Question 1

-A single-price monopoly has the demand and marginal cost schedules given in the above table.What is the profit-maximizing level of output and price?

Accepted Answer

The profit-maximizing output i

Question 2

How should a natural monopoly be regulated under the social interest theory of regulation?

Accepted Answer

A) by setting price equal to the average cost of production 
B) by allowing a price that maximizes the profit of the natural monopoly 
C) by using a marginal cost pricing rule 
D) by subsidizing other producers to compete with the monopoly 
E) by using rate of return regulation 
A) by setting price equal to the average cost of production 
B) by allowing a price that maximizes the profit of the natural monopoly 
C) by using a marginal cost pricing rule 
D) by subsidizing other producers to compete with the monopoly 
E) by using rate of return regulation

Question 3

Which of the following must a firm be able to do to successfully price discriminate?
I∙divide buyers into different groups according to their willingness to pay
Ii∙prevent resale of the good or service
Iii∙identify into which group (high willingness to pay or low willingness to pay)a buyer falls

Accepted Answer

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

Question 4

If a monopoly engages in rent seeking,
I∙its average total cost curve is lower than otherwise.
Ii∙it might or might not make an economic profit depending on how many other competitors also are rent seeking.
Iii∙it necessarily incurs an economic loss.

Accepted Answer

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

Question 5

A single-price monopoly is producing at an output level where marginal revenue is $15, marginal cost is $13, and price is $20.This monopoly is

Accepted Answer

A) not maximizing its profit and should decrease output to increase its profit. 
B) not maximizing its profit and should increase output to increase its profit. 
C) maximizing its profit but should shut down. 
D) maximizing its profit and should not shut down. 
E) maximizing its profit but still should decrease output to earn even more profit. 
A) not maximizing its profit and should decrease output to increase its profit. 
B) not maximizing its profit and should increase output to increase its profit. 
C) maximizing its profit but should shut down. 
D) maximizing its profit and should not shut down. 
E) maximizing its profit but still should decrease output to earn even more profit.

Question 6

Price discrimination is possible, in part, because

Accepted Answer

A) costs of production vary as output increases. 
B) monopolies are regulated. 
C) monopolies don't profit maximize. 
D) the willingness to pay can vary among groups of buyers. 
E) monopolies face horizontal demand curves. 
A) costs of production vary as output increases. 
B) monopolies are regulated. 
C) monopolies don't profit maximize. 
D) the willingness to pay can vary among groups of buyers. 
E) monopolies face horizontal demand curves.

Question 7

What is price discrimination?

Accepted Answer

A firm price discriminates when it sells

Question 8

The social interest theory of regulation asserts that regulation

Accepted Answer

A) seeks an efficient use of resources. 
B) is aimed at keeping prices as low as possible. 
C) helps firms maximize economic profit. 
D) of a natural monopoly must be done using rate of return regulation. 
E) does not work for society as well as would allowing the firms freedom from regulation. 
A) seeks an efficient use of resources. 
B) is aimed at keeping prices as low as possible. 
C) helps firms maximize economic profit. 
D) of a natural monopoly must be done using rate of return regulation. 
E) does not work for society as well as would allowing the firms freedom from regulation.

Question 9

Which of the following would create a natural monopoly?

Accepted Answer

A) ownership of all the available units of a necessary input 
B) an exclusive right granted to supply a good or service 
C) requirement of a government license before the firm can sell the good or service 
D) technology enabling a single firm to produce at a lower average total cost than two or more firms 
E) a patent granted the producer of the good or service 
A) ownership of all the available units of a necessary input 
B) an exclusive right granted to supply a good or service 
C) requirement of a government license before the firm can sell the good or service 
D) technology enabling a single firm to produce at a lower average total cost than two or more firms 
E) a patent granted the producer of the good or service

Question 10

Comparing a perfectly competitive market to a single-price monopoly with the same costs, we see that

Accepted Answer

A) both markets are equally efficient in their use of resources. 
B) the monopoly market always is more efficient in the use of resources. 
C) the perfectly competitive market achieves efficiency in resource use while the monopoly market does not. 
D) the monopoly market achieves efficiency in resource use while perfectly competitive market does not. 
E) None of the above answers is correct because comparing a perfectly competitive market to a monopoly is impossible. 
A) both markets are equally efficient in their use of resources. 
B) the monopoly market always is more efficient in the use of resources. 
C) the perfectly competitive market achieves efficiency in resource use while the monopoly market does not. 
D) the monopoly market achieves efficiency in resource use while perfectly competitive market does not. 
E) None of the above answers is correct because comparing a perfectly competitive market to a monopoly is impossible.

Question 11

Compared to a perfectly competitive market, a single-price monopoly sets

Accepted Answer

A) a lower price. 
B) the same price. 
C) a higher price. 
D) a price that might be higher, lower, or the same depending on whether the monopoly's marginal revenue curve lies above, below, or on its demand curve. 
E) a price that might be higher, lower, or the same depending on whether the monopoly's marginal cost curve lies above, below, or on its marginal revenue curve. 
A) a lower price. 
B) the same price. 
C) a higher price. 
D) a price that might be higher, lower, or the same depending on whether the monopoly's marginal revenue curve lies above, below, or on its demand curve. 
E) a price that might be higher, lower, or the same depending on whether the monopoly's marginal cost curve lies above, below, or on its marginal revenue curve.

Question 12

A profit-maximizing output for a single-price monopoly is determined by the intersection of the ________ curves and the profit-maximizing price is found on the ________ curve.

Accepted Answer

A) marginal cost and marginal revenue; marginal revenue 
B) marginal cost and marginal revenue; demand 
C) total revenue and total cost, total revenue 
D) marginal cost and average total cost; demand 
E) demand and supply; supply 
A) marginal cost and marginal revenue; marginal revenue 
B) marginal cost and marginal revenue; demand 
C) total revenue and total cost, total revenue 
D) marginal cost and average total cost; demand 
E) demand and supply; supply

Question 13

Which of the following is an example of a two-part tariff?

Accepted Answer

A) price discrimination based on the buyers' willingness to pay 
B) charging a hookup fee plus a monthly charge equal to marginal cost 
C) higher sales tax on specific products 
D) different prices based on the cost of production and quantity bought 
E) A regulated firm uses marginal cost pricing for some customers and average cost pricing for other customers. 
A) price discrimination based on the buyers' willingness to pay 
B) charging a hookup fee plus a monthly charge equal to marginal cost 
C) higher sales tax on specific products 
D) different prices based on the cost of production and quantity bought 
E) A regulated firm uses marginal cost pricing for some customers and average cost pricing for other customers.

Question 14

What potential problem is there with rate of return pricing?

Accepted Answer

The monopolist might exaggerate its cost

Question 15

If a monopoly can perfectly price discriminate, then its marginal revenue curve will be

Accepted Answer

A) the same as its demand curve. 
B) the same as its supply curve. 
C) the same as its marginal cost curve. 
D) a vertical line at the profit-maximizing quantity of output. 
E) undefined because it does not exist. 
A) the same as its demand curve. 
B) the same as its supply curve. 
C) the same as its marginal cost curve. 
D) a vertical line at the profit-maximizing quantity of output. 
E) undefined because it does not exist.

Question 16

If a single-price monopoly is making a large economic profit, what keeps other firms from competing away the profit?

Accepted Answer

A) There are barriers to entry. 
B) The monopoly must be keeping the amount earned secret. 
C) The market must be too small. 
D) The existing firm's ATC must be too large to allow competitors to enter and earn an economic profit. 
E) Nothing, other firms will enter and will compete away the profit. 
A) There are barriers to entry. 
B) The monopoly must be keeping the amount earned secret. 
C) The market must be too small. 
D) The existing firm's ATC must be too large to allow competitors to enter and earn an economic profit. 
E) Nothing, other firms will enter and will compete away the profit.

Question 17

-The figure above shows the demand, marginal revenue, and marginal cost curves for Paul's Parrot pillows, a single-price monopoly producer of pillows stuffed with parrot feathers.When Paul maximizes his profit, the difference between marginal cost and price

Accepted Answer

A) $0. 
B) $40. 
C) $60. 
D) $30. 
E) $20. 
A) $0. 
B) $40. 
C) $60. 
D) $30. 
E) $20.

Question 18

Arnie's Airlines is a monopoly airline that is able to price discriminate.If Arnie's decides to price discriminate, then

Accepted Answer

A) Arnie's profit increases. 
B) consumer surplus increases. 
C) Arnie's revenues decrease. 
D) Arnie's sells fewer tickets. 
E) Arnie can no longer set a price that depends upon the buyer's willingness to pay. 
A) Arnie's profit increases. 
B) consumer surplus increases. 
C) Arnie's revenues decrease. 
D) Arnie's sells fewer tickets. 
E) Arnie can no longer set a price that depends upon the buyer's willingness to pay.

Question 19

A monopoly

Accepted Answer

A) is not protected by barriers to entry. 
B) produces a good with no close substitutes. 
C) faces a downward-sloping demand curve. 
D) Both answers A and B are correct. 
E) Both answers B and C are correct. 
A) is not protected by barriers to entry. 
B) produces a good with no close substitutes. 
C) faces a downward-sloping demand curve. 
D) Both answers A and B are correct. 
E) Both answers B and C are correct.

Question 20

-In the above figure, a perfectly competitive market will have a price of ________ and a single-price monopoly will have a price of ________.

Accepted Answer

A) P₁ and quantity of Q₁; P₂ and quantity of Q₂ 
B) P₂ and quantity of Q₂; P₁ and quantity of Q₁ 
C) P₃ and quantity of Q₃; P₁ and quantity of Q₁ 
D) P₂ and quantity of Q₂; P₃ and quantity of Q₁ 
E) P₂ and quantity of Q₁; P₁ and quantity of Q₁ 
A) P₁ and quantity of Q₁; P₂ and quantity of Q₂ 
B) P₂ and quantity of Q₂; P₁ and quantity of Q₁ 
C) P₃ and quantity of Q₃; P₁ and quantity of Q₁ 
D) P₂ and quantity of Q₂; P₃ and quantity of Q₁ 
E) P₂ and quantity of Q₁; P₁ and quantity of Q₁

-A single-price monopoly has the demand and marginal cost schedules given in the above table.What is the profit-maximizing level of output and price?

How should a natural monopoly be regulated under the social interest theory of regulation?

If a monopoly engages in rent seeking, I∙its average total cost curve is lower than otherwise. Ii∙it might or might not make an economic profit depending on how many other competitors also are rent seeking. Iii∙it necessarily incurs an economic loss.

A single-price monopoly is producing at an output level where marginal revenue is $15, marginal cost is $13, and price is $20.This monopoly is

Price discrimination is possible, in part, because

What is price discrimination?

The social interest theory of regulation asserts that regulation

Which of the following would create a natural monopoly?

Comparing a perfectly competitive market to a single-price monopoly with the same costs, we see that

Compared to a perfectly competitive market, a single-price monopoly sets

A profit-maximizing output for a single-price monopoly is determined by the intersection of the curves and the profit-maximizing price is found on the curve.

Which of the following is an example of a two-part tariff?

What potential problem is there with rate of return pricing?

If a monopoly can perfectly price discriminate, then its marginal revenue curve will be

If a single-price monopoly is making a large economic profit, what keeps other firms from competing away the profit?

-The figure above shows the demand, marginal revenue, and marginal cost curves for Paul's Parrot pillows, a single-price monopoly producer of pillows stuffed with parrot feathers.When Paul maximizes his profit, the difference between marginal cost and price

Arnie's Airlines is a monopoly airline that is able to price discriminate.If Arnie's decides to price discriminate, then

A monopoly

-In the above figure, a perfectly competitive market will have a price of and a single-price monopoly will have a price of .

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets With Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

Exam 16: Monopoly

-A single-price monopoly has the demand and marginal cost schedules given in the above table.What is the profit-maximizing level of output and price?

How should a natural monopoly be regulated under the social interest theory of regulation?

If a monopoly engages in rent seeking, I∙its average total cost curve is lower than otherwise. Ii∙it might or might not make an economic profit depending on how many other competitors also are rent seeking. Iii∙it necessarily incurs an economic loss.

A single-price monopoly is producing at an output level where marginal revenue is $15, marginal cost is $13, and price is $20.This monopoly is

Price discrimination is possible, in part, because

What is price discrimination?

The social interest theory of regulation asserts that regulation

Which of the following would create a natural monopoly?

Comparing a perfectly competitive market to a single-price monopoly with the same costs, we see that

Compared to a perfectly competitive market, a single-price monopoly sets

A profit-maximizing output for a single-price monopoly is determined by the intersection of the ________ curves and the profit-maximizing price is found on the ________ curve.

Which of the following is an example of a two-part tariff?

What potential problem is there with rate of return pricing?

If a monopoly can perfectly price discriminate, then its marginal revenue curve will be

If a single-price monopoly is making a large economic profit, what keeps other firms from competing away the profit?

-The figure above shows the demand, marginal revenue, and marginal cost curves for Paul's Parrot pillows, a single-price monopoly producer of pillows stuffed with parrot feathers.When Paul maximizes his profit, the difference between marginal cost and price

Arnie's Airlines is a monopoly airline that is able to price discriminate.If Arnie's decides to price discriminate, then

A monopoly

-In the above figure, a perfectly competitive market will have a price of ________ and a single-price monopoly will have a price of ________.

Getting Started

The Usand Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets With Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

A profit-maximizing output for a single-price monopoly is determined by the intersection of the curves and the profit-maximizing price is found on the curve.

-In the above figure, a perfectly competitive market will have a price of and a single-price monopoly will have a price of .