Question 1

A difference between a perfectly competitive industry and a monopoly is that

Accepted Answer

A) in the long run, firms in a perfectly competitive industry make zero economic profit and a monopoly can make an economic profit. 
B) a firm in a perfectly competitive industry can perfectly price discriminate but a monopoly cannot. 
C) only monopolies have an incentive to maximize profit. 
D) perfectly competitive firms can have a public franchise. 
E) a barrier to entry protects perfectly competitive firms in the short run and protects a monopoly in the long run. 
A) in the long run, firms in a perfectly competitive industry make zero economic profit and a monopoly can make an economic profit. 
B) a firm in a perfectly competitive industry can perfectly price discriminate but a monopoly cannot. 
C) only monopolies have an incentive to maximize profit. 
D) perfectly competitive firms can have a public franchise. 
E) a barrier to entry protects perfectly competitive firms in the short run and protects a monopoly in the long run.

Question 2

A legal barrier is created when a firm

Accepted Answer

A) has economies of scale, which allow it to produce at a lower cost than two or more firms. 
B) is granted a public franchise, government license, patent, or copyright. 
C) produces a unique product or service. 
D) produces a standardized product or service. 
E) has an ownership barrier to entry. 
A) has economies of scale, which allow it to produce at a lower cost than two or more firms. 
B) is granted a public franchise, government license, patent, or copyright. 
C) produces a unique product or service. 
D) produces a standardized product or service. 
E) has an ownership barrier to entry.

Question 3

Compared to a perfectly competitive industry, a single-price monopoly produces

Accepted Answer

A) more output. 
B) less output. 
C) the same output. 
D) some amount that might be more, less, or the same depending on whether the monopoly's marginal revenue curve lies above, below, or on its demand curve. 
E) some amount that might be more, less, or the same depending on whether the monopoly's marginal cost curve lies above, below, or on its marginal revenue curve. 
A) more output. 
B) less output. 
C) the same output. 
D) some amount that might be more, less, or the same depending on whether the monopoly's marginal revenue curve lies above, below, or on its demand curve. 
E) some amount that might be more, less, or the same depending on whether the monopoly's marginal cost curve lies above, below, or on its marginal revenue curve.

Question 4

If total revenue falls when output increases, marginal revenue is

Accepted Answer

A) positive. 
B) negative. 
C) zero. 
D) greater than total revenue. 
E) elastic. 
A) positive. 
B) negative. 
C) zero. 
D) greater than total revenue. 
E) elastic.

Question 5

A single-price monopoly can sell 1 unit for $9.00.To sell 2 units, the price must be $8.50 per unit.The marginal revenue from selling the second unit is

Accepted Answer

A) $17.50. 
B) $17.00. 
C) $8.50. 
D) $8.00. 
E) $9.00 
A) $17.50. 
B) $17.00. 
C) $8.50. 
D) $8.00. 
E) $9.00

Question 6

Capture theory is

Accepted Answer

A) an economic theory of regulation. 
B) a model about perfect competition. 
C) the same as the public interest theory. 
D) the theory that regulators capture firms' attention by dictating a very low price. 
E) a theory that explains behavior of competitive firms. 
A) an economic theory of regulation. 
B) a model about perfect competition. 
C) the same as the public interest theory. 
D) the theory that regulators capture firms' attention by dictating a very low price. 
E) a theory that explains behavior of competitive firms.

Question 7

-The figure above shows the demand curve, marginal revenue curve, and marginal cost curve.The deadweight loss when the market has a monopoly producer is

Accepted Answer

A) ace. 
B) abf. 
C) bcd. 
D) bcef. 
E) acd. 
A) ace. 
B) abf. 
C) bcd. 
D) bcef. 
E) acd.

Question 8

Patents

Accepted Answer

A) are a legal barrier to entry. 
B) remove legal barriers to entry. 
C) create economies of scale. 
D) decrease the incentive to innovate. 
E) are prohibited in the United States. 
A) are a legal barrier to entry. 
B) remove legal barriers to entry. 
C) create economies of scale. 
D) decrease the incentive to innovate. 
E) are prohibited in the United States.

Question 9

A monopoly definitely incurs an economic loss if

Accepted Answer

A) it produces where its marginal revenue equals its marginal cost. 
B) its average total cost is greater than price. 
C) it cannot perfectly price discriminate. 
D) it price discriminates. 
E) The statement errs because a monopoly cannot incur an economic loss. 
A) it produces where its marginal revenue equals its marginal cost. 
B) its average total cost is greater than price. 
C) it cannot perfectly price discriminate. 
D) it price discriminates. 
E) The statement errs because a monopoly cannot incur an economic loss.

Question 10

Which of the following is NOT correct about patents?

Accepted Answer

A) Patents encourage invention of new products. 
B) Patents stimulate innovation. 
C) A patent is a barrier to entry. 
D) Patents enable a firm to be a permanent monopoly. 
E) Patents are granted to the inventor of a product or service. 
A) Patents encourage invention of new products. 
B) Patents stimulate innovation. 
C) A patent is a barrier to entry. 
D) Patents enable a firm to be a permanent monopoly. 
E) Patents are granted to the inventor of a product or service.

Question 11

Which of the following is ALWAYS true when a single-price monopolist maximizes its profit?

Accepted Answer

A) P = MC 
B) P = MR 
C) MR = MC 
D) MC = ATC 
E) P > ATC 
A) P = MC 
B) P = MR 
C) MR = MC 
D) MC = ATC 
E) P > ATC

Question 12

A natural monopoly exists when

Accepted Answer

A) diseconomies of scale exist in an industry. 
B) one firm can supply an entire market at a lower average total cost than can two or more firms. 
C) a firm can engage in price discrimination. 
D) the producers in an industry have formed a cartel. 
E) a monopoly firm faces a horizontal demand curve. 
A) diseconomies of scale exist in an industry. 
B) one firm can supply an entire market at a lower average total cost than can two or more firms. 
C) a firm can engage in price discrimination. 
D) the producers in an industry have formed a cartel. 
E) a monopoly firm faces a horizontal demand curve.

Question 13

Total revenue is equal to

Accepted Answer

A) the change in price resulting from a one-unit increase in quantity sold. 
B) the amount people will buy at a given price. 
C) the change in the quantity sold when you change the price by one unit. 
D) price multiplied by the quantity sold. 
E) the price at which the good or service is sold. 
A) the change in price resulting from a one-unit increase in quantity sold. 
B) the amount people will buy at a given price. 
C) the change in the quantity sold when you change the price by one unit. 
D) price multiplied by the quantity sold. 
E) the price at which the good or service is sold.

Question 14

For a single-price monopolist, why is marginal revenue less than price?

Accepted Answer

A) Because the firm is a price taker 
B) To sell another unit, the price must be lowered. 
C) Demand is elastic when another unit is sold. 
D) Demand is inelastic when another unit is sold. 
E) The question is false because marginal revenue is always equal to price. 
A) Because the firm is a price taker 
B) To sell another unit, the price must be lowered. 
C) Demand is elastic when another unit is sold. 
D) Demand is inelastic when another unit is sold. 
E) The question is false because marginal revenue is always equal to price.

Question 15

-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 price per pillow is

Accepted Answer

A) $70. 
B) $60. 
C) $40. 
D) $100. 
E) $30. 
A) $70. 
B) $60. 
C) $40. 
D) $100. 
E) $30.

Question 16

Suppose a single-price monopoly sells 3 units of a good at $20 per unit.If the monopoly sells 4 units, the total revenue increases to $72.What price is being charged for 4 units?

Accepted Answer

A) $52 each 
B) $18 each 
C) $60 each 
D) $12 each 
E) $20 each 
A) $52 each 
B) $18 each 
C) $60 each 
D) $12 each 
E) $20 each

Question 17

-Suppose the Busy Bee Café is the monopoly producer of hamburgers in Hugo, Oklahoma.The above figure represents the demand, marginal revenue, and marginal cost curves for this establishment.If the Busy Bee produces 40 hamburgers per hour, then

Accepted Answer

A) marginal revenue will exceed marginal cost. 
B) profit will be maximized. 
C) marginal revenue will be negative. 
D) marginal revenue will be maximized. 
E) both the marginal revenue and the price will be negative. 
A) marginal revenue will exceed marginal cost. 
B) profit will be maximized. 
C) marginal revenue will be negative. 
D) marginal revenue will be maximized. 
E) both the marginal revenue and the price will be negative.

Question 18

If a monopoly wants to sell a greater quantity of output, it must

Accepted Answer

A) lower its price. 
B) raise its price. 
C) tell consumers to buy more because it's a monopolist. 
D) raise its marginal cost. 
E) change its fixed costs. 
A) lower its price. 
B) raise its price. 
C) tell consumers to buy more because it's a monopolist. 
D) raise its marginal cost. 
E) change its fixed costs.

Question 19

Gene's Car Wash is a natural monopoly.To wash 100 cars a week, if Gene is unregulated, he would charge a price of $10.Gene's average total cost for washing 100 cars is $8, his average variable cost is $6, and his marginal cost is $4.If Gene is regulated using a marginal cost pricing rule, the price he is allowed to charge to wash 100 cars is

Accepted Answer

A) $10. 
B) $8. 
C) $6. 
D) $4. 
E) $400. 
A) $10. 
B) $8. 
C) $6. 
D) $4. 
E) $400.

Question 20

Briefly describe and discuss the different ways a natural monopoly can be regulated: Marginal cost pricing, average cost pricing, rate of return regulation, and price cap regulation.

Accepted Answer

Marginal cost pricing: The regulated pri

A difference between a perfectly competitive industry and a monopoly is that

A legal barrier is created when a firm

Compared to a perfectly competitive industry, a single-price monopoly produces

If total revenue falls when output increases, marginal revenue is

A single-price monopoly can sell 1 unit for $9.00.To sell 2 units, the price must be $8.50 per unit.The marginal revenue from selling the second unit is

Capture theory is

-The figure above shows the demand curve, marginal revenue curve, and marginal cost curve.The deadweight loss when the market has a monopoly producer is

Patents

A monopoly definitely incurs an economic loss if

Which of the following is NOT correct about patents?

Which of the following is ALWAYS true when a single-price monopolist maximizes its profit?

A natural monopoly exists when

Total revenue is equal to

For a single-price monopolist, why is marginal revenue less than price?

-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 price per pillow is

Suppose a single-price monopoly sells 3 units of a good at $20 per unit.If the monopoly sells 4 units, the total revenue increases to $72.What price is being charged for 4 units?

-Suppose the Busy Bee Café is the monopoly producer of hamburgers in Hugo, Oklahoma.The above figure represents the demand, marginal revenue, and marginal cost curves for this establishment.If the Busy Bee produces 40 hamburgers per hour, then

If a monopoly wants to sell a greater quantity of output, it must

Briefly describe and discuss the different ways a natural monopoly can be regulated: Marginal cost pricing, average cost pricing, rate of return regulation, and price cap regulation.

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 difference between a perfectly competitive industry and a monopoly is that

A legal barrier is created when a firm

Compared to a perfectly competitive industry, a single-price monopoly produces

If total revenue falls when output increases, marginal revenue is

A single-price monopoly can sell 1 unit for $9.00.To sell 2 units, the price must be $8.50 per unit.The marginal revenue from selling the second unit is

Capture theory is

-The figure above shows the demand curve, marginal revenue curve, and marginal cost curve.The deadweight loss when the market has a monopoly producer is

Patents

A monopoly definitely incurs an economic loss if

Which of the following is NOT correct about patents?

Which of the following is ALWAYS true when a single-price monopolist maximizes its profit?

A natural monopoly exists when

Total revenue is equal to

For a single-price monopolist, why is marginal revenue less than price?

-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 price per pillow is

Suppose a single-price monopoly sells 3 units of a good at $20 per unit.If the monopoly sells 4 units, the total revenue increases to $72.What price is being charged for 4 units?

-Suppose the Busy Bee Café is the monopoly producer of hamburgers in Hugo, Oklahoma.The above figure represents the demand, marginal revenue, and marginal cost curves for this establishment.If the Busy Bee produces 40 hamburgers per hour, then

If a monopoly wants to sell a greater quantity of output, it must

Briefly describe and discuss the different ways a natural monopoly can be regulated: Marginal cost pricing, average cost pricing, rate of return regulation, and price cap regulation.

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