Question 1

The proper level of government intervention is ambiguous when dealing with a monopoly.

Accepted Answer

A) True 
 B)False

Question 2

Table 15-1
  
-Refer to Table 15-1.If the monopolist sells 8 units of its product,how much total revenue will it receive from the sale?

Accepted Answer

A) 14 
B) 40 
C) 112 
D) 164 
A) 14 
B) 40 
C) 112 
D) 164

Question 3

If the distribution of water is a natural monopoly,then (i)	multiple firms will each have to pay large fixed costs to develop their own network of pipes.
(ii)	allowing for competition among different firms in the water-distribution industry is efficient.
(iii)	a single firm can serve the market at the lowest possible average total cost.

Accepted Answer

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

Question 4

Which of the following is not a reason for the existence of a monopoly?

Accepted Answer

A) Sole ownership of a key resource 
B) Patents 
C) Copyrights 
D) Diseconomies of scale 
A) Sole ownership of a key resource 
B) Patents 
C) Copyrights 
D) Diseconomies of scale

Question 5

Natural monopolies differ from other forms of monopoly because they

Accepted Answer

A) are not subject to barriers to entry. 
B) are not regulated by government. 
C) generally don't make a profit. 
D) are generally not worried about competition eroding their monopoly position in the market. 
A) are not subject to barriers to entry. 
B) are not regulated by government. 
C) generally don't make a profit. 
D) are generally not worried about competition eroding their monopoly position in the market.

Question 6

For a monopoly market,total surplus can be defined as the value of the good to

Accepted Answer

A) producers minus the cost incurred by consumers. 
B) producers plus the cost incurred by consumers. 
C) consumers minus the costs of producing the good. 
D) consumers plus the cost of producing the good. 
A) producers minus the cost incurred by consumers. 
B) producers plus the cost incurred by consumers. 
C) consumers minus the costs of producing the good. 
D) consumers plus the cost of producing the good.

Question 7

One problem with regulating a monopolist on the basis of cost is that

Accepted Answer

A) regulators are unable to effectively control prices and/or production. 
B) it does not provide an incentive for the monopolist to reduce its cost. 
C) a monopolist's costs, by definition, are higher than costs of perfectly competitive firms. 
D) a monopolist is still able to generate excessive economic profits. 
A) regulators are unable to effectively control prices and/or production. 
B) it does not provide an incentive for the monopolist to reduce its cost. 
C) a monopolist's costs, by definition, are higher than costs of perfectly competitive firms. 
D) a monopolist is still able to generate excessive economic profits.

Question 8

The De Beers Diamond company advertises heavily to promote the sale of all diamonds,not just its own.This is evidence that it has a monopoly position to some degree.

Accepted Answer

A) True 
 B)False

Question 9

Table 15-1
  
-Refer to Table 15-1.When 4 units of output are produced and sold,what is average revenue?

Accepted Answer

A) 17 
B) 21 
C) 23 
D) 26 
A) 17 
B) 21 
C) 23 
D) 26

Question 10

A firm cannot price discriminate if

Accepted Answer

A) its marginal revenue curve is linear for all levels of output. 
B) it operates in a competitive market. 
C) buyers only reveal the price they are willing to pay for the product. 
D) it has a constant marginal cost. 
A) its marginal revenue curve is linear for all levels of output. 
B) it operates in a competitive market. 
C) buyers only reveal the price they are willing to pay for the product. 
D) it has a constant marginal cost.

Question 11

Price discrimination is a rational strategy for a profit-maximizing monopolist when

Accepted Answer

A) the monopolist finds itself able to produce only limited amounts of output. 
B) consumers are unable to be segmented into identifiable markets. 
C) the monopolist wishes to increase the deadweight loss that results from profit-maximizing behavior. 
D) there is no opportunity for arbitrage across market segments. 
A) the monopolist finds itself able to produce only limited amounts of output. 
B) consumers are unable to be segmented into identifiable markets. 
C) the monopolist wishes to increase the deadweight loss that results from profit-maximizing behavior. 
D) there is no opportunity for arbitrage across market segments.

Question 12

"Monopolists do not worry about efficient production and minimizing costs since they can just pass along any increase in costs to their consumers." This statement is

Accepted Answer

A) false; price increases will mean fewer sales, and lower costs will mean higher profits (or smaller losses). 
B) true; this is the primary reason why economists believe that monopolies result in economic inefficiency. 
C) false; the monopolist is a price taker. 
D) true; consumers in a monopoly market have no substitutes to turn to when the monopolist raises prices. 
A) false; price increases will mean fewer sales, and lower costs will mean higher profits (or smaller losses). 
B) true; this is the primary reason why economists believe that monopolies result in economic inefficiency. 
C) false; the monopolist is a price taker. 
D) true; consumers in a monopoly market have no substitutes to turn to when the monopolist raises prices.

Question 13

The social cost of a single-price monopoly is equal to its

Accepted Answer

A) economic profit. 
B) fixed cost. 
C) dead weight loss. 
D) variable cost. 
A) economic profit. 
B) fixed cost. 
C) dead weight loss. 
D) variable cost.

Question 14

Price discrimination adds to social welfare in the form of (i)	increased total surplus.
(ii)	reduced costs of production.
(iii)	increased consumer surplus.

Accepted Answer

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

Question 15

Young Johnny inherited the only local cable TV company in town after his father passed away.The company is completely unregulated by the government and is therefore free to operate as it wishes.Assuming that Johnny understands the true power of his new monopoly,he is probably most excited about which of the following statements? (i)	He will be able to set the price of cable TV service at whatever level he wishes.
(ii)	The customers will be forced to purchase cable TV service at whatever price he wants to set.
(iii)	He will be able to achieve any profit level that he desires.

Accepted Answer

A) (i) only 
B) (ii) only 
C) (i) and (iii) 
D) All of the above are correct. 
A) (i) only 
B) (ii) only 
C) (i) and (iii) 
D) All of the above are correct.

Question 16

For a monopoly firm,which of the following equalities is always true?

Accepted Answer

A) price = marginal revenue 
B) price = average revenue 
C) price = total revenue 
D) marginal revenue = marginal cost 
A) price = marginal revenue 
B) price = average revenue 
C) price = total revenue 
D) marginal revenue = marginal cost

Question 17

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

Accepted Answer

A) increases and its marginal revenue increases. 
B) increases and its marginal revenue decreases. 
C) decreases and its marginal revenue increases. 
D) decreases and its marginal revenue decreases. 
A) increases and its marginal revenue increases. 
B) increases and its marginal revenue decreases. 
C) decreases and its marginal revenue increases. 
D) decreases and its marginal revenue decreases.

Question 18

When a natural monopoly exists,it is

Accepted Answer

A) always cost effective for government-owned firms to produce the product. 
B) never cost effective for one firm to produce the product. 
C) always cost effective for two or more private firms to produce the product. 
D) never cost effective for two or more private firms to produce the product. 
A) always cost effective for government-owned firms to produce the product. 
B) never cost effective for one firm to produce the product. 
C) always cost effective for two or more private firms to produce the product. 
D) never cost effective for two or more private firms to produce the product.

Question 19

Encouraging firms to invest in research and development and individuals to engage in creative endeavors such as writing novels is one justification for

Accepted Answer

A) resource monopolies. 
B) natural monopolies. 
C) government-created monopolies. 
D) breaking up monopolies into smaller firms. 
A) resource monopolies. 
B) natural monopolies. 
C) government-created monopolies. 
D) breaking up monopolies into smaller firms.

Question 20

In order to sell more of its product,a monopolist must

Accepted Answer

A) sell to the government. 
B) sell in international markets. 
C) lower its price. 
D) use its market power to force up the price of complementary products. 
A) sell to the government. 
B) sell in international markets. 
C) lower its price. 
D) use its market power to force up the price of complementary products.

Exam 15: Monopoly

The proper level of government intervention is ambiguous when dealing with a monopoly.

Table 15-1 -Refer to Table 15-1.If the monopolist sells 8 units of its product,how much total revenue will it receive from the sale?

Which of the following is not a reason for the existence of a monopoly?

Natural monopolies differ from other forms of monopoly because they

For a monopoly market,total surplus can be defined as the value of the good to

One problem with regulating a monopolist on the basis of cost is that

The De Beers Diamond company advertises heavily to promote the sale of all diamonds,not just its own.This is evidence that it has a monopoly position to some degree.

Table 15-1 -Refer to Table 15-1.When 4 units of output are produced and sold,what is average revenue?

A firm cannot price discriminate if

Price discrimination is a rational strategy for a profit-maximizing monopolist when

"Monopolists do not worry about efficient production and minimizing costs since they can just pass along any increase in costs to their consumers." This statement is

The social cost of a single-price monopoly is equal to its

Price discrimination adds to social welfare in the form of (i) increased total surplus. (ii) reduced costs of production. (iii) increased consumer surplus.

For a monopoly firm,which of the following equalities is always true?

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

When a natural monopoly exists,it is

Encouraging firms to invest in research and development and individuals to engage in creative endeavors such as writing novels is one justification for

In order to sell more of its product,a monopolist must

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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