Question 1

Firms with substantial monopoly power are quite common,because many goods are truly unique.

Accepted Answer

A) True 
 B)False

Question 2

Table 15-2
Dreher's Designer Shirt Company, a monopolist, has the following cost and revenue information.
  
-Refer to Table 15-2.What are Dreher's Designer Shirt Company's fixed costs?

Accepted Answer

A) $0 
B) $100 
C) $600 
D) $745 
A) $0 
B) $100 
C) $600 
D) $745

Question 3

Table 15-2
Dreher's Designer Shirt Company, a monopolist, has the following cost and revenue information.
  
-Refer to Table 15-2.What is the marginal cost of the 6th shirt?

Accepted Answer

A) $44 
B) $46 
C) $55 
D) $60 
A) $44 
B) $46 
C) $55 
D) $60

Question 4

When deciding what price to charge consumers,the monopolist may choose to charge them different prices based on the customers'

Accepted Answer

A) geographical location. 
B) age. 
C) income. 
D) All of the above are correct. 
A) geographical location. 
B) age. 
C) income. 
D) All of the above are correct.

Question 5

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.What is the deadweight loss associated with the nondiscriminating pricing policy compared to the price discriminating policy?

Accepted Answer

A) $375,000 
B) $400,000 
C) $475,000 
D) It cannot be determined from the information provided. 
A) $375,000 
B) $400,000 
C) $475,000 
D) It cannot be determined from the information provided.

Question 6

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 quantity that maximizes economic profit?

Accepted Answer

A) 5 
B) 6 
C) 7 
D) 8 
A) 5 
B) 6 
C) 7 
D) 8

Question 7

A rational pricing strategy for a profit-maximizing monopolist is

Accepted Answer

A) price discrimination. 
B) price segregation. 
C) synergy pricing. 
D) average cost pricing. 
A) price discrimination. 
B) price segregation. 
C) synergy pricing. 
D) average cost pricing.

Question 8

Splitting up a monopoly is often justified on the grounds that

Accepted Answer

A) consumers prefer dealing with small firms. 
B) small firms have lower costs. 
C) competition is inherently efficient. 
D) nationalization is a less-preferred option. 
A) consumers prefer dealing with small firms. 
B) small firms have lower costs. 
C) competition is inherently efficient. 
D) nationalization is a less-preferred option.

Question 9

Table 15-4
Consider the following demand and cost information for a monopoly.
  
-Refer to Table 15-4.The marginal cost of the fourth unit is

Accepted Answer

A) $7. 
B) $12. 
C) $25. 
D) $60. 
A) $7. 
B) $12. 
C) $25. 
D) $60.

Question 10

A natural monopoly occurs when

Accepted Answer

A) the product is sold in its natural state (such as water or diamonds). 
B) there are economies of scale over the relevant range of output. 
C) the firm is characterized by a rising marginal cost curve. 
D) production requires the use of free natural resources, such as water or air. 
A) the product is sold in its natural state (such as water or diamonds). 
B) there are economies of scale over the relevant range of output. 
C) the firm is characterized by a rising marginal cost curve. 
D) production requires the use of free natural resources, such as water or air.

Question 11

Figure 15-4
The figure below depicts the demand and marginal cost curves of a profit-maximizing monopolist.
  
-Refer to Figure 15-4.A benevolent social planner would have the monopoly operate at an output level

Accepted Answer

A) below Q₀. 
B) above Q₀. 
C) equal to Q₀. 
D) equal to zero. 
A) below Q₀. 
B) above Q₀. 
C) equal to Q₀. 
D) equal to zero.

Question 12

Additional firms often do not try to compete with a natural monopoly because

Accepted Answer

A) they fear retaliation in the form of pricing wars from the natural monopolist. 
B) they are unsure of the size of the market in general. 
C) they know they cannot achieve the same low costs that the monopolist enjoys. 
D) the natural monopoly doesn't make a huge profit. 
A) they fear retaliation in the form of pricing wars from the natural monopolist. 
B) they are unsure of the size of the market in general. 
C) they know they cannot achieve the same low costs that the monopolist enjoys. 
D) the natural monopoly doesn't make a huge profit.

Question 13

Patents grant

Accepted Answer

A) permanent monopoly status to creators of scientific inventions. 
B) permanent monopoly status to creators of any intellectual property. 
C) temporary monopoly status to creators of scientific inventions. 
D) temporary monopoly status to creators of any intellectual property. 
A) permanent monopoly status to creators of scientific inventions. 
B) permanent monopoly status to creators of any intellectual property. 
C) temporary monopoly status to creators of scientific inventions. 
D) temporary monopoly status to creators of any intellectual property.

Question 14

When a monopolist increases the amount of output that it produces and sells,the price of its output

Accepted Answer

A) stays the same. 
B) increases. 
C) decreases. 
D) may increase or decrease depending on the price elasticity of demand. 
A) stays the same. 
B) increases. 
C) decreases. 
D) may increase or decrease depending on the price elasticity of demand.

Question 15

Goods that do not have close substitutes have downward-sloping demand curves.

Accepted Answer

A) True 
 B)False

Question 16

In a natural monopoly,

Accepted Answer

A) society would be better off if antitrust laws were used to create many different firms in the market. 
B) the marginal cost curve is positively sloped. 
C) if the government requires marginal cost pricing, it must pay the monopolist a subsidy. 
D) the marginal revenue curve is horizontal. 
A) society would be better off if antitrust laws were used to create many different firms in the market. 
B) the marginal cost curve is positively sloped. 
C) if the government requires marginal cost pricing, it must pay the monopolist a subsidy. 
D) the marginal revenue curve is horizontal.

Question 17

In reality,perfect price discrimination is

Accepted Answer

A) used by about 75 percent of all monopolies. 
B) used by about 50 percent of all monopolies. 
C) seldom used by monopolies because it leads to lower profits. 
D) not possible. 
A) used by about 75 percent of all monopolies. 
B) used by about 50 percent of all monopolies. 
C) seldom used by monopolies because it leads to lower profits. 
D) not possible.

Question 18

Scenario 15-1
Consider a transportation corporation named C.R. Evans that has just completed the development of a new subway system in a medium-sized town in the Northwest. Currently, there are plenty of seats on the subway, and it is never crowded. Its capacity far exceeds the needs of the city. After just a few years of operation, the shareholders of C.R. Evans experienced incredible rates of return on their investment, due to the profitability of the corporation.
-Refer to Scenario 15-1.C.R.Evans will continue to be a monopolist in the subway transportation industry only if

Accepted Answer

A) population growth leads to an overcrowding of the subway cars. 
B) there are no new entrants to the market. 
C) demand for transportation services decreases. 
D) All of the above are correct. 
A) population growth leads to an overcrowding of the subway cars. 
B) there are no new entrants to the market. 
C) demand for transportation services decreases. 
D) All of the above are correct.

Question 19

One solution to the problems of marginal-cost pricing of a regulated monopolist is average cost pricing.In this model,the monopolist is allowed to price its production at average total cost.How does average-cost pricing differ from marginal-cost pricing? Does this solution maximize social well-being?

Accepted Answer

Average-cost pricing always gu

Question 20

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 able to price discriminate,what would be the maximum amount of profit it could generate?

Accepted Answer

A) $500,000 
B) $600,000 
C) $850,000 
D) $925,000 
A) $500,000 
B) $600,000 
C) $850,000 
D) $925,000

Exam 15: Monopoly

Firms with substantial monopoly power are quite common,because many goods are truly unique.

Table 15-2 Dreher's Designer Shirt Company, a monopolist, has the following cost and revenue information. -Refer to Table 15-2.What are Dreher's Designer Shirt Company's fixed costs?

Table 15-2 Dreher's Designer Shirt Company, a monopolist, has the following cost and revenue information. -Refer to Table 15-2.What is the marginal cost of the 6th shirt?

When deciding what price to charge consumers,the monopolist may choose to charge them different prices based on the customers'

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 quantity that maximizes economic profit?

A rational pricing strategy for a profit-maximizing monopolist is

Splitting up a monopoly is often justified on the grounds that

Table 15-4 Consider the following demand and cost information for a monopoly. -Refer to Table 15-4.The marginal cost of the fourth unit is

A natural monopoly occurs when

Figure 15-4 The figure below depicts the demand and marginal cost curves of a profit-maximizing monopolist. -Refer to Figure 15-4.A benevolent social planner would have the monopoly operate at an output level

Additional firms often do not try to compete with a natural monopoly because

Patents grant

When a monopolist increases the amount of output that it produces and sells,the price of its output

Goods that do not have close substitutes have downward-sloping demand curves.

In a natural monopoly,

In reality,perfect price discrimination is

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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