Question 1

Some companies merge in order to lower costs through efficient joint production.

Accepted Answer

A) True 
 B)False

Question 2

Describe how government is involved in creating a monopoly.Why might the government create one? Give an example.

Accepted Answer

The government can create a monopoly by

Question 3

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 wants to maximize its profit,it should operate at a level of output equal to

Accepted Answer

A) Q₁. 
B) Q₂. 
C) Q₃. 
D) Q₄. 
A) Q₁. 
B) Q₂. 
C) Q₃. 
D) Q₄.

Question 4

Since natural monopolies have a declining average cost curve,regulating natural monopolies by setting price equal to marginal cost would

Accepted Answer

A) cause the monopolist to operate at a loss. 
B) result in a less than optimal total surplus. 
C) maximize producer surplus. 
D) result in higher profits for the monopoly. 
A) cause the monopolist to operate at a loss. 
B) result in a less than optimal total surplus. 
C) maximize producer surplus. 
D) result in higher profits for the monopoly.

Question 5

The laws governing patents and copyrights

Accepted Answer

A) can lead to monopolies. 
B) are intended to serve private interests, not the public interest. 
C) have costs, but no benefits. 
D) eliminate the need for firms to engage in research and development. 
A) can lead to monopolies. 
B) are intended to serve private interests, not the public interest. 
C) have costs, but no benefits. 
D) eliminate the need for firms to engage in research and development.

Question 6

A monopolist that practices perfect price discrimination

Accepted Answer

A) creates no deadweight loss. 
B) charges one group of buyers a higher price than another group, such as offering a student discount. 
C) produces the same monopoly level of output as when a single price is charged. 
D) charges some customers a price below marginal cost because costs are covered by the high-priced buyers. 
A) creates no deadweight loss. 
B) charges one group of buyers a higher price than another group, such as offering a student discount. 
C) produces the same monopoly level of output as when a single price is charged. 
D) charges some customers a price below marginal cost because costs are covered by the high-priced buyers.

Question 7

Table 15-3
George has the following demand curve for selling vegemite:
   
In addition, George has a marginal cost of $3.00 per unit.
-Refer to Table 15-3.What is George's profit-maximizing level of output?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
A) 1 
B) 2 
C) 3 
D) 4

Question 8

Consumers' willingness to pay for a good minus the amount they actually pay for it equals

Accepted Answer

A) consumer surplus. 
B) consumer benefit. 
C) price discriminant. 
D) quantity demanded. 
A) consumer surplus. 
B) consumer benefit. 
C) price discriminant. 
D) quantity demanded.

Question 9

Suppose most people regard emeralds,rubies,and sapphires as close substitutes for diamonds.Then DeBeers,a large diamond company,has

Accepted Answer

A) less incentive to advertise than it would otherwise have. 
B) less market power than it would otherwise have. 
C) more control over the price of diamonds than it would otherwise have. 
D) higher profits than it would otherwise have. 
A) less incentive to advertise than it would otherwise have. 
B) less market power than it would otherwise have. 
C) more control over the price of diamonds than it would otherwise have. 
D) higher profits than it would otherwise have.

Question 10

By selling hardcover books to die-hard fans and paperback books to less enthusiastic readers,the publisher is able to price discriminate and raise its profit.

Accepted Answer

A) True 
 B)False

Question 11

Price discrimination requires the firm to

Accepted Answer

A) separate customers according to their willingness to pay. 
B) differentiate between different units of its product. 
C) engage in arbitrage. 
D) use coupons. 
A) separate customers according to their willingness to pay. 
B) differentiate between different units of its product. 
C) engage in arbitrage. 
D) use coupons.

Question 12

It doesn't make sense to talk about a monopolist's supply curve.

Accepted Answer

A) True 
 B)False

Question 13

When the government creates a monopoly,the social loss may include

Accepted Answer

A) declining marginal costs. 
B) the cost of lawyers and lobbyists hired to convince lawmakers to continue the monopoly. 
C) excessive monopoly profits. 
D) diminishing marginal revenue. 
A) declining marginal costs. 
B) the cost of lawyers and lobbyists hired to convince lawmakers to continue the monopoly. 
C) excessive monopoly profits. 
D) diminishing marginal revenue.

Question 14

The following table provides information on the price,quantity,and average cost for a monopoly.At what price will the firm maximize its profit?

Accepted Answer

A) $1 
B) $2 
C) $3 
D) $4 
A) $1 
B) $2 
C) $3 
D) $4

Question 15

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 are Dreher's Designer Shirt Company's fixed costs?

Accepted Answer

A) $100 
B) $150 
C) $354 
D) $654 
A) $100 
B) $150 
C) $354 
D) $654

Question 16

Due to the nature of the patent laws on pharmaceuticals,the market for such drugs

Accepted Answer

A) always remains a competitive market. 
B) always remains a monopolistic market. 
C) switches from competitive to monopolistic once the firm's patent runs out. 
D) switches from monopolistic to competitive once the firm's patent runs out. 
A) always remains a competitive market. 
B) always remains a monopolistic market. 
C) switches from competitive to monopolistic once the firm's patent runs out. 
D) switches from monopolistic to competitive once the firm's patent runs out.

Question 17

Private ownership of a monopoly may benefit society because the monopoly will have an incentive to

Accepted Answer

A) charge a price that is consistent with that of a benevolent social planner. 
B) charge a price that prevents some people from buying. 
C) price its good according to the intersection of marginal cost and average revenue. 
D) lower its costs to earn a higher profit. 
A) charge a price that is consistent with that of a benevolent social planner. 
B) charge a price that prevents some people from buying. 
C) price its good according to the intersection of marginal cost and average revenue. 
D) lower its costs to earn a higher profit.

Question 18

If a monopolist has zero marginal costs it will produce

Accepted Answer

A) the output at which total revenue is maximized. 
B) in the range in which marginal revenue is still increasing. 
C) at the point at which marginal revenue is at a maximum. 
D) in the range in which marginal revenue is negative. 
A) the output at which total revenue is maximized. 
B) in the range in which marginal revenue is still increasing. 
C) at the point at which marginal revenue is at a maximum. 
D) in the range in which marginal revenue is negative.

Question 19

In order for antitrust laws to raise social welfare,the government must

Accepted Answer

A) disallow synergy benefits from accruing to monopolists. 
B) disallow any mergers from taking place. 
C) be able to determine which mergers are desirable and which are not. 
D) always attempt to keep markets in their most competitive form. 
A) disallow synergy benefits from accruing to monopolists. 
B) disallow any mergers from taking place. 
C) be able to determine which mergers are desirable and which are not. 
D) always attempt to keep markets in their most competitive form.

Question 20

Generic drugs enter the pharmaceutical drug market once

Accepted Answer

A) the ingredients to the name brand drug have been discovered. 
B) 10 years have passed. 
C) they are patented. 
D) the patent on the name brand drug expires. 
A) the ingredients to the name brand drug have been discovered. 
B) 10 years have passed. 
C) they are patented. 
D) the patent on the name brand drug expires.

Exam 15: Monopoly

Some companies merge in order to lower costs through efficient joint production.

Describe how government is involved in creating a monopoly.Why might the government create one? Give an example.

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 wants to maximize its profit,it should operate at a level of output equal to

Since natural monopolies have a declining average cost curve,regulating natural monopolies by setting price equal to marginal cost would

The laws governing patents and copyrights

A monopolist that practices perfect price discrimination

Table 15-3 George has the following demand curve for selling vegemite: In addition, George has a marginal cost of $3.00 per unit. -Refer to Table 15-3.What is George's profit-maximizing level of output?

Consumers' willingness to pay for a good minus the amount they actually pay for it equals

Suppose most people regard emeralds,rubies,and sapphires as close substitutes for diamonds.Then DeBeers,a large diamond company,has

By selling hardcover books to die-hard fans and paperback books to less enthusiastic readers,the publisher is able to price discriminate and raise its profit.

Price discrimination requires the firm to

It doesn't make sense to talk about a monopolist's supply curve.

When the government creates a monopoly,the social loss may include

The following table provides information on the price,quantity,and average cost for a monopoly.At what price will the firm maximize its profit?

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 are Dreher's Designer Shirt Company's fixed costs?

Due to the nature of the patent laws on pharmaceuticals,the market for such drugs

Private ownership of a monopoly may benefit society because the monopoly will have an incentive to

If a monopolist has zero marginal costs it will produce

In order for antitrust laws to raise social welfare,the government must

Generic drugs enter the pharmaceutical drug market once

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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