Question 1

Which one of the following is an example of a natural barrier to entry of new firms into an industry?

Accepted Answer

A) licensing of professions 
B) economies of scale 
C) issuing a patent 
D) a public franchise 
E) ownership of a significant portion of a key resource 
A) licensing of professions 
B) economies of scale 
C) issuing a patent 
D) a public franchise 
E) ownership of a significant portion of a key resource

Question 2

Use the figure below to answer the following questions.
   
Figure 13.3.3
-Consider the cost and revenue curves in Figure 13.3.3. Which area indicates the deadweight loss from a single-price monopoly?

Accepted Answer

A) EACF 
B) ACD 
C) ABD 
D) BCD 
E) EADCF 
A) EACF 
B) ACD 
C) ABD 
D) BCD 
E) EADCF

Question 3

Firms that can price discriminate between customers do so to

Accepted Answer

A) increase consumer surplus. 
B) increase employment. 
C) increase economic profit. 
D) decrease the quantity they produce. 
E) increase producer surplus and deadweight loss. 
A) increase consumer surplus. 
B) increase employment. 
C) increase economic profit. 
D) decrease the quantity they produce. 
E) increase producer surplus and deadweight loss.

Question 4

Use the figure below to answer the following question.
   
Figure 13.4.3
-Refer to Figure 13.4.3. The outcome is efficient if

Accepted Answer

A) the monopoly is able to perfectly price discriminate. 
B) the price consumers pay is equal to average total cost. 
C) the price consumers pay exceeds minimum average variable cost. 
D) the quantity produced is 80 units. 
E) the quantity produced is 20 units. 
A) the monopoly is able to perfectly price discriminate. 
B) the price consumers pay is equal to average total cost. 
C) the price consumers pay exceeds minimum average variable cost. 
D) the quantity produced is 80 units. 
E) the quantity produced is 20 units.

Question 5

A perfect price-discriminating monopoly produces

Accepted Answer

A) less than a single-price monopoly. 
B) more than a single-price monopoly but less than a perfectly competitive industry. 
C) less than a monopoly that practices price discrimination but not perfect price discrimination. 
D) more than a perfectly competitive industry. 
E) the same amount as a perfectly competitive industry. 
A) less than a single-price monopoly. 
B) more than a single-price monopoly but less than a perfectly competitive industry. 
C) less than a monopoly that practices price discrimination but not perfect price discrimination. 
D) more than a perfectly competitive industry. 
E) the same amount as a perfectly competitive industry.

Question 6

Use the figure below to answer the following questions.
   
Figure 13.5.2
-Consider the natural monopoly depicted in Figure 13.5.2. If a regulatory agency sets a price just sufficient for the firm to make zero economic profit, and if the firm inflates its costs as much as possible, the regulated price will be

Accepted Answer

A) P₀. 
B) P₁. 
C) P₂. 
D) P₃. 
E) either P₀ or P₃. 
A) P₀. 
B) P₁. 
C) P₂. 
D) P₃. 
E) either P₀ or P₃.

Question 7

Use the figure below to answer the following question.
   
Figure 13.1.1
-Refer to Figure 13.1.1. The quantity demanded by the market is 8 million cubic metres a month. This market is

Accepted Answer

A) a legal monopoly. 
B) served by a perfect price discriminating monopoly. 
C) served by many firms each making an economic profit. 
D) served by many firms each incurring an economic loss. 
E) a natural monopoly. 
A) a legal monopoly. 
B) served by a perfect price discriminating monopoly. 
C) served by many firms each making an economic profit. 
D) served by many firms each incurring an economic loss. 
E) a natural monopoly.

Question 8

A monopoly

Accepted Answer

A) faces a perfectly elastic demand. 
B) ignores the demand curve because it is the only seller. 
C) can raise the price it charges only if it decreases the quantity that it sells. 
D) can raise the price it charges only if it increases the quantity that it sells. 
E) faces a perfectly inelastic demand. 
A) faces a perfectly elastic demand. 
B) ignores the demand curve because it is the only seller. 
C) can raise the price it charges only if it decreases the quantity that it sells. 
D) can raise the price it charges only if it increases the quantity that it sells. 
E) faces a perfectly inelastic demand.

Question 9

Taking competitive rent seeking activity into account, the social cost of monopoly is equal to the

Accepted Answer

A) deadweight loss from monopoly. 
B) monopoly's producer surplus. 
C) deadweight loss plus the monopoly's producer surplus. 
D) deadweight loss minus the monopoly's producer surplus. 
E) consumer surplus lost plus producer surplus lost. 
A) deadweight loss from monopoly. 
B) monopoly's producer surplus. 
C) deadweight loss plus the monopoly's producer surplus. 
D) deadweight loss minus the monopoly's producer surplus. 
E) consumer surplus lost plus producer surplus lost.

Question 10

An exclusive right granted to a firm to supply a good or service is

Accepted Answer

A) a licence. 
B) a patent. 
C) a public franchise. 
D) the essential characteristic of natural monopoly. 
E) an economy of scale. 
A) a licence. 
B) a patent. 
C) a public franchise. 
D) the essential characteristic of natural monopoly. 
E) an economy of scale.

Question 11

Canada Post has a monopoly on residential mail delivery. Pfizer Inc. makes LIPITOR, a prescription drug that lowers cholesterol. Rogers Communications is the sole provider of cable television service in some parts of Ontario. The monopolies which profit from price discrimination are

Accepted Answer

A) Canada Post and Rogers Communications. 
B) only Pfizer. 
C) only Canada Post. 
D) Canada Post, Pfizer, and Rogers Communications. 
E) only Rogers Communications. 
A) Canada Post and Rogers Communications. 
B) only Pfizer. 
C) only Canada Post. 
D) Canada Post, Pfizer, and Rogers Communications. 
E) only Rogers Communications.

Question 12

When Dominant Pizza is willing to sell a pizza to a student who lives on-campus at a lower price than it sells the identical pizza to a student who lives a block away from the campus, the pizza firm is

Accepted Answer

A) implementing unfair pricing practices. 
B) incurring a loss on on-campus sales. 
C) eliminating all competition. 
D) located close to the campus. 
E) practising price discrimination. 
A) implementing unfair pricing practices. 
B) incurring a loss on on-campus sales. 
C) eliminating all competition. 
D) located close to the campus. 
E) practising price discrimination.

Question 13

An average cost pricing rule sets ________ equal to average total cost. An average cost pricing rule is not an efficient way of regulating monopoly because at the quantity produced, ________.

Accepted Answer

A) price; marginal benefit exceeds marginal cost 
B) the return on capital; marginal benefit exceeds marginal cost 
C) marginal cost; marginal cost exceeds marginal benefit 
D) price equal to marginal revenue, which in long-run equilibrium is; marginal cost exceeds marginal benefit 
E) marginal cost; marginal benefit exceeds marginal cost 
A) price; marginal benefit exceeds marginal cost 
B) the return on capital; marginal benefit exceeds marginal cost 
C) marginal cost; marginal cost exceeds marginal benefit 
D) price equal to marginal revenue, which in long-run equilibrium is; marginal cost exceeds marginal benefit 
E) marginal cost; marginal benefit exceeds marginal cost

Question 14

Use the table below to answer the following questions.
Table 13.4.1
  
-Table 13.4.1 shows the demand schedule faced by a monopoly. If the monopoly is a perfect price-discriminating monopoly the marginal revenue from the sale of the 3rd unit of output is

Accepted Answer

A) $2. 
B) $6. 
C) $4. 
D) $3. 
E) $5. 
A) $2. 
B) $6. 
C) $4. 
D) $3. 
E) $5.

Question 15

A monopoly can practise price discrimination when it

Accepted Answer

A) can segment the market according to the different prices the consumers are willing to pay. 
B) is a price taker. 
C) has different marginal costs of production for different output levels. 
D) has decreasing average variables cost. 
E) produces a good with close substitutes. 
A) can segment the market according to the different prices the consumers are willing to pay. 
B) is a price taker. 
C) has different marginal costs of production for different output levels. 
D) has decreasing average variables cost. 
E) produces a good with close substitutes.

Question 16

Sue's Surfboards is the sole renter of surfboards on Big Wave Island. Sue does not price discriminate. For Sue's Surfboards, the change in total revenue from each additional surfboard rented is her

Accepted Answer

A) marginal revenue, which is less than the rental price of a surfboard. 
B) marginal cost, which is constant regardless of how many surfboards are rented. 
C) marginal revenue, which is equal to the rental price of a surfboard. 
D) marginal cost, which is greater than the rental price of a surfboard. 
E) marginal revenue, which is equal to average total cost in the long run. 
A) marginal revenue, which is less than the rental price of a surfboard. 
B) marginal cost, which is constant regardless of how many surfboards are rented. 
C) marginal revenue, which is equal to the rental price of a surfboard. 
D) marginal cost, which is greater than the rental price of a surfboard. 
E) marginal revenue, which is equal to average total cost in the long run.

Question 17

Rent seeking is best defined as

Accepted Answer

A) an attempt by landlords to get tenants. 
B) the pursuit of wealth by capturing economic rent. 
C) an attempt by individuals to avoid paying taxes. 
D) owners of a monopoly selling the firm at the highest possible price. 
E) a means of eliminating deadweight loss. 
A) an attempt by landlords to get tenants. 
B) the pursuit of wealth by capturing economic rent. 
C) an attempt by individuals to avoid paying taxes. 
D) owners of a monopoly selling the firm at the highest possible price. 
E) a means of eliminating deadweight loss.

Question 18

A single-price monopolist

Accepted Answer

A) maximizes economic profit by producing the quantity at which marginal revenue equals marginal cost. 
B) maximizes economic profit by producing the quantity at which marginal revenue equals average total cost. 
C) can increase the price and the quantity sold simultaneously. 
D) is not restricted by the law of demand. 
E) can sell as much as it wants at a given price because it is the only seller. 
A) maximizes economic profit by producing the quantity at which marginal revenue equals marginal cost. 
B) maximizes economic profit by producing the quantity at which marginal revenue equals average total cost. 
C) can increase the price and the quantity sold simultaneously. 
D) is not restricted by the law of demand. 
E) can sell as much as it wants at a given price because it is the only seller.

Question 19

A price cap is a price ________. A price cap might be a more effective way of regulating monopoly than rate of return regulation because under rate of return regulation, ________.

Accepted Answer

A) ceiling; a firm incurs an economic loss 
B) floor; price is set equal to marginal cost 
C) ceiling; the firm's managers have an incentive to inflate costs 
D) floor; the firm's managers have an incentive to purchase more than the efficient quantity of capital 
E) floor; the firm's managers have an incentive to inflate costs 
A) ceiling; a firm incurs an economic loss 
B) floor; price is set equal to marginal cost 
C) ceiling; the firm's managers have an incentive to inflate costs 
D) floor; the firm's managers have an incentive to purchase more than the efficient quantity of capital 
E) floor; the firm's managers have an incentive to inflate costs

Question 20

Use the figure below to answer the following questions.
   
Figure 13.4.2
-Refer to Figure 13.4.2. Assume this monopolist practises perfect price discrimination. How many tickets are sold?

Accepted Answer

A) 20 tickets 
B) 60 tickets 
C) 40 tickets 
D) 100 tickets 
E) 80 tickets 
A) 20 tickets 
B) 60 tickets 
C) 40 tickets 
D) 100 tickets 
E) 80 tickets

Exam 13: Monopoly

Which one of the following is an example of a natural barrier to entry of new firms into an industry?

Use the figure below to answer the following questions. Figure 13.3.3 -Consider the cost and revenue curves in Figure 13.3.3. Which area indicates the deadweight loss from a single-price monopoly?

Firms that can price discriminate between customers do so to

Use the figure below to answer the following question. Figure 13.4.3 -Refer to Figure 13.4.3. The outcome is efficient if

A perfect price-discriminating monopoly produces

Use the figure below to answer the following question. Figure 13.1.1 -Refer to Figure 13.1.1. The quantity demanded by the market is 8 million cubic metres a month. This market is

A monopoly

Taking competitive rent seeking activity into account, the social cost of monopoly is equal to the

An exclusive right granted to a firm to supply a good or service is

Canada Post has a monopoly on residential mail delivery. Pfizer Inc. makes LIPITOR, a prescription drug that lowers cholesterol. Rogers Communications is the sole provider of cable television service in some parts of Ontario. The monopolies which profit from price discrimination are

When Dominant Pizza is willing to sell a pizza to a student who lives on-campus at a lower price than it sells the identical pizza to a student who lives a block away from the campus, the pizza firm is

An average cost pricing rule sets ________ equal to average total cost. An average cost pricing rule is not an efficient way of regulating monopoly because at the quantity produced, ________.

Use the table below to answer the following questions. Table 13.4.1 -Table 13.4.1 shows the demand schedule faced by a monopoly. If the monopoly is a perfect price-discriminating monopoly the marginal revenue from the sale of the 3rd unit of output is

A monopoly can practise price discrimination when it

Sue's Surfboards is the sole renter of surfboards on Big Wave Island. Sue does not price discriminate. For Sue's Surfboards, the change in total revenue from each additional surfboard rented is her

Rent seeking is best defined as

A single-price monopolist

A price cap is a price ________. A price cap might be a more effective way of regulating monopoly than rate of return regulation because under rate of return regulation, ________.

Use the figure below to answer the following questions. Figure 13.4.2 -Refer to Figure 13.4.2. Assume this monopolist practises perfect price discrimination. How many tickets are sold?

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Governments Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopolistic Competition

Oligopoly

Externalities

Public Goods and Common Resources

Markets for Factors of Production

Economic Inequality

Measuring Gdp and Economic Growth

Monitoring Jobs and Inflation

Economic Growth

Finance, Saving, and Investment

Money, the Price Level, and Inflation

The Exchange Rate and the Balance of Payments

Aggregate Supply and Aggregate Demand

Expenditure Multipliers

The Business Cycle, Inflation, and Deflation

Fiscal Policy

Monetary Policy

Macro Only: International Trade Policy

Filters

An average cost pricing rule sets equal to average total cost. An average cost pricing rule is not an efficient way of regulating monopoly because at the quantity produced, .

A price cap is a price . A price cap might be a more effective way of regulating monopoly than rate of return regulation because under rate of return regulation, .