Question 1

Which of the following items is a primary source of barriers to entry?

Accepted Answer

A) The costs of production make a single firm more efficient than a large number of firms. 
B) A single firm hires all the people who have the management skills that are important in the industry. 
C) Contracts among firms prohibit them from competing with one another in the production and sale of certain products. 
D) All of the above are correct. 
A) The costs of production make a single firm more efficient than a large number of firms. 
B) A single firm hires all the people who have the management skills that are important in the industry. 
C) Contracts among firms prohibit them from competing with one another in the production and sale of certain products. 
D) All of the above are correct.

Question 2

What happens to the price and quantity sold of a drug when its patent runs out? (i)	The price will fall.
(ii)	The quantity sold will fall.
(iii)	The marginal cost of producing the drug will rise.

Accepted Answer

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

Question 3

Competitive firms differ from monopolies in which of the following ways? (i)	Competitive firms do not have to worry about the price effect lowering their total revenue.
(ii)	Marginal revenue for a competitive firm equals price,while marginal revenue for a monopoly is less than the price it is able to charge.
(iii)	Monopolies must lower their price in order to sell more of their product,while competitive firms do not.

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 4

In the market for "home heating" consumers typically have several options (e.g.,electricity,heating fuel,natural gas,propane,etc.)yet we often think of firms in this industry as behaving like monopolists.Using your understanding of monopoly,discuss the context in which your electricity provider is a monopolist.Is this characterization universally applicable? Carefully explain your answer.

Accepted Answer

In this case,the firms are monopolists i

Question 5

A monopolist faces the following demand curve:  
The monopolist has total fixed costs of $60 and has a constant marginal cost of $15.What is the profit-maximizing level of production?

Accepted Answer

A) 2 units 
B) 3 units 
C) 4 units 
D) 5 units 
A) 2 units 
B) 3 units 
C) 4 units 
D) 5 units

Question 6

Suppose a monopolist chooses the price and production level which maximizes its profit.From that point,to increase society's economic welfare,output would need to be increased as long as

Accepted Answer

A) average revenue exceeds marginal cost. 
B) average revenue exceeds average total cost. 
C) marginal revenue exceeds marginal cost. 
D) marginal revenue exceeds average total cost. 
A) average revenue exceeds marginal cost. 
B) average revenue exceeds average total cost. 
C) marginal revenue exceeds marginal cost. 
D) marginal revenue exceeds average total cost.

Question 7

A reduction in a monopolist's fixed costs would

Accepted Answer

A) decrease the profit-maximizing price and increase the profit-maximizing quantity produced. 
B) increase the profit-maximizing price and decrease the profit-maximizing quantity produced. 
C) not effect the profit-maximizing price or quantity. 
D) possibly increase, decrease or not effect profit-maximizing price and quantity, depending on the elasticity of demand. 
A) decrease the profit-maximizing price and increase the profit-maximizing quantity produced. 
B) increase the profit-maximizing price and decrease the profit-maximizing quantity produced. 
C) not effect the profit-maximizing price or quantity. 
D) possibly increase, decrease or not effect profit-maximizing price and quantity, depending on the elasticity of demand.

Question 8

Airlines often separate their customers into business travelers and personal travelers by giving a discount to those travelers who stay over a Saturday night.

Accepted Answer

A) True 
 B)False

Question 9

Figure 15-7
The figure below depicts the demand, marginal revenue, and marginal cost curves of a profit-maximizing monopolist.
  
-Refer to Figure 15-7.If there are no fixed costs of production,monopoly profit with perfect price discrimination equals

Accepted Answer

A) $500. 
B) $1,000. 
C) $2,000. 
D) $4,000. 
A) $500. 
B) $1,000. 
C) $2,000. 
D) $4,000.

Question 10

For a long while,electricity producers were thought to be a classic example of a natural monopoly.People held this view because

Accepted Answer

A) the average cost of producing units of electricity by one producer in a specific region was lower than if the same quantity were produced by two or more producers in the same region. 
B) the average cost of producing units of electricity by one producer in a specific region was higher than if the same quantity were produced by two or more produced in the same region. 
C) the marginal cost of producing units of electricity by one producer in a specific region was higher than if the same quantity were produced by two or more producers in the same region. 
D) electricity is a special non-excludable good that could never be sold in a competitive market. 
A) the average cost of producing units of electricity by one producer in a specific region was lower than if the same quantity were produced by two or more producers in the same region. 
B) the average cost of producing units of electricity by one producer in a specific region was higher than if the same quantity were produced by two or more produced in the same region. 
C) the marginal cost of producing units of electricity by one producer in a specific region was higher than if the same quantity were produced by two or more producers in the same region. 
D) electricity is a special non-excludable good that could never be sold in a competitive market.

Question 11

Which of the following statements comparing monopoly with competition is correct?

Accepted Answer

A) A monopolist produces a higher level of output and charges a lower price than a competitive firm would. 
B) With perfect price discrimination, the total surplus under monopoly can be the same as under competition. 
C) With or without price discrimination, the consumer surplus under monopoly is at least as large as it would be under competition. 
D) The deadweight loss associated with monopoly is caused by the positive economic profits of the monopolist; competitive firms do not earn a positive economic profit so there is no deadweight loss under competition. 
A) A monopolist produces a higher level of output and charges a lower price than a competitive firm would. 
B) With perfect price discrimination, the total surplus under monopoly can be the same as under competition. 
C) With or without price discrimination, the consumer surplus under monopoly is at least as large as it would be under competition. 
D) The deadweight loss associated with monopoly is caused by the positive economic profits of the monopolist; competitive firms do not earn a positive economic profit so there is no deadweight loss under competition.

Question 12

When a monopoly charges a higher price,fewer of its goods are sold.

Accepted Answer

A) True 
 B)False

Question 13

In many countries,the government chooses to "internalize" the monopoly by owning monopoly providers of goods and services.(In some cases these firms are "nationalized" and the government actually buys or confiscates firms that operate in monopoly markets).What would be the advantages and disadvantages of such an approach to ensuring the "best interest of society" is promoted in these markets? Carefully explain your answer.

Accepted Answer

As long as the government "owner" pursue

Question 14

If a monopolist sells 100 units at $8 per unit and realizes an average total cost of $6 per unit,what is the monopolist's profit?

Accepted Answer

A) $200 
B) $400 
C) $600 
D) $800 
A) $200 
B) $400 
C) $600 
D) $800

Question 15

The amount of power that a monopoly has depends on whether there are close substitutes for its product.

Accepted Answer

A) True 
 B)False

Question 16

A monopolist's profits with price discrimination will be

Accepted Answer

A) lower than if the firm charged a single, profit-maximizing price 
B) the same as if the firm charged a single, profit-maximizing price. 
C) higher than if the firm charged just one price because the firm will capture more consumer surplus. 
D) higher than if the firm charged a single price because the costs of selling the good will be lower. 
A) lower than if the firm charged a single, profit-maximizing price 
B) the same as if the firm charged a single, profit-maximizing price. 
C) higher than if the firm charged just one price because the firm will capture more consumer surplus. 
D) higher than if the firm charged a single price because the costs of selling the good will be lower.

Question 17

Which of the following statements is correct?

Accepted Answer

A) A competitive firm is a price maker and a monopoly is a price taker. 
B) A competitive firm is a price taker and a monopoly is a price maker. 
C) Both competitive firms and monopolies are price takers. 
D) Both competitive firms and monopolies are price makers. 
A) A competitive firm is a price maker and a monopoly is a price taker. 
B) A competitive firm is a price taker and a monopoly is a price maker. 
C) Both competitive firms and monopolies are price takers. 
D) Both competitive firms and monopolies are price makers.

Question 18

Figure 15-7
The figure below depicts the demand, marginal revenue, and marginal cost curves of a profit-maximizing monopolist.
  
-Refer to Figure 15-7.If the monopoly firm perfectly price discriminates,then consumer surplus amounts to

Accepted Answer

A) $0. 
B) $250. 
C) $500. 
D) $1,000. 
A) $0. 
B) $250. 
C) $500. 
D) $1,000.

Question 19

Explain the benefits and costs of antitrust laws.

Accepted Answer

Benefits: Promote competition

Question 20

If a monopolist is able to perfectly price discriminate,

Accepted Answer

A) consumer surplus is always increased. 
B) total surplus is always decreased. 
C) consumer surplus and deadweight losses are transformed into monopoly profits. 
D) the price effect dominates the output effect on monopoly revenue. 
A) consumer surplus is always increased. 
B) total surplus is always decreased. 
C) consumer surplus and deadweight losses are transformed into monopoly profits. 
D) the price effect dominates the output effect on monopoly revenue.

Exam 15: Monopoly

Which of the following items is a primary source of barriers to entry?

What happens to the price and quantity sold of a drug when its patent runs out? (i) The price will fall. (ii) The quantity sold will fall. (iii) The marginal cost of producing the drug will rise.

A monopolist faces the following demand curve: The monopolist has total fixed costs of $60 and has a constant marginal cost of $15.What is the profit-maximizing level of production?

Suppose a monopolist chooses the price and production level which maximizes its profit.From that point,to increase society's economic welfare,output would need to be increased as long as

A reduction in a monopolist's fixed costs would

Airlines often separate their customers into business travelers and personal travelers by giving a discount to those travelers who stay over a Saturday night.

Figure 15-7 The figure below depicts the demand, marginal revenue, and marginal cost curves of a profit-maximizing monopolist. -Refer to Figure 15-7.If there are no fixed costs of production,monopoly profit with perfect price discrimination equals

For a long while,electricity producers were thought to be a classic example of a natural monopoly.People held this view because

Which of the following statements comparing monopoly with competition is correct?

When a monopoly charges a higher price,fewer of its goods are sold.

If a monopolist sells 100 units at $8 per unit and realizes an average total cost of $6 per unit,what is the monopolist's profit?

The amount of power that a monopoly has depends on whether there are close substitutes for its product.

A monopolist's profits with price discrimination will be

Which of the following statements is correct?

Figure 15-7 The figure below depicts the demand, marginal revenue, and marginal cost curves of a profit-maximizing monopolist. -Refer to Figure 15-7.If the monopoly firm perfectly price discriminates,then consumer surplus amounts to

Explain the benefits and costs of antitrust laws.

If a monopolist is able to perfectly price discriminate,

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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