Question 1

For the following, please answer "True" or "False" and explain why.
-A specific tax imposed on a monopolist may increase the price by more than the tax.

Accepted Answer

A) True 
 B)False

Question 2

If a monopoly's Lerner Index exceeds 1,then

Accepted Answer

A)  it is earning maximum profit. 
B)  it has ultimate market power. 
C)  it must be pricing below marginal cost. 
D)  marginal revenue is negative. 
A)  it is earning maximum profit. 
B)  it has ultimate market power. 
C)  it must be pricing below marginal cost. 
D)  marginal revenue is negative.

Question 3

For the following, please answer "True" or "False" and explain why.
-Because of market power,wages are higher under monopsony than under competitive conditions.

Accepted Answer

A) True 
 B)False

Question 4

If the inverse demand curve a monopoly faces is p = 100 - 2Q,then profit maximization

Accepted Answer

A)  is achieved when 25 units are produced. 
B)  is achieved by setting price equal to 25. 
C)  is achieved only by shutting down in the short run. 
D)  cannot be determined solely from the information provided. 
A)  is achieved when 25 units are produced. 
B)  is achieved by setting price equal to 25. 
C)  is achieved only by shutting down in the short run. 
D)  cannot be determined solely from the information provided.

Question 5

-The above figure shows the demand and cost curves facing a monopoly.The monopoly maximizes profit by selling

Accepted Answer

A)  0 units. 
B)  25 units. 
C)  50 units. 
D)  75 units. 
A)  0 units. 
B)  25 units. 
C)  50 units. 
D)  75 units.

Question 6

The situation in which a person places greater value on a good as fewer and fewer people possess it is called

Accepted Answer

A)  Bandwagon Effect. 
B)  Greater Value Effect. 
C)  Snob Effect. 
D)  Behavioral Effect. 
A)  Bandwagon Effect. 
B)  Greater Value Effect. 
C)  Snob Effect. 
D)  Behavioral Effect.

Question 7

The monopoly maximizes profit by setting

Accepted Answer

A)  price equal to marginal cost. 
B)  price equal to marginal revenue. 
C)  marginal revenue equal to marginal cost. 
D)  marginal revenue equal to zero. 
A)  price equal to marginal cost. 
B)  price equal to marginal revenue. 
C)  marginal revenue equal to marginal cost. 
D)  marginal revenue equal to zero.

Question 8

Limited government licenses that create a monopoly do so because

Accepted Answer

A)  the license generates a marginal cost advantage. 
B)  the monopoly will become a natural monopoly. 
C)  a barrier to enter the market exists. 
D)  All of the above. 
A)  the license generates a marginal cost advantage. 
B)  the monopoly will become a natural monopoly. 
C)  a barrier to enter the market exists. 
D)  All of the above.

Question 9

If a firm is able to set price,

Accepted Answer

A)  it is a monopoly. 
B)  its marginal revenue is constant. 
C)  it sells its output at a constant price. 
D)  it faces a downward-sloping demand curve. 
A)  it is a monopoly. 
B)  its marginal revenue is constant. 
C)  it sells its output at a constant price. 
D)  it faces a downward-sloping demand curve.

Question 10

Why do patents stimulate research?

Accepted Answer

A)  Patents give firms time to do research. 
B)  Patents give firms the opportunity to recover research costs and thus a profit motive. 
C)  Firms would research as much even without patents. 
D)  Patents don't stimulate research. 
A)  Patents give firms time to do research. 
B)  Patents give firms the opportunity to recover research costs and thus a profit motive. 
C)  Firms would research as much even without patents. 
D)  Patents don't stimulate research.

Question 11

Universities are able to act as monopsonists in the market for professors because

Accepted Answer

A)  a university usually does not consider hiring faculty members from another institution. 
B)  faculty members usually have to move to a different city when changing universities. 
C)  students like all of their professors. 
D)  senior faculty members are willing to move to a new university at any cost. 
A)  a university usually does not consider hiring faculty members from another institution. 
B)  faculty members usually have to move to a different city when changing universities. 
C)  students like all of their professors. 
D)  senior faculty members are willing to move to a new university at any cost.

Question 12

For the following, please answer "True" or "False" and explain why.
-An ad valorem tax imposed on a monopolist will reduce the deadweight loss generated by the monopolist.

Accepted Answer

A) True 
 B)False

Question 13

The government prefers an ad valorem tax to a specific tax that reduces the monopoly output by the same amount because

Accepted Answer

A)  consumers are not harmed by the ad valorem tax. 
B)  the monopoly prefers the ad valorem tax. 
C)  consumers prefer the ad valorem tax. 
D)  the ad valorem tax transfers more revenue from the monopoly to the government. 
A)  consumers are not harmed by the ad valorem tax. 
B)  the monopoly prefers the ad valorem tax. 
C)  consumers prefer the ad valorem tax. 
D)  the ad valorem tax transfers more revenue from the monopoly to the government.

Question 14

A monopolist faces the (inverse)demand for its product: p = a - bQ.The monopolist has a marginal cost given by c and a fixed cost given by F.
a.Assume that F is sufficiently small such that the monopolist produces a strictly positive level of output.What is the profit-maximizing price and quantity?
b.Compute the maximum profit for the monopolist.
c.For what values of F will the monopolist earn negative profit?

Accepted Answer

a.The monopolist will choose p = MR (or

Question 15

A profit-maximizing monopoly will never operate in the portion of the demand curve with MR equal to

Accepted Answer

A)  3. 
B)  2. 
C)  1. 
D)  -1. 
A)  3. 
B)  2. 
C)  1. 
D)  -1.

Question 16

If the inverse demand curve a monopoly faces is p = 100 - 2Q,and MC is constant at 16,then maximum profit

Accepted Answer

A)  equals $336. 
B)  equals $882. 
C)  equals $1,218. 
D)  cannot be determined solely from the information provided. 
A)  equals $336. 
B)  equals $882. 
C)  equals $1,218. 
D)  cannot be determined solely from the information provided.

Question 17

Which of the following measures are government regulations to increase competition?

Accepted Answer

A)  Government ends the ban on steel imports. 
B)  Government shortens the term of the patent for a drug. 
C)  Government subsidizes firms to enter energy market. 
D)  All of above. 
A)  Government ends the ban on steel imports. 
B)  Government shortens the term of the patent for a drug. 
C)  Government subsidizes firms to enter energy market. 
D)  All of above.

Question 18

If the government sets a specific tax and an ad valorem tax so that they raise the same amount of tax revenue,why does the ad valorem tax reduce output less than the specific tax?

Accepted Answer

While the per unit amount of the specifi

Question 19

Empirical evidence from electric-power-producing firms suggests that the largest electric-power-producing firms are not natural monopolies because

Accepted Answer

A)  the average cost curve for these firms is U-shaped. 
B)  no electric-power-producing firms are natural monopolies. 
C)  the largest firms enjoy economies of scale. 
D)  the designation of natural monopoly can only be bestowed by the government. 
A)  the average cost curve for these firms is U-shaped. 
B)  no electric-power-producing firms are natural monopolies. 
C)  the largest firms enjoy economies of scale. 
D)  the designation of natural monopoly can only be bestowed by the government.

Question 20

Under monopsony,the wage rate

Accepted Answer

A)  equals the marginal product of labor. 
B)  equals the marginal revenue product of labor. 
C)  is less than the marginal revenue product of labor. 
D)  is greater than it would be under perfect competition. 
A)  equals the marginal product of labor. 
B)  equals the marginal revenue product of labor. 
C)  is less than the marginal revenue product of labor. 
D)  is greater than it would be under perfect competition.

For the following, please answer "True" or "False" and explain why. -A specific tax imposed on a monopolist may increase the price by more than the tax.

If a monopoly's Lerner Index exceeds 1,then

For the following, please answer "True" or "False" and explain why. -Because of market power,wages are higher under monopsony than under competitive conditions.

If the inverse demand curve a monopoly faces is p = 100 - 2Q,then profit maximization

-The above figure shows the demand and cost curves facing a monopoly.The monopoly maximizes profit by selling

The situation in which a person places greater value on a good as fewer and fewer people possess it is called

The monopoly maximizes profit by setting

Limited government licenses that create a monopoly do so because

If a firm is able to set price,

Why do patents stimulate research?

Universities are able to act as monopsonists in the market for professors because

For the following, please answer "True" or "False" and explain why. -An ad valorem tax imposed on a monopolist will reduce the deadweight loss generated by the monopolist.

The government prefers an ad valorem tax to a specific tax that reduces the monopoly output by the same amount because

A profit-maximizing monopoly will never operate in the portion of the demand curve with MR equal to

If the inverse demand curve a monopoly faces is p = 100 - 2Q,and MC is constant at 16,then maximum profit

Which of the following measures are government regulations to increase competition?

If the government sets a specific tax and an ad valorem tax so that they raise the same amount of tax revenue,why does the ad valorem tax reduce output less than the specific tax?

Empirical evidence from electric-power-producing firms suggests that the largest electric-power-producing firms are not natural monopolies because

Under monopsony,the wage rate

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. -A specific tax imposed on a monopolist may increase the price by more than the tax.

If a monopoly's Lerner Index exceeds 1,then

For the following, please answer "True" or "False" and explain why. -Because of market power,wages are higher under monopsony than under competitive conditions.

If the inverse demand curve a monopoly faces is p = 100 - 2Q,then profit maximization

-The above figure shows the demand and cost curves facing a monopoly.The monopoly maximizes profit by selling

The situation in which a person places greater value on a good as fewer and fewer people possess it is called

The monopoly maximizes profit by setting

Limited government licenses that create a monopoly do so because

If a firm is able to set price,

Why do patents stimulate research?

Universities are able to act as monopsonists in the market for professors because

For the following, please answer "True" or "False" and explain why. -An ad valorem tax imposed on a monopolist will reduce the deadweight loss generated by the monopolist.

The government prefers an ad valorem tax to a specific tax that reduces the monopoly output by the same amount because

A profit-maximizing monopoly will never operate in the portion of the demand curve with MR equal to

If the inverse demand curve a monopoly faces is p = 100 - 2Q,and MC is constant at 16,then maximum profit

Which of the following measures are government regulations to increase competition?

If the government sets a specific tax and an ad valorem tax so that they raise the same amount of tax revenue,why does the ad valorem tax reduce output less than the specific tax?

Empirical evidence from electric-power-producing firms suggests that the largest electric-power-producing firms are not natural monopolies because

Under monopsony,the wage rate

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