Question 1

Use the figure below to answer the following questions.
   
Figure 13.3.1
-Refer to Figure 13.3.1.If this market is a single-price monopoly, then

Accepted Answer

A) it is efficient because the monopoly is maximizing economic profit. 
B) price is equal to marginal cost and the outcome is efficient. 
C) price is less than marginal cost, and consumer surplus is less than in a perfectly competitive market. 
D) price is greater than the marginal cost and the outcome is inefficient. 
E) the outcome is inefficient because the monopoly's costs are too high. 
A) it is efficient because the monopoly is maximizing economic profit. 
B) price is equal to marginal cost and the outcome is efficient. 
C) price is less than marginal cost, and consumer surplus is less than in a perfectly competitive market. 
D) price is greater than the marginal cost and the outcome is inefficient. 
E) the outcome is inefficient because the monopoly's costs are too high.

Question 2

A natural monopoly exists when

Accepted Answer

A) the government protects the firm by granting an exclusive franchise. 
B) production can take place with constant returns to scale. 
C) there are no rivals in the market. 
D) one firm can supply the entire market at a lower cost than two or more firms. 
E) the average total cost curve is upward sloping. 
A) the government protects the firm by granting an exclusive franchise. 
B) production can take place with constant returns to scale. 
C) there are no rivals in the market. 
D) one firm can supply the entire market at a lower cost than two or more firms. 
E) the average total cost curve is upward sloping.

Question 3

Use the figure below to answer the following question.
   
Figure 13.4.1
-Which area in Figure 13.4.1 indicates the deadweight loss from a perfect price-discriminating monopoly?

Accepted Answer

A) EACF 
B) ACD 
C) ABD 
D) BCD 
E) None of the above 
A) EACF 
B) ACD 
C) ABD 
D) BCD 
E) None of the above

Question 4

Use the figure below to answer the following questions.
   
Figure 13.3.3
-Consider the revenue and cost curves in Figure 13.3.3.What is the difference in consumer surplus between a single-price monopoly and a perfectly competitive market?

Accepted Answer

A) EADH 
B) EABH 
C) ABD 
D) ACD 
E) FHDC 
A) EADH 
B) EABH 
C) ABD 
D) ACD 
E) FHDC

Question 5

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 6

If marginal revenue equals zero, then demand at this level of output is

Accepted Answer

A) perfectly inelastic. 
B) inelastic. 
C) unit elastic. 
D) elastic. 
E) perfectly elastic. 
A) perfectly inelastic. 
B) inelastic. 
C) unit elastic. 
D) elastic. 
E) perfectly elastic.

Question 7

Use the figure below to answer the following questions.
   
Figure 13.4.6
-Prime Pharmaceuticals has developed a new asthma medicine, for which it has a patent.An inhaler can be produced at a constant marginal cost of $2 per inhaler.The demand curve, marginal revenue curve, and marginal cost curve for this new asthma inhaler are shown in Figure 13.4.6.The patent gives Prime Pharmaceuticals a monopoly for its new inhaler.If Prime Pharmaceuticals can perfectly price discriminate, then consumer surplus is

Accepted Answer

A) zero. 
B) $24 million. 
C) $64 million. 
D) $44 million. 
E) $32 million. 
A) zero. 
B) $24 million. 
C) $64 million. 
D) $44 million. 
E) $32 million.

Question 8

A perfect price-discriminating monopoly

Accepted Answer

A) has a demand curve that is also its marginal revenue curve. 
B) maximizes total revenue. 
C) is inefficient. 
D) will produce the quantity at which the marginal cost curve intersects its demand curve. 
E) both A and D 
A) has a demand curve that is also its marginal revenue curve. 
B) maximizes total revenue. 
C) is inefficient. 
D) will produce the quantity at which the marginal cost curve intersects its demand curve. 
E) both A and D

Question 9

Use the information below to answer the following questions.
Fact 13.1.1
The following statements give some information about seven markets.
1. Coca-Cola cuts its price below that of Pepsi-Cola in an attempt to increase its market share.
2. A single firm, protected by a barrier to entry, produces a personal service that has no close substitutes.
3. A barrier to entry exists, but the good has some close substitutes.
4. A firm offers discounts to students and seniors.
5. A firm can sell any quantity it chooses at the going price.
6. The government issues Nike an exclusive licence to produce golf balls.
7. A firm experiences economies of scale even when it produces the quantity that meets the entire market demand.
-Refer to Fact 13.1.1.A monopoly might arise in the market described in

Accepted Answer

A) statement 5. 
B) statement 1. 
C) statements 2, 6, and 7. 
D) statement 3. 
E) statement 4. 
A) statement 5. 
B) statement 1. 
C) statements 2, 6, and 7. 
D) statement 3. 
E) statement 4.

Question 10

The more perfectly a monopoly can price discriminate, the

Accepted Answer

A) smaller its output and the lower its profit. 
B) smaller its output and the higher its profit. 
C) larger its output and the lower its profit. 
D) larger its output and the higher its profit. 
E) greater is consumer surplus. 
A) smaller its output and the lower its profit. 
B) smaller its output and the higher its profit. 
C) larger its output and the lower its profit. 
D) larger its output and the higher its profit. 
E) greater is consumer surplus.

Question 11

One difference between perfectly competitive markets and a single-price monopoly is that

Accepted Answer

A) marginal revenue equals marginal cost for perfectly competitive firms, but not for single-price monopolists. 
B) marginal cost equals average variable cost for perfectly competitive firms but not for single-price monopolists. 
C) price equals minimum average total cost for single-price monopolists but not for perfectly competitive firms. 
D) marginal revenue equals price for perfectly competitive firms, but not for single-price monopolists. 
E) marginal revenue equals marginal cost for single-price monopolists but not for perfectly competitive firms. 
A) marginal revenue equals marginal cost for perfectly competitive firms, but not for single-price monopolists. 
B) marginal cost equals average variable cost for perfectly competitive firms but not for single-price monopolists. 
C) price equals minimum average total cost for single-price monopolists but not for perfectly competitive firms. 
D) marginal revenue equals price for perfectly competitive firms, but not for single-price monopolists. 
E) marginal revenue equals marginal cost for single-price monopolists but not for perfectly competitive firms.

Question 12

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 13

Use the figure below to answer the following questions.
   
Figure 13.3.3
-Consider the revenue and cost curves in Figure 13.3.3.What is the difference in producer surplus between a single-price monopoly and a perfectly competitive market?

Accepted Answer

A) EADH 
B) EABH 
C) ABD 
D) ACD 
E) EABH - BCD 
A) EADH 
B) EABH 
C) ABD 
D) ACD 
E) EABH - BCD

Question 14

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 15

Use the information below to answer the following questions.
Fact 13.5.1
Cascade Springs Inc. is a natural monopoly that bottles water from a spring high in the Rocky Mountains. The total fixed cost it incurs is $80,000, and its marginal cost is 10 cents a bottle. The demand curve for Cascade Springs bottled water is shown in the following figure:
   
Figure 13.5.1
-Refer to Figure 13.5.1.Suppose the government regulates the firm with average cost pricing.What is the price?

Accepted Answer

A) $0 a bottle 
B) $0.50 a bottle 
C) $0.30 a bottle 
D) $0.10 a bottle 
E) $0.20 a bottle 
A) $0 a bottle 
B) $0.50 a bottle 
C) $0.30 a bottle 
D) $0.10 a bottle 
E) $0.20 a bottle

Question 16

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 regulator uses a marginal cost pricing rule to set price, what is the quantity produced?

Accepted Answer

A) 0 
B) Q₀ 
C) Q₁ 
D) Q₂ 
E) Q₃ 
A) 0 
B) Q₀ 
C) Q₁ 
D) Q₂ 
E) Q₃

Question 17

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 18

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, what output will it produce?

Accepted Answer

A) Q₄ 
B) Q₀ 
C) Q₁ 
D) Q₂ 
E) Q₃ 
A) Q₄ 
B) Q₀ 
C) Q₁ 
D) Q₂ 
E) Q₃

Question 19

Use the figure below to answer the following question.
   
Figure 13.4.4
-Refer to Figure 13.4.4.Consider a market with a perfect price-discriminating monopolist.If the light grey area shows the consumer surplus and the dark grey area shows the producer surplus, which graph correctly represents this firm?

Accepted Answer

A) (a) 
B) (b) 
C) (c) 
D) (d) 
E) none of the graphs 
A) (a) 
B) (b) 
C) (c) 
D) (d) 
E) none of the graphs

Question 20

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.

Use the figure below to answer the following questions. Figure 13.3.1 -Refer to Figure 13.3.1.If this market is a single-price monopoly, then

A natural monopoly exists when

Use the figure below to answer the following question. Figure 13.4.1 -Which area in Figure 13.4.1 indicates the deadweight loss from a perfect price-discriminating monopoly?

Use the figure below to answer the following questions. Figure 13.3.3 -Consider the revenue and cost curves in Figure 13.3.3.What is the difference in consumer surplus between a single-price monopoly and a perfectly competitive market?

Firms that can price discriminate between customers do so to

If marginal revenue equals zero, then demand at this level of output is

A perfect price-discriminating monopoly

The more perfectly a monopoly can price discriminate, the

One difference between perfectly competitive markets and a single-price monopoly is that

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 13.3.3 -Consider the revenue and cost curves in Figure 13.3.3.What is the difference in producer surplus between a single-price monopoly and a perfectly competitive market?

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

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 regulator uses a marginal cost pricing rule to set price, what is the quantity produced?

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 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, what output will it produce?

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

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government 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

Filters

Exam 13: Monopoly

Use the figure below to answer the following questions. Figure 13.3.1 -Refer to Figure 13.3.1.If this market is a single-price monopoly, then

A natural monopoly exists when

Use the figure below to answer the following question. Figure 13.4.1 -Which area in Figure 13.4.1 indicates the deadweight loss from a perfect price-discriminating monopoly?

Use the figure below to answer the following questions. Figure 13.3.3 -Consider the revenue and cost curves in Figure 13.3.3.What is the difference in consumer surplus between a single-price monopoly and a perfectly competitive market?

Firms that can price discriminate between customers do so to

If marginal revenue equals zero, then demand at this level of output is

A perfect price-discriminating monopoly

The more perfectly a monopoly can price discriminate, the

One difference between perfectly competitive markets and a single-price monopoly is that

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 13.3.3 -Consider the revenue and cost curves in Figure 13.3.3.What is the difference in producer surplus between a single-price monopoly and a perfectly competitive market?

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

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 regulator uses a marginal cost pricing rule to set price, what is the quantity produced?

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 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, what output will it produce?

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

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government 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

Filters

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, .

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, .