Question 1

Pure monopoly is not studied because of its descriptive realism, but because it is a stepping stone toward more realistic models.

Accepted Answer

A) True 
 B)False

Question 2

The monopoly producer

Accepted Answer

A) sets MU equal to P. 
B) sets MR = MC. 
C) has MC > MU. 
D) sets MR = P. 
A) sets MU equal to P. 
B) sets MR = MC. 
C) has MC > MU. 
D) sets MR = P.

Question 3

Under monopoly, resources are allocated as efficiently as in perfect competition.

Accepted Answer

A) True 
 B)False

Question 4

Economists consider price discrimination to always be undesirable.

Accepted Answer

A) True 
 B)False

Question 5

Provide two circumstances where monopoly may offer efficiency advantages over competition.

Accepted Answer

The first is when production is characte

Question 6

Figure 11-7
  
-The firm in Figure 11-7 is an unregulated monopolist; it will produce which of the following?

Accepted Answer

A) 175 units at a price of 7 
B) 100 units at a price of 6 
C) 100 units at a price of 9 
D) 150 units at a price of about 7.5 
A) 175 units at a price of 7 
B) 100 units at a price of 6 
C) 100 units at a price of 9 
D) 150 units at a price of about 7.5

Question 7

Which of the following is not potentially a barrier to entry into the widget market?

Accepted Answer

A) patent protection on the design of widgets 
B) high prices for widgets 
C) government licensing of widget producers 
D) massive advertising by existing widget producers 
A) patent protection on the design of widgets 
B) high prices for widgets 
C) government licensing of widget producers 
D) massive advertising by existing widget producers

Question 8

The key element in preserving a monopoly is keeping rivals out of the market.

Accepted Answer

A) True 
 B)False

Question 9

Unlike a perfectly competitive firm, a monopolist

Accepted Answer

A) can choose how much output to produce. 
B) cannot increase production without affecting the price she receives for her good. 
C) usually sells in a market with a downward-sloping demand curve. 
D) has an MR from increasing output by one unit equal to the price of his product. 
A) can choose how much output to produce. 
B) cannot increase production without affecting the price she receives for her good. 
C) usually sells in a market with a downward-sloping demand curve. 
D) has an MR from increasing output by one unit equal to the price of his product.

Question 10

Figure 11-3
  
-In Figure 11-3, one can tell from the graph that the monopolist will earn a positive profit only if

Accepted Answer

A) the price exceeds $3. 
B) the price exceeds $2. 
C) output is less than 60 units. 
D) One cannot tell from the information given. 
A) the price exceeds $3. 
B) the price exceeds $2. 
C) output is less than 60 units. 
D) One cannot tell from the information given.

Question 11

What is a key criterion involved in deciding a natural monopoly?

Accepted Answer

A) Size of the firm relative to its competitors. 
B) Size of the firm relative to the total market demand for a product. 
C) Magnitude of profits generated by the company. 
D) A firm's ability to adapt to market changes. 
A) Size of the firm relative to its competitors. 
B) Size of the firm relative to the total market demand for a product. 
C) Magnitude of profits generated by the company. 
D) A firm's ability to adapt to market changes.

Question 12

A positive aspect of monopolies is that they may aid innovation in the marketplace.

Accepted Answer

A) True 
 B)False

Question 13

Advertising by the monopolist

Accepted Answer

A) is not done because the monopolist has the only supply of the product and doesn't need to advertise. 
B) would have the effect of shifting its demand curve to the left. 
C) may lead to expanded production by the monopolist. 
D) makes no sense because there are no substitute commodities available to consumers. 
A) is not done because the monopolist has the only supply of the product and doesn't need to advertise. 
B) would have the effect of shifting its demand curve to the left. 
C) may lead to expanded production by the monopolist. 
D) makes no sense because there are no substitute commodities available to consumers.

Question 14

Monopolists may in the long run

Accepted Answer

A) earn positive economic profit. 
B) be protected by barriers to entry. 
C) grow wealthy at the expense of their consumers. 
D) All of the above are correct. 
A) earn positive economic profit. 
B) be protected by barriers to entry. 
C) grow wealthy at the expense of their consumers. 
D) All of the above are correct.

Question 15

One of the conclusions of the model of monopoly is that the firm earns economic profits above the required opportunity cost of the factors of production.Are these profits lost to society?
 Do they take spending power from the economy, and act as a brake on economic growth?

Accepted Answer

No.The profits are "transferred" from th

Question 16

A market is not a pure monopoly if firms

Accepted Answer

A) can enter it freely. 
B) sell unique products. 
C) can exit the market freely. 
D) require government permission to sell in the market. 
A) can enter it freely. 
B) sell unique products. 
C) can exit the market freely. 
D) require government permission to sell in the market.

Question 17

Figure 11-2
  
-In Figure 11-2, at what quantity would the monopolist maximize profit?

Accepted Answer

A) E 
B) F 
C) G 
D) H 
A) E 
B) F 
C) G 
D) H

Question 18

Since a monopoly faces a downward-sloping demand curve,

Accepted Answer

A) then, as Adam Smith wrote, "the price of monopoly is upon every occasion the highest which can be got." 
B) price always exceeds average revenue. 
C) marginal revenue increases as output increases. 
D) the monopolist is a price maker. 
A) then, as Adam Smith wrote, "the price of monopoly is upon every occasion the highest which can be got." 
B) price always exceeds average revenue. 
C) marginal revenue increases as output increases. 
D) the monopolist is a price maker.

Question 19

A monopolist will stop production when MR equals MC.

Accepted Answer

A) True 
 B)False

Question 20

In the long-run, a monopolist charges the same price as a perfectly competitive firm.

Accepted Answer

A) True 
 B)False

Exam 11: Monopoly

Pure monopoly is not studied because of its descriptive realism, but because it is a stepping stone toward more realistic models.

The monopoly producer

Under monopoly, resources are allocated as efficiently as in perfect competition.

Economists consider price discrimination to always be undesirable.

Provide two circumstances where monopoly may offer efficiency advantages over competition.

Figure 11-7 -The firm in Figure 11-7 is an unregulated monopolist; it will produce which of the following?

Which of the following is not potentially a barrier to entry into the widget market?

The key element in preserving a monopoly is keeping rivals out of the market.

Unlike a perfectly competitive firm, a monopolist

Figure 11-3 -In Figure 11-3, one can tell from the graph that the monopolist will earn a positive profit only if

What is a key criterion involved in deciding a natural monopoly?

A positive aspect of monopolies is that they may aid innovation in the marketplace.

Advertising by the monopolist

Monopolists may in the long run

One of the conclusions of the model of monopoly is that the firm earns economic profits above the required opportunity cost of the factors of production.Are these profits lost to society? Do they take spending power from the economy, and act as a brake on economic growth?

A market is not a pure monopoly if firms

Figure 11-2 -In Figure 11-2, at what quantity would the monopolist maximize profit?

Since a monopoly faces a downward-sloping demand curve,

A monopolist will stop production when MR equals MC.

In the long-run, a monopolist charges the same price as a perfectly competitive firm.

What Is Economics

The Economy: Myth and Reality

The Fundamental Economic Problem: Scarcity and Choice

Supply and Demand: an Initial Look

Consumer Choice: Individual and Market Demand

Demand and Elasticity

Production, Inputs, and Cost: Building Blocks for Supply Analysis

Output, Price, and Profit: the Importance of Marginal Analysis

Securities: Business Finance and the Economy: the Tail That Wags the Dog

The Firm and the Industry Under Perfect Competition

Between Competition and Monopoly

Limiting Market Power: Regulation and Antitrust

The Case for Free Markets: the Price System

The Shortcomings of Free Markets

Externalities, the Environment, and Natural Resources

Taxation and Resource Allocation

Pricing the Factors of Production

Labor and Entrepreneurship: the Human Inputs

Poverty, Inequality, and Discrimination

Is Useconomic Leadership Threatened

An Introduction to Macroeconomics

The Goals of Macroeconomic Policy

Economic Growth: Theory and Policy

Aggregate Demand and the Powerful Consumer

Demand-Side Equilibrium: Unemployment or Inflation

Bringing in the Supply Side: Unemployment and Inflation

Managing Aggregate Demand: Fiscal Policy

Money and the Banking System

Monetary Policy: Conventional and Unconventional

He Financial Crisis and the Great Recession

The Debate Over Monetary and Fiscal Policy

Budget Deficits in the Short and Long Run

The Trade-Off Between Inflation and Unemployment

International Trade and Comparative Advantage

The International Monetary System: Order or Disorder

Exchange Rates and the Macroeconomy

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