Question 1

The ability of a monopoly to charge a price that exceeds marginal cost depends on

Accepted Answer

A)  the price elasticity of supply. 
B)  price elasticity of demand. 
C)  slope of the demand curve. 
D)  shape of the marginal cost curve. 
A)  the price elasticity of supply. 
B)  price elasticity of demand. 
C)  slope of the demand curve. 
D)  shape of the marginal cost curve.

Question 2

For a monopoly,marginal revenue is less than price because

Accepted Answer

A)  the firm is a price taker. 
B)  the firm must lower price if it wishes to sell more output. 
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 firm is a price taker. 
B)  the firm must lower price if it wishes to sell more output. 
C)  the firm can sell all of its output at any price. 
D)  the demand for the firm's output is perfectly elastic.

Question 3

For the following, please answer "True" or "False" and explain why.
-The less elastic is the demand for a firm's product,the greater is that firm's market power.

Accepted Answer

A) True 
 B)False

Question 4

At the current level of output,a firm's marginal cost equals 16 and marginal revenue equals 10.The firm

Accepted Answer

A)  is producing the profit-maximizing amount. 
B)  should produce more. 
C)  should produce less. 
D)  Not enough information. 
A)  is producing the profit-maximizing amount. 
B)  should produce more. 
C)  should produce less. 
D)  Not enough information.

Question 5

A monopoly sets a price of $50 per unit for an item that has a marginal cost of $10.Assuming profit maximization,the implicit demand elasticity is

Accepted Answer

A)  -0.2. 
B)  -0.8. 
C)  -1.25. 
D)  -5.0. 
A)  -0.2. 
B)  -0.8. 
C)  -1.25. 
D)  -5.0.

Question 6

Consider a monopolist facing a linear (inverse)demand curve given by:
p = a - bQ
Show with calculus that the marginal revenue in fact has the same price-axis intercept but twice the slope as the inverse demand curve above.

Accepted Answer

Total Reve

Question 7

-The above figure shows the demand and cost curves facing a monopoly.At the profit-maximizing price,the elasticity of demand equals

Accepted Answer

A)  -1. 
B)  zero. 
C)  infinity. 
D)  -3. 
A)  -1. 
B)  zero. 
C)  infinity. 
D)  -3.

Question 8

The situation in which one firm can produce the total output of the market at lower cost than several firms is called

Accepted Answer

A)  natural monopoly. 
B)  pure monopoly. 
C)  ruling monopoly. 
D)  cost monopoly. 
A)  natural monopoly. 
B)  pure monopoly. 
C)  ruling monopoly. 
D)  cost monopoly.

Question 9

Which of the following would be most able to act like a monopsonist?

Accepted Answer

A)  a hospital in a small isolated town 
B)  a hospital in a very big city 
C)  a law firm in Washington, D.C. 
D)  a computer software firm in Silicon Valley 
A)  a hospital in a small isolated town 
B)  a hospital in a very big city 
C)  a law firm in Washington, D.C. 
D)  a computer software firm in Silicon Valley

Question 10

-The above figure shows the demand and cost curves facing a monopoly.The monopoly maximizes profit by setting price equal to

Accepted Answer

A)  $100. 
B)  $200. 
C)  $300. 
D)  $400. 
A)  $100. 
B)  $200. 
C)  $300. 
D)  $400.

Question 11

-The above figure shows the demand and cost curves facing a monopoly.Maximum profit equals

Accepted Answer

A)  $0. 
B)  $100. 
C)  $1,000. 
D)  $2,500. 
A)  $0. 
B)  $100. 
C)  $1,000. 
D)  $2,500.

Question 12

Which of the following average cost functions suggests the presence of a natural monopoly?

Accepted Answer

A)  AC = 2 
B)  AC = 100/Q + 2 
C)  TC = 100/Q + 2Q 
D)  All of the above. 
A)  AC = 2 
B)  AC = 100/Q + 2 
C)  TC = 100/Q + 2Q 
D)  All of the above.

Question 13

The Lerner Index is

Accepted Answer

A)  the ratio of the difference between price and marginal to price. 
B)  equal to (Price - M
C) /Price. 
C)  a measure of market power. 
D)  All of the above. 
A)  the ratio of the difference between price and marginal to price. 
B)  equal to (Price - M
C) /Price. 
C)  a measure of market power. 
D)  All of the above.

Question 14

Suppose that a mining company employs 80% of the available laborers in a town.Explain what will happen to the number of laborers hired and the wage rate paid by the mine if a minimum wage is set at the competitive level.

Accepted Answer

The mine was operating as a mo

Question 15

The SSS Co.has a patent on a particular medication.The medication sells for $1 per daily dose and marginal cost is estimated to be a constant at 20¢.Assuming linear demand and marginal cost curves,use this information to estimate the deadweight loss from monopoly pricing if the firm currently sells 1,000 doses per day.Can this loss be justified?

Accepted Answer

The firm's Lerner Index equals 0.8 which

Question 16

If the government attempts to force a natural monopoly to charge a price equal to marginal cost,

Accepted Answer

A)  the natural monopoly will shut down. 
B)  the natural monopoly will still make high profits. 
C)  the natural monopoly's marginal cost curve will shift up. 
D)  total welfare is maximized. 
A)  the natural monopoly will shut down. 
B)  the natural monopoly will still make high profits. 
C)  the natural monopoly's marginal cost curve will shift up. 
D)  total welfare is maximized.

Question 17

The steeper the labor supply curve,

Accepted Answer

A)  the higher the wage the monopsonist pays. 
B)  the lower the wage the monopsonist pays. 
C)  the smaller the difference between the wage and the marginal expenditure on labor. 
D)  the better off workers are. 
A)  the higher the wage the monopsonist pays. 
B)  the lower the wage the monopsonist pays. 
C)  the smaller the difference between the wage and the marginal expenditure on labor. 
D)  the better off workers are.

Question 18

It is a conventional practice among apparel retailers to set the retail price of clothing at twice the cost paid to the manufacturer.For example,if the retailer pays $7 for a pair of jeans,the jeans will retail for $14.What must the price elasticity of demand be for this practice to be profit maximizing?

Accepted Answer

Since price is twice marginal

Question 19

If the supply of labor to a monopsonist is everywhere unit elastic,then the wage will equal

Accepted Answer

A)  the marginal expenditure. 
B)  one-half of the marginal expenditure. 
C)  the marginal revenue product of labor. 
D)  one. 
A)  the marginal expenditure. 
B)  one-half of the marginal expenditure. 
C)  the marginal revenue product of labor. 
D)  one.

Question 20

If the government wants to regulate a natural monopoly,it will force the firm to set price equal to

Accepted Answer

A)  average cost. 
B)  marginal cost. 
C)  marginal revenue. 
D)  None of the above. 
A)  average cost. 
B)  marginal cost. 
C)  marginal revenue. 
D)  None of the above.

The ability of a monopoly to charge a price that exceeds marginal cost depends on

For a monopoly,marginal revenue is less than price because

For the following, please answer "True" or "False" and explain why. -The less elastic is the demand for a firm's product,the greater is that firm's market power.

At the current level of output,a firm's marginal cost equals 16 and marginal revenue equals 10.The firm

A monopoly sets a price of $50 per unit for an item that has a marginal cost of $10.Assuming profit maximization,the implicit demand elasticity is

Consider a monopolist facing a linear (inverse)demand curve given by: p = a - bQ Show with calculus that the marginal revenue in fact has the same price-axis intercept but twice the slope as the inverse demand curve above.

-The above figure shows the demand and cost curves facing a monopoly.At the profit-maximizing price,the elasticity of demand equals

The situation in which one firm can produce the total output of the market at lower cost than several firms is called

Which of the following would be most able to act like a monopsonist?

-The above figure shows the demand and cost curves facing a monopoly.The monopoly maximizes profit by setting price equal to

-The above figure shows the demand and cost curves facing a monopoly.Maximum profit equals

Which of the following average cost functions suggests the presence of a natural monopoly?

The Lerner Index is

Suppose that a mining company employs 80% of the available laborers in a town.Explain what will happen to the number of laborers hired and the wage rate paid by the mine if a minimum wage is set at the competitive level.

If the government attempts to force a natural monopoly to charge a price equal to marginal cost,

The steeper the labor supply curve,

If the supply of labor to a monopsonist is everywhere unit elastic,then the wage will equal

If the government wants to regulate a natural monopoly,it will force the firm to set price equal to

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

The ability of a monopoly to charge a price that exceeds marginal cost depends on

For a monopoly,marginal revenue is less than price because

For the following, please answer "True" or "False" and explain why. -The less elastic is the demand for a firm's product,the greater is that firm's market power.

At the current level of output,a firm's marginal cost equals 16 and marginal revenue equals 10.The firm

A monopoly sets a price of $50 per unit for an item that has a marginal cost of $10.Assuming profit maximization,the implicit demand elasticity is

Consider a monopolist facing a linear (inverse)demand curve given by: p = a - bQ Show with calculus that the marginal revenue in fact has the same price-axis intercept but twice the slope as the inverse demand curve above.

-The above figure shows the demand and cost curves facing a monopoly.At the profit-maximizing price,the elasticity of demand equals

The situation in which one firm can produce the total output of the market at lower cost than several firms is called

Which of the following would be most able to act like a monopsonist?

-The above figure shows the demand and cost curves facing a monopoly.The monopoly maximizes profit by setting price equal to

-The above figure shows the demand and cost curves facing a monopoly.Maximum profit equals

Which of the following average cost functions suggests the presence of a natural monopoly?

The Lerner Index is

Suppose that a mining company employs 80% of the available laborers in a town.Explain what will happen to the number of laborers hired and the wage rate paid by the mine if a minimum wage is set at the competitive level.

If the government attempts to force a natural monopoly to charge a price equal to marginal cost,

The steeper the labor supply curve,

If the supply of labor to a monopsonist is everywhere unit elastic,then the wage will equal

If the government wants to regulate a natural monopoly,it will force the firm to set price equal to

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