario 15-3.If Black Box Cable TV is unable to price discriminate,what price will it choose to maximize its profit,and what is the amount of the profit?

Accepted Answer

A) price = $20; profit = $400,000 
B) price = $20; profit = $330,000 
C) price = $150; profit = $450,000 
D) price = $150; profit = $600,000 
A) price = $20; profit = $400,000 
B) price = $20; profit = $330,000 
C) price = $150; profit = $450,000 
D) price = $150; profit = $600,000

Question 11

The marginal revenue curve for a monopoly firm starts at the same point on the vertical axis as the (i)	average revenue curve.
(ii)	marginal cost curve.
(iii)	demand curve.

Accepted Answer

A) (i) only 
B) (i) and (ii) 
C) (i) and (iii) 
D) (iii) only 
A) (i) only 
B) (i) and (ii) 
C) (i) and (iii) 
D) (iii) only

Question 12

Patent and copyright laws are major sources of

Accepted Answer

A) natural monopolies. 
B) government-created monopolies. 
C) resource monopolies. 
D) antitrust regulation. 
A) natural monopolies. 
B) government-created monopolies. 
C) resource monopolies. 
D) antitrust regulation.

Question 13

What is the defining characteristic of a natural monopoly? Give an example of a natural monopoly.

Accepted Answer

The defining characteristic of a natural

Question 14

An airline knows that there are two types of travelers: business travelers and vacationers.For a particular flight,there are 100 business travelers who will pay $600 for a ticket while there are 50 vacationers who will pay $300 for a ticket.There are 150 seats available on the plane.Suppose the cost to the airline of providing the flight is $20,000,which includes the cost of the pilots,flight attendants,fuel,etc.How much additional profit can the firm earn by charging each customer their willingness to pay relative to charging a flat price of $600 per ticket?

Accepted Answer

A) $15,000 
B) $25,000 
C) $40,000 
D) $70,000 
A) $15,000 
B) $25,000 
C) $40,000 
D) $70,000

Question 15

A firm cannot price discriminate if it

Accepted Answer

A) has perfect information about consumer demand. 
B) operates in a competitive market. 
C) faces a downward-sloping demand curve. 
D) is regulated by the government. 
A) has perfect information about consumer demand. 
B) operates in a competitive market. 
C) faces a downward-sloping demand curve. 
D) is regulated by the government.

Question 16

In the majority of cases where there is a natural monopoly,the U.S.government usually deals with the problem

Accepted Answer

A) by splitting the natural monopoly into smaller companies. 
B) through regulation. 
C) by turning the natural monopoly into a public enterprise. 
D) by doing nothing. 
A) by splitting the natural monopoly into smaller companies. 
B) through regulation. 
C) by turning the natural monopoly into a public enterprise. 
D) by doing nothing.

Question 17

The assessment by George Stigler concerning the tradeoffs between "market failure" and "political failure" in the American economy provides support for which of the following solutions to the problems of monopolies?

Accepted Answer

A) Public ownership of monopolies 
B) Government regulation of monopolies 
C) Government incentives to promote competition in monopolized industries 
D) Doing nothing at all 
A) Public ownership of monopolies 
B) Government regulation of monopolies 
C) Government incentives to promote competition in monopolized industries 
D) Doing nothing at all

Question 18

For a monopoly,

Accepted Answer

A) average revenue exceeds marginal revenue. 
B) average revenue equals marginal revenue. 
C) average revenue is less than marginal revenue. 
D) price equals marginal revenue. 
A) average revenue exceeds marginal revenue. 
B) average revenue equals marginal revenue. 
C) average revenue is less than marginal revenue. 
D) price equals marginal revenue.

Question 19

A benefit to society of the patent and copyright laws is that those laws

Accepted Answer

A) help to keep prices down. 
B) help to prevent a single firm from acquiring ownership of a key resource. 
C) encourage creative activity. 
D) discourage excessive amounts of output of certain products. 
A) help to keep prices down. 
B) help to prevent a single firm from acquiring ownership of a key resource. 
C) encourage creative activity. 
D) discourage excessive amounts of output of certain products.

Question 20

For a monopoly,marginal revenue is often greater than the price they charge for their good.

Accepted Answer

A) True 
 B)False

Exam 15: Monopoly

If a social planner were running a monopoly,that planner could achieve an efficient outcome by charging the price that is determined by the

Figure 15-2 The figure below illustrates the cost and revenue structure for a monopoly firm. -Refer to Figure 15-2.The average total cost curve for a monopoly firm is depicted by curve

Monopolies use their market power to

Table 15-5 Dreher's Designer Shirt Company, a monopolist, has the following cost and revenue information. Assume that Dreher's is able to engage in perfect price discrimination. -Refer to Table 15-5.What is the marginal revenue from selling the 8th shirt?

Table 15-1 -Refer to Table 15-1.If the monopolist wants to maximize its revenue,how many units of its product should it sell?

The economic inefficiency of a monopolist can be measured by the

The marginal revenue curve for a monopoly firm starts at the same point on the vertical axis as the (i) average revenue curve. (ii) marginal cost curve. (iii) demand curve.

Patent and copyright laws are major sources of

What is the defining characteristic of a natural monopoly? Give an example of a natural monopoly.

A firm cannot price discriminate if it

In the majority of cases where there is a natural monopoly,the U.S.government usually deals with the problem

The assessment by George Stigler concerning the tradeoffs between "market failure" and "political failure" in the American economy provides support for which of the following solutions to the problems of monopolies?

For a monopoly,

A benefit to society of the patent and copyright laws is that those laws

For a monopoly,marginal revenue is often greater than the price they charge for their good.

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Applications

Supply, demand, and Government Policies

Consumers, producers, and the Efficiency of Markets

Application: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Oligopoly

Monopolistic Competition

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short Run Trade Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

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