Question 1

Which of the following is a market structure of monopoly?

Accepted Answer

A)  Few firms operating as price takers. 
B)  Single firm operating as a price taker. 
C)  Single firm that is a price maker. 
D)  All of the above are true. 
A)  Few firms operating as price takers. 
B)  Single firm operating as a price taker. 
C)  Single firm that is a price maker. 
D)  All of the above are true.

Question 2

Which of the following factors is not a barrier to entry?

Accepted Answer

A)  legally enforced patent rights 
B)  an inelastic demand for a product 
C)  licensing 
D)  control over an essential resource 
A)  legally enforced patent rights 
B)  an inelastic demand for a product 
C)  licensing 
D)  control over an essential resource

Question 3

To earn an economic profit in the short-run,a monopolist sets marginal revenue equal to zero.

Accepted Answer

A) True 
 B)False

Question 4

Exhibit 8-8 Profit maximizing for a monopolist
  
-As shown in Exhibit 8-8,if the monopolist produces the profit-maximizing output,total revenue is the rectangular area:

Accepted Answer

A)  OQAP₁. 
B)  OQ₂BP₂. 
C)  OQ₃CP₃. 
D)  OQ₂DP₄. 
A)  OQAP₁. 
B)  OQ₂BP₂. 
C)  OQ₃CP₃. 
D)  OQ₂DP₄.

Question 5

Which of the following best explains why the monopolist's marginal revenue is less than the selling price?

Accepted Answer

A)  To sell more units, the monopolist must reduce price on all units sold. 
B)  As the monopolist expands output, the average total cost will decline. 
C)  The monopolist charges each consumer the highest possible price. 
D)  When a firm has a monopoly, consumers have no choice other than to pay the price set by the monopolist. 
A)  To sell more units, the monopolist must reduce price on all units sold. 
B)  As the monopolist expands output, the average total cost will decline. 
C)  The monopolist charges each consumer the highest possible price. 
D)  When a firm has a monopoly, consumers have no choice other than to pay the price set by the monopolist.

Question 6

Which of the following represents an arbitrage transaction?

Accepted Answer

A)  Traders buy silks where they are abundant and cheap, and haul them along a trail to another place where they would be quite scarce and valued. 
B)  A trader buys a block of government bonds in one market where it is temporarily priced below where it can be immediately resold in a different market. 
C)  Someone buys a block of Final Four tickets and scalp them at the game. 
D)  A senior citizen buys a block of theater tickets at a senior discount and scalps them to teenagers behind the theater. 
E)  All of the above are example of arbitrage. 
A)  Traders buy silks where they are abundant and cheap, and haul them along a trail to another place where they would be quite scarce and valued. 
B)  A trader buys a block of government bonds in one market where it is temporarily priced below where it can be immediately resold in a different market. 
C)  Someone buys a block of Final Four tickets and scalp them at the game. 
D)  A senior citizen buys a block of theater tickets at a senior discount and scalps them to teenagers behind the theater. 
E)  All of the above are example of arbitrage.

Question 7

Which of the following statements best describes the price,output,and profit conditions of monopoly?

Accepted Answer

A)  Price will equal marginal cost at the profit-maximizing level of output and profits will be positive in the long run. 
B)  Price will always equal average variable cost in the short-run and either profits or losses may result in the long run. 
C)  In the long run, positive economic profit will be eliminated. 
D)  None of the above. 
A)  Price will equal marginal cost at the profit-maximizing level of output and profits will be positive in the long run. 
B)  Price will always equal average variable cost in the short-run and either profits or losses may result in the long run. 
C)  In the long run, positive economic profit will be eliminated. 
D)  None of the above.

Question 8

For a monopolist:

Accepted Answer

A)  price equals average total cost. 
B)  price is above marginal revenue. 
C)  marginal revenue equals zero. 
D)  marginal cost equals zero. 
E)  average total cost equals marginal cost. 
A)  price equals average total cost. 
B)  price is above marginal revenue. 
C)  marginal revenue equals zero. 
D)  marginal cost equals zero. 
E)  average total cost equals marginal cost.

Question 9

Under both perfect competition and monopoly,a firm:

Accepted Answer

A)  is a price taker. 
B)  maximizes profit by setting marginal cost equal to marginal revenue. 
C)  will shut down in the short-run if price falls short of average total cost. 
D)  always earns a pure economic profit. 
A)  is a price taker. 
B)  maximizes profit by setting marginal cost equal to marginal revenue. 
C)  will shut down in the short-run if price falls short of average total cost. 
D)  always earns a pure economic profit.

Question 10

Which of the following is a difference between a monopolist and a firm in perfect competition?

Accepted Answer

A)  The marginal revenue curve is downward-sloping. 
B)  Marginal revenue equals price. 
C)  Economic profits are zero in the long-run. 
D)  The marginal revenue curve lies above the demand curve. 
A)  The marginal revenue curve is downward-sloping. 
B)  Marginal revenue equals price. 
C)  Economic profits are zero in the long-run. 
D)  The marginal revenue curve lies above the demand curve.

Question 11

Assume a monopolist charges a price corresponding to the intersection of the marginal cost and marginal revenue curves.If this price is between its average variable cost and average total cost curves,the firm will:

Accepted Answer

A)  earn an economic profit. 
B)  continue to operate in the short run. 
C)  shut down. 
D)  all of the above are true. 
A)  earn an economic profit. 
B)  continue to operate in the short run. 
C)  shut down. 
D)  all of the above are true.

Question 12

A monopoly can successfully price discriminate as long as there are no close substitutes for its product.

Accepted Answer

A) True 
 B)False

Question 13

The monopolist's demand curve is:

Accepted Answer

A)  identical to the market demand curve. 
B)  identical to the marginal revenue curve. 
C)  below the marginal revenue curve. 
D)  a horizontal line at the market price. 
E)  a U-shaped curve. 
A)  identical to the market demand curve. 
B)  identical to the marginal revenue curve. 
C)  below the marginal revenue curve. 
D)  a horizontal line at the market price. 
E)  a U-shaped curve.

Question 14

Which of the following is true about a monopoly?

Accepted Answer

A)  A monopoly charges a higher price and produces a lower output level than if the market were competitive. 
B)  A monopoly is guaranteed an economic profit. 
C)  A monopoly charges the highest possible price. 
D)  A monopoly will shut down whenever losses are incurred. 
E)  All of the above. 
A)  A monopoly charges a higher price and produces a lower output level than if the market were competitive. 
B)  A monopoly is guaranteed an economic profit. 
C)  A monopoly charges the highest possible price. 
D)  A monopoly will shut down whenever losses are incurred. 
E)  All of the above.

Question 15

For a monopoly to successfully price discriminate,its customers must:

Accepted Answer

A)  feel that the product is a necessity. 
B)  have identical demands. 
C)  be unable to resell the product. 
D)  actively engage in arbitrage. 
A)  feel that the product is a necessity. 
B)  have identical demands. 
C)  be unable to resell the product. 
D)  actively engage in arbitrage.

Question 16

A natural monopoly maximizes profits at the point at which price equals minimum average total cost.

Accepted Answer

A) True 
 B)False

Question 17

Price discrimination often permits some consumers who otherwise would be excluded from a market to buy a good or service.

Accepted Answer

A) True 
 B)False

Question 18

A perfectly competitive firm is a price taker,but a monopoly is a price maker.

Accepted Answer

A) True 
 B)False

Question 19

If marginal costs increase,a monopolist will:

Accepted Answer

A)  decrease price and increase output. 
B)  decrease both price and output. 
C)  increase price and decrease output. 
D)  increase both price and output. 
E)  keep both price and output at the same level. 
A)  decrease price and increase output. 
B)  decrease both price and output. 
C)  increase price and decrease output. 
D)  increase both price and output. 
E)  keep both price and output at the same level.

Question 20

A monopolist faces a downward sloping demand curve that is equal to which of the following?

Accepted Answer

A)  The prevailing market price. 
B)  The market demand curve. 
C)  Its marginal cost curve. 
D)  Marginal revenue. 
A)  The prevailing market price. 
B)  The market demand curve. 
C)  Its marginal cost curve. 
D)  Marginal revenue.

Exam 8: Monopoly

Which of the following is a market structure of monopoly?

Which of the following factors is not a barrier to entry?

To earn an economic profit in the short-run,a monopolist sets marginal revenue equal to zero.

Exhibit 8-8 Profit maximizing for a monopolist -As shown in Exhibit 8-8,if the monopolist produces the profit-maximizing output,total revenue is the rectangular area:

Which of the following best explains why the monopolist's marginal revenue is less than the selling price?

Which of the following represents an arbitrage transaction?

Which of the following statements best describes the price,output,and profit conditions of monopoly?

For a monopolist:

Under both perfect competition and monopoly,a firm:

Which of the following is a difference between a monopolist and a firm in perfect competition?

Assume a monopolist charges a price corresponding to the intersection of the marginal cost and marginal revenue curves.If this price is between its average variable cost and average total cost curves,the firm will:

A monopoly can successfully price discriminate as long as there are no close substitutes for its product.

The monopolist's demand curve is:

Which of the following is true about a monopoly?

For a monopoly to successfully price discriminate,its customers must:

A natural monopoly maximizes profits at the point at which price equals minimum average total cost.

Price discrimination often permits some consumers who otherwise would be excluded from a market to buy a good or service.

A perfectly competitive firm is a price taker,but a monopoly is a price maker.

If marginal costs increase,a monopolist will:

A monopolist faces a downward sloping demand curve that is equal to which of the following?

Introducing the Economic Way of Thinking

A: Appendix: Applying Graphs to Economics

Production Possibilities,Opportunity Cost,and Economic Growth

Part 1: Market Demand and Supply

Part 2: Market Demand and Supply

Markets in Action

Price Elasticity of Demand

Production Costs

Perfect Competition

Monopolistic Competition and Oligopoly

Labor Markets and Income Distribution

Gross Domestic Product

Business Cycles and Unemployment

Inflation

Aggregate Demand and Supply

A: Appendix: The Self-Correcting Aggregate Demand and Supply Model

Fiscal Policy

The Public Sector

Federal Deficits,Surpluses,and the National Debt

Money and the Federal Reserve System

Money Creation

Monetary Policy

A: Appendix: Policy Disputes Using the Self-Correcting Aggregate Demand and Supply Model

International Trade and Finance

Economies in Transition

Growth and the Less-Developed Countries

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