Question 1

For the following, please answer "True" or "False" and explain why.
-Since a monopoly can set any price it wants,it always makes a profit.

Accepted Answer

A) True 
 B)False

Question 2

For a monopsonist,the labor supply curve is upward sloping because

Accepted Answer

A)  the monopsonist must compete with other industries for that labor. 
B)  the monopsonist requires that the laborers are highly skilled. 
C)  the monopsonist is the only buyer in that labor market. 
D)  the monopsonist restricts the supply of labor. 
A)  the monopsonist must compete with other industries for that labor. 
B)  the monopsonist requires that the laborers are highly skilled. 
C)  the monopsonist is the only buyer in that labor market. 
D)  the monopsonist restricts the supply of labor.

Question 3

If the average cost curve for an individual firm is decreasing when it intersects the market demand curve,why is a natural monopoly likely to develop in this market? Explain.

Accepted Answer

Perfect competition leads to firms incre

Question 4

In a recent court case,an expert witness defined a monopoly as a firm that can "raise price without reducing its total revenue." What does this imply about the elasticity of demand? Would this definition hold for a profit-maximizing monopoly? Explain.

Accepted Answer

If the firm raises price,the quantity so

Question 5

A monopolist faces a demand curve Q = 120 - 2p and has costs given by C(Q)= 20Q + 100.
a.Write the monopolist's profits in terms of the price it charges.
b.Use the derivative (w.r.t.price)to determine the monopolist's profit-maximizing price.
c.Now,derive the monopolist's inverse demand based on the demand equation above.Write out the monopolist's profits in terms of quantity.
d.Use the derivative w.r.t.Q to determine the monopolist's optimal quantity.What price does the monopoly charge?

Accepted Answer

a.(p)= (120 - 2p)p - 20(120 - 2p)- 100
b

Question 6

Which of the following is an example of the snob effect?

Accepted Answer

A)  The fewer consumers that buy the operating system, the fewer the applications that will be available. 
B)  The more people that buy a luxury watch, the less value consumers put on the watch. 
C)  The fewer ATMs available in the city, the fewer consumers want to join the network. 
D)  None of the above. 
A)  The fewer consumers that buy the operating system, the fewer the applications that will be available. 
B)  The more people that buy a luxury watch, the less value consumers put on the watch. 
C)  The fewer ATMs available in the city, the fewer consumers want to join the network. 
D)  None of the above.

Question 7

A monopoly faces an inverse demand curve of P = 100 - 2Q.The marginal cost curve is MC = .5Q.What government price ceiling would represent optimal price regulation?

Accepted Answer

Setting P = 100 - 2Q

Question 8

If a firm buys some labor in a competitive market and some labor as a monopsonist,the firm is most likely to

Accepted Answer

A)  pay the same wage to both types of labor. 
B)  pay a lower wage to the labor purchased in the competitive market. 
C)  pay a higher wage to the labor purchased in the competitive market. 
D)  not exercise any of its monopsony power. 
A)  pay the same wage to both types of labor. 
B)  pay a lower wage to the labor purchased in the competitive market. 
C)  pay a higher wage to the labor purchased in the competitive market. 
D)  not exercise any of its monopsony power.

Question 9

For a monopoly,marginal revenue is less than price because

Accepted Answer

A)  the demand for the firm's output is downward sloping. 
B)  the firm has no supply curve. 
C)  the firm can sell all of its output at any price. 
D)  the demand for the firm's output is perfectly elastic. 
A)  the demand for the firm's output is downward sloping. 
B)  the firm has no supply curve. 
C)  the firm can sell all of its output at any price. 
D)  the demand for the firm's output is perfectly elastic.

Question 10

If the inverse demand curve a monopoly faces is p = 100 - 2Q,and MC is constant at 16,then the deadweight loss from monopoly equals

Accepted Answer

A)  $21. 
B)  $441. 
C)  $882. 
D)  $1,764. 
A)  $21. 
B)  $441. 
C)  $882. 
D)  $1,764.

Question 11

One difference between a monopoly and a competitive firm is that

Accepted Answer

A)  only a monopoly is a price taker. 
B)  only a monopoly maximizes profit by setting marginal revenue equal to marginal cost. 
C)  only a monopoly faces a downward-sloping demand curve. 
D)  None of the above. 
A)  only a monopoly is a price taker. 
B)  only a monopoly maximizes profit by setting marginal revenue equal to marginal cost. 
C)  only a monopoly faces a downward-sloping demand curve. 
D)  None of the above.

Question 12

When would a profit-maximizing monopolist that operates with no government intervention choose to produce the competitive level of output?

Accepted Answer

A monopolist that faces a perf

Question 13

If a monopoly discovers that the demand for its output has become more elastic at the original output level,then it will respond by

Accepted Answer

A)  producing more and setting a higher price. 
B)  setting a lower price. 
C)  setting a higher price. 
D)  producing more while leaving price unchanged. 
A)  producing more and setting a higher price. 
B)  setting a lower price. 
C)  setting a higher price. 
D)  producing more while leaving price unchanged.

Question 14

The government forcing a monopoly telecommunications company to allow other firms to use its cables is an attempt to

Accepted Answer

A)  regulate prices. 
B)  decrease the monopoly market power by eliminating a natural monopoly. 
C)  decrease the monopoly market power by increasing competition. 
D)  None of the above. 
A)  regulate prices. 
B)  decrease the monopoly market power by eliminating a natural monopoly. 
C)  decrease the monopoly market power by increasing competition. 
D)  None of the above.

Question 15

Why is the monopoly total welfare lower than the competitive total welfare?

Accepted Answer

A monopoly restricts output relative to

Question 16

Relative to a competitive labor market,monopsony

Accepted Answer

A)  is also efficient. 
B)  creates a deadweight loss because it pays an excessive wage. 
C)  creates a deadweight loss because the wage is below the marginal revenue product of labor. 
D)  creates a deadweight loss because the wage is above the marginal revenue product of labor. 
A)  is also efficient. 
B)  creates a deadweight loss because it pays an excessive wage. 
C)  creates a deadweight loss because the wage is below the marginal revenue product of labor. 
D)  creates a deadweight loss because the wage is above the marginal revenue product of labor.

Question 17

The loss associated with the fact that at the profit-maximizing quantity consumers value the goods more than it cost to produce them is called

Accepted Answer

A)  deadweight loss. 
B)  comparative loss. 
C)  Lerner Loss. 
D)  Consumer Value Loss. 
A)  deadweight loss. 
B)  comparative loss. 
C)  Lerner Loss. 
D)  Consumer Value Loss.

Question 18

If the inverse demand curve a monopoly faces is p = 100 - 2Q,and MC is constant at 16,then the firm's Lerner Index equals

Accepted Answer

A)  58/16. 
B)  16/42. 
C)  58/42. 
D)  42/58. 
A)  58/16. 
B)  16/42. 
C)  58/42. 
D)  42/58.

Question 19

Show with a graph that an increase in the minimum wage can increase the level of employment in a monopsony market.

Accepted Answer

A monopolist will select a level of empl

Question 20

For the following, please answer "True" or "False" and explain why.
-If a firm in an industry experiences very high fixed costs and constant marginal cost,it is a good candidate for a natural monopoly.

Accepted Answer

A) True 
 B)False

For the following, please answer "True" or "False" and explain why. -Since a monopoly can set any price it wants,it always makes a profit.

For a monopsonist,the labor supply curve is upward sloping because

If the average cost curve for an individual firm is decreasing when it intersects the market demand curve,why is a natural monopoly likely to develop in this market? Explain.

In a recent court case,an expert witness defined a monopoly as a firm that can "raise price without reducing its total revenue." What does this imply about the elasticity of demand? Would this definition hold for a profit-maximizing monopoly? Explain.

Which of the following is an example of the snob effect?

A monopoly faces an inverse demand curve of P = 100 - 2Q.The marginal cost curve is MC = .5Q.What government price ceiling would represent optimal price regulation?

If a firm buys some labor in a competitive market and some labor as a monopsonist,the firm is most likely to

For a monopoly,marginal revenue is less than price because

If the inverse demand curve a monopoly faces is p = 100 - 2Q,and MC is constant at 16,then the deadweight loss from monopoly equals

One difference between a monopoly and a competitive firm is that

When would a profit-maximizing monopolist that operates with no government intervention choose to produce the competitive level of output?

If a monopoly discovers that the demand for its output has become more elastic at the original output level,then it will respond by

The government forcing a monopoly telecommunications company to allow other firms to use its cables is an attempt to

Why is the monopoly total welfare lower than the competitive total welfare?

Relative to a competitive labor market,monopsony

The loss associated with the fact that at the profit-maximizing quantity consumers value the goods more than it cost to produce them is called

If the inverse demand curve a monopoly faces is p = 100 - 2Q,and MC is constant at 16,then the firm's Lerner Index equals

Show with a graph that an increase in the minimum wage can increase the level of employment in a monopsony market.

For the following, please answer "True" or "False" and explain why. -If a firm in an industry experiences very high fixed costs and constant marginal cost,it is a good candidate for a natural monopoly.

Introduction

Supply and Demand

A Consumers Constrained Choice

Demand

Consumer Welfare and Policy Analysis

Firms and Production

Costs

Competitive Firms and Markets

Properties and Applications of the Competitive Model

General Equilibrium and Economic Welfare

Pricing and Advertising

Game Theory

Oligopoly and Monopolistic Competition

Factor Markets

Uncertainty

Property Rights, externalities, rivalry, and Exclusion

Asymmetric Information

Contracts and Moral Hazards

Filters

Exam 11: Monopoly and Monopsony

For the following, please answer "True" or "False" and explain why. -Since a monopoly can set any price it wants,it always makes a profit.

For a monopsonist,the labor supply curve is upward sloping because

If the average cost curve for an individual firm is decreasing when it intersects the market demand curve,why is a natural monopoly likely to develop in this market? Explain.

In a recent court case,an expert witness defined a monopoly as a firm that can "raise price without reducing its total revenue." What does this imply about the elasticity of demand? Would this definition hold for a profit-maximizing monopoly? Explain.

Which of the following is an example of the snob effect?

A monopoly faces an inverse demand curve of P = 100 - 2Q.The marginal cost curve is MC = .5Q.What government price ceiling would represent optimal price regulation?

If a firm buys some labor in a competitive market and some labor as a monopsonist,the firm is most likely to

For a monopoly,marginal revenue is less than price because

If the inverse demand curve a monopoly faces is p = 100 - 2Q,and MC is constant at 16,then the deadweight loss from monopoly equals

One difference between a monopoly and a competitive firm is that

When would a profit-maximizing monopolist that operates with no government intervention choose to produce the competitive level of output?

If a monopoly discovers that the demand for its output has become more elastic at the original output level,then it will respond by

The government forcing a monopoly telecommunications company to allow other firms to use its cables is an attempt to

Why is the monopoly total welfare lower than the competitive total welfare?

Relative to a competitive labor market,monopsony

The loss associated with the fact that at the profit-maximizing quantity consumers value the goods more than it cost to produce them is called

If the inverse demand curve a monopoly faces is p = 100 - 2Q,and MC is constant at 16,then the firm's Lerner Index equals

Show with a graph that an increase in the minimum wage can increase the level of employment in a monopsony market.

For the following, please answer "True" or "False" and explain why. -If a firm in an industry experiences very high fixed costs and constant marginal cost,it is a good candidate for a natural monopoly.

Introduction

Supply and Demand

A Consumers Constrained Choice

Demand

Consumer Welfare and Policy Analysis

Firms and Production

Costs

Competitive Firms and Markets

Properties and Applications of the Competitive Model

General Equilibrium and Economic Welfare

Pricing and Advertising

Game Theory

Oligopoly and Monopolistic Competition

Factor Markets

Uncertainty

Property Rights, externalities, rivalry, and Exclusion

Asymmetric Information

Contracts and Moral Hazards

Filters