Question 1

To maximize total surplus with a monopoly firm,a benevolent social planner would

Accepted Answer

A) choose the level of output where MR = MC. 
B) choose the level of output where MR intersects the demand curve. 
C) choose the level of output where MC intersects the demand curve. 
D) allow the free market system to determine the level of output. 
A) choose the level of output where MR = MC. 
B) choose the level of output where MR intersects the demand curve. 
C) choose the level of output where MC intersects the demand curve. 
D) allow the free market system to determine the level of output.

Question 2

Table 15-4
Consider the following demand and cost information for a monopoly.
  
-Refer to Table 15-4.To maximize profit,the monopolist sets price at

Accepted Answer

A) $10 
B) $15 
C) $20 
D) $25 
A) $10 
B) $15 
C) $20 
D) $25

Question 3

Figure 15-2
The figure below illustrates the cost and revenue structure for a monopoly firm.
  
-Refer to Figure 15-2.Profit can always be increased by increasing the level of output by one unit if the monopolist is currently operating at (i)	Q₀.
(ii)	Q₁.
(iii)	Q₂.
(iv)	Q₃.

Accepted Answer

A) (i) or (ii) 
B) (i), (ii) or (iii) 
C) (iii) or (iv) 
D) (iv) only 
A) (i) or (ii) 
B) (i), (ii) or (iii) 
C) (iii) or (iv) 
D) (iv) only

Question 4

A monopolist will choose to increase output when

Accepted Answer

A) market price increases. 
B) at all levels of output, marginal cost increases. 
C) at the present level of output, marginal revenue exceeds marginal cost. 
D) the demand curve shifts to the left. 
A) market price increases. 
B) at all levels of output, marginal cost increases. 
C) at the present level of output, marginal revenue exceeds marginal cost. 
D) the demand curve shifts to the left.

Question 5

One problem with government operation of monopolies is that

Accepted Answer

A) a benevolent government is likely to be interested in generating profits for political gain. 
B) monopolies typically have rising average costs. 
C) the government typically has little incentive to reduce costs. 
D) a government-regulated outcome will increase the profitability of the monopoly. 
A) a benevolent government is likely to be interested in generating profits for political gain. 
B) monopolies typically have rising average costs. 
C) the government typically has little incentive to reduce costs. 
D) a government-regulated outcome will increase the profitability of the monopoly.

Question 6

Suppose when a monopolist produces 75 units its average revenue is $10 per unit,its marginal revenue is $5 per unit,its marginal cost is $6 per unit,and its average total cost is $5 per unit.What can we conclude about this monopolist?

Accepted Answer

A) The monopolist is currently maximizing profits and its total profits are $375. 
B) The monopolist is currently maximizing profits and its total profits are $300. 
C) The monopolist is not currently maximizing profits; it should produce more units and charge a lower price to maximize profits. 
D) The monopolist is not currently maximizing profits; it should produce fewer units and charge a higher price to maximize profits. 
A) The monopolist is currently maximizing profits and its total profits are $375. 
B) The monopolist is currently maximizing profits and its total profits are $300. 
C) The monopolist is not currently maximizing profits; it should produce more units and charge a lower price to maximize profits. 
D) The monopolist is not currently maximizing profits; it should produce fewer units and charge a higher price to maximize profits.

Question 7

The task of economic regulation is to

Accepted Answer

A) protect monopoly profits. 
B) approximate the results of the competitive market. 
C) replace competition with government ownership. 
D) increase competition within the market. 
A) protect monopoly profits. 
B) approximate the results of the competitive market. 
C) replace competition with government ownership. 
D) increase competition within the market.

Question 8

Figure 15-2
The figure below illustrates the cost and revenue structure for a monopoly firm.
  
-Refer to Figure 15-2.If the monopoly firm is currently producing Q₃ units of output,then a decrease in output will necessarily cause profit to

Accepted Answer

A) remain unchanged. 
B) decrease. 
C) increase as long as the new level of output is at least Q₂. 
D) increase as long as the new level of output is at least Q₁. 
A) remain unchanged. 
B) decrease. 
C) increase as long as the new level of output is at least Q₂. 
D) increase as long as the new level of output is at least Q₁.

Question 9

For a monopoly,the level of output at which marginal revenue equals zero is also the level of output at which

Accepted Answer

A) average revenue is zero. 
B) profit is maximized. 
C) total revenue is maximized. 
D) marginal cost is zero. 
A) average revenue is zero. 
B) profit is maximized. 
C) total revenue is maximized. 
D) marginal cost is zero.

Question 10

Which of the following statements is correct?

Accepted Answer

A) The benefits that accrue to a monopoly's owners are equal to the costs that are incurred by consumers of that firm's product. 
B) The deadweight loss that arises in monopoly stems from the fact that the profit-maximizing monopoly firm produces a quantity of output that exceeds the socially-efficient quantity. 
C) The deadweight loss caused by monopoly is similar to the deadweight loss caused by a tax on a product. 
D) The primary social problem caused by monopoly is monopoly profit. 
A) The benefits that accrue to a monopoly's owners are equal to the costs that are incurred by consumers of that firm's product. 
B) The deadweight loss that arises in monopoly stems from the fact that the profit-maximizing monopoly firm produces a quantity of output that exceeds the socially-efficient quantity. 
C) The deadweight loss caused by monopoly is similar to the deadweight loss caused by a tax on a product. 
D) The primary social problem caused by monopoly is monopoly profit.

Question 11

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 total revenue when 3 shirts are sold?

Accepted Answer

A) $140 
B) $420 
C) $450 
D) $620 
A) $140 
B) $420 
C) $450 
D) $620

Question 12

In theory,perfect price discrimination

Accepted Answer

A) decreases the monopolist's profits. 
B) decreases consumer surplus. 
C) increases deadweight loss. 
D) reduces the number of consumers who purchase the monopoly's product. 
A) decreases the monopolist's profits. 
B) decreases consumer surplus. 
C) increases deadweight loss. 
D) reduces the number of consumers who purchase the monopoly's product.

Question 13

For a typical natural monopoly,average total cost is

Accepted Answer

A) falling and marginal cost is above average total cost. 
B) falling and marginal cost is below average total cost. 
C) rising and marginal cost is below average total cost. 
D) rising and marginal cost is above average total cost. 
A) falling and marginal cost is above average total cost. 
B) falling and marginal cost is below average total cost. 
C) rising and marginal cost is below average total cost. 
D) rising and marginal cost is above average total cost.

Question 14

When an industry is a natural monopoly,

Accepted Answer

A) it is characterized by constant returns to scale. 
B) it is characterized by diseconomies of scale. 
C) a larger number of firms may lead to a lower average cost. 
D) a larger number of firms will lead to a higher average cost. 
A) it is characterized by constant returns to scale. 
B) it is characterized by diseconomies of scale. 
C) a larger number of firms may lead to a lower average cost. 
D) a larger number of firms will lead to a higher average cost.

Question 15

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 revenue from selling the 2nd shirt?

Accepted Answer

A) $140 
B) $150 
C) $160 
D) $170 
A) $140 
B) $150 
C) $160 
D) $170

Question 16

A natural monopoly arises when

Accepted Answer

A) there are constant returns to scale over the relevant range of output. 
B) there are economies of scale over the relevant range of output. 
C) one firm owns a key natural resource. 
D) the government gives a single firm the exclusive right to produce a particular good or service. 
A) there are constant returns to scale over the relevant range of output. 
B) there are economies of scale over the relevant range of output. 
C) one firm owns a key natural resource. 
D) the government gives a single firm the exclusive right to produce a particular good or service.

Question 17

Table 15-2
Dreher's Designer Shirt Company, a monopolist, has the following cost and revenue information.
  
-Refer to Table 15-2.Which of the following quantities will achieve the maximum profit?

Accepted Answer

A) 3 
B) 4 
C) 6 
D) 7 
A) 3 
B) 4 
C) 6 
D) 7

Question 18

Figure 15-6
  
-Refer to Figure 15-6.The monopolist's maximum profit

Accepted Answer

A) is $800. 
B) is $1,000. 
C) is $1,250. 
D) cannot be determined from the diagram. 
A) is $800. 
B) is $1,000. 
C) is $1,250. 
D) cannot be determined from the diagram.

Question 19

Because a monopolist is the sole producer in its market,it can necessarily alter the price of its good (i)	without affecting the quantity sold.
(ii)	without affecting its average total cost.
(iii)	by adjusting the quantity it supplies to the market.

Accepted Answer

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

Question 20

During the life of a drug patent,the monopoly pharmaceutical firm maximizes profit by producing the quantity at which marginal revenue equals marginal cost.

Accepted Answer

A) True 
 B)False

Exam 15: Monopoly

To maximize total surplus with a monopoly firm,a benevolent social planner would

Table 15-4 Consider the following demand and cost information for a monopoly. -Refer to Table 15-4.To maximize profit,the monopolist sets price at

Figure 15-2 The figure below illustrates the cost and revenue structure for a monopoly firm. -Refer to Figure 15-2.Profit can always be increased by increasing the level of output by one unit if the monopolist is currently operating at (i) Q₀. (ii) Q₁. (iii) Q₂. (iv) Q₃.

A monopolist will choose to increase output when

One problem with government operation of monopolies is that

Suppose when a monopolist produces 75 units its average revenue is $10 per unit,its marginal revenue is $5 per unit,its marginal cost is $6 per unit,and its average total cost is $5 per unit.What can we conclude about this monopolist?

The task of economic regulation is to

Figure 15-2 The figure below illustrates the cost and revenue structure for a monopoly firm. -Refer to Figure 15-2.If the monopoly firm is currently producing Q₃ units of output,then a decrease in output will necessarily cause profit to

For a monopoly,the level of output at which marginal revenue equals zero is also the level of output at which

Which of the following statements is correct?

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 total revenue when 3 shirts are sold?

In theory,perfect price discrimination

For a typical natural monopoly,average total cost is

When an industry is a natural monopoly,

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 revenue from selling the 2nd shirt?

A natural monopoly arises when

Table 15-2 Dreher's Designer Shirt Company, a monopolist, has the following cost and revenue information. -Refer to Table 15-2.Which of the following quantities will achieve the maximum profit?

Figure 15-6 -Refer to Figure 15-6.The monopolist's maximum profit

Because a monopolist is the sole producer in its market,it can necessarily alter the price of its good (i) without affecting the quantity sold. (ii) without affecting its average total cost. (iii) by adjusting the quantity it supplies to the market.

During the life of a drug patent,the monopoly pharmaceutical firm maximizes profit by producing the quantity at which marginal revenue equals marginal cost.

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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