Question 1

Why can a monopoly earn economic profits in the long run?

Accepted Answer

Because a monopoly experiences very stro

Question 2

Exhibit 8-9 A monopolist
  
-In Exhibit 8-9,the profit-maximizing or loss-minimizing output for the monopolist is:

Accepted Answer

A)  200 units per day. 
B)  300 units per day. 
C)  400 units per day. 
D)  500 units per day. 
E)  600 units per day. 
A)  200 units per day. 
B)  300 units per day. 
C)  400 units per day. 
D)  500 units per day. 
E)  600 units per day.

Question 3

Exhibit 8-4 Demand and cost curves for a monopolist
  
-As shown in Exhibit 8-4,in order to maximize its profit (or minimize its loss),what price should the monopoly charge for its product?

Accepted Answer

A)  $60 per unit. 
B)  $90 per unit. 
C)  $120 per unit. 
D)  $150 per unit. 
A)  $60 per unit. 
B)  $90 per unit. 
C)  $120 per unit. 
D)  $150 per unit.

Question 4

A monopoly market is characterized by a single seller of a product which has few,if any suitable substitutes.

Accepted Answer

A) True 
 B)False

Question 5

Under 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 6

The monopolist faces the market demand curve.

Accepted Answer

A) True 
 B)False

Question 7

A profit-maximizing monopolist will continue expanding output as long as:

Accepted Answer

A)  marginal revenue exceeds marginal cost. 
B)  marginal revenue is positive. 
C)  the cost of producing an additional unit exceeds the marginal revenue derived from the unit. 
D)  economic profit is more than zero. 
A)  marginal revenue exceeds marginal cost. 
B)  marginal revenue is positive. 
C)  the cost of producing an additional unit exceeds the marginal revenue derived from the unit. 
D)  economic profit is more than zero.

Question 8

The monopolist faces the market demand curve.

Accepted Answer

A) True 
 B)False

Question 9

A profit maximizing monopolist sets price and output so that it always operates on the elastic portion of its straight-line demand curve when in equilibrium.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following firms best fits the definition of a monopoly?

Accepted Answer

A)  General Motors 
B)  Exxon Mobile 
C)  Local electric utility 
D)  AT&T 
A)  General Motors 
B)  Exxon Mobile 
C)  Local electric utility 
D)  AT&T

Question 11

Alcoa had a monopoly in the U.S.aluminum market from the late nineteenth century until the end of World War II.Which barrier to entry was the source of Alcoa's monopoly power?

Accepted Answer

A)  Ownership of a vital resource. 
B)  Government franchises and licenses. 
C)  Patents and copyrights. 
D)  Economies of scale. 
A)  Ownership of a vital resource. 
B)  Government franchises and licenses. 
C)  Patents and copyrights. 
D)  Economies of scale.

Question 12

If a monopolist finds that at the present level of output marginal revenue exceeds marginal cost,the firm should:

Accepted Answer

A)  shut down. 
B)  expand output. 
C)  maintain the current output. 
D)  reduce output (but still produce). 
E)  raise prices. 
A)  shut down. 
B)  expand output. 
C)  maintain the current output. 
D)  reduce output (but still produce). 
E)  raise prices.

Question 13

Exhibit 8-2 Demand and cost information for a monopoly
  
-The marginal revenue of the second unit of output in Exhibit 8-2 is:

Accepted Answer

A)  10. 
B)  20. 
C)  30. 
D)  40. 
E)  60. 
A)  10. 
B)  20. 
C)  30. 
D)  40. 
E)  60.

Question 14

The strategy underlying price discrimination is to:

Accepted Answer

A)  charge higher prices to customers who have better access to substitutes. 
B)  charge everyone the same price but limit the quantity they are allowed to buy. 
C)  increase total revenue by charging higher prices to those with the most inelastic demand for the product and lower prices to those with the most elastic demand. 
D)  reduce per-unit costs by charging higher prices to those with the most elastic demand and lower prices to those with the most inelastic demand. 
A)  charge higher prices to customers who have better access to substitutes. 
B)  charge everyone the same price but limit the quantity they are allowed to buy. 
C)  increase total revenue by charging higher prices to those with the most inelastic demand for the product and lower prices to those with the most elastic demand. 
D)  reduce per-unit costs by charging higher prices to those with the most elastic demand and lower prices to those with the most inelastic demand.

Question 15

Because monopolists are protected by high barriers to entry,they:

Accepted Answer

A)  may be able to earn long-run economic profits. 
B)  will not minimize the per-unit cost of producing their output. 
C)  will price their product at the highest possible price. 
D)  seek economic profit; however, they are not able to earn it in the long run. 
A)  may be able to earn long-run economic profits. 
B)  will not minimize the per-unit cost of producing their output. 
C)  will price their product at the highest possible price. 
D)  seek economic profit; however, they are not able to earn it in the long run.

Question 16

A monopolist will charge a lower price and produce more output than if it was operating in a competitive market.

Accepted Answer

A) True 
 B)False

Question 17

Monopoly is a market structure characterized by a:

Accepted Answer

A)  single firm operating as a price taker. 
B)  few firms operating as price takers. 
C)  single firm that is not a price taker. 
D)  none of the above. 
A)  single firm operating as a price taker. 
B)  few firms operating as price takers. 
C)  single firm that is not a price taker. 
D)  none of the above.

Question 18

A monopolist maximizes total revenue.

Accepted Answer

A) True 
 B)False

Question 19

There is only one gas station within hundreds of miles.The owner finds that when she charges $3 a gallon,she sells 199 gallons a day,and when she charges $2.99 a gallon,she sells 200 gallons a day.The marginal revenue of the 200th gallon of gas is:

Accepted Answer

A)  $.01. 
B)  $1. 
C)  $2.99. 
D)  $3. 
E)  $600. 
A)  $.01. 
B)  $1. 
C)  $2.99. 
D)  $3. 
E)  $600.

Question 20

Exhibit 8-6 Monopoly
  
-When the monopolist is maximizing total profit in Exhibit 8-6,the average total cost of producing that output level is:

Accepted Answer

A)  $4. 
B)  $6. 
C)  $7. 
D)  $8. 
E)  $10. 
A)  $4. 
B)  $6. 
C)  $7. 
D)  $8. 
E)  $10.

Exam 8: Monopoly

Why can a monopoly earn economic profits in the long run?

Exhibit 8-9 A monopolist -In Exhibit 8-9,the profit-maximizing or loss-minimizing output for the monopolist is:

Exhibit 8-4 Demand and cost curves for a monopolist -As shown in Exhibit 8-4,in order to maximize its profit (or minimize its loss),what price should the monopoly charge for its product?

A monopoly market is characterized by a single seller of a product which has few,if any suitable substitutes.

Under monopoly,a firm:

The monopolist faces the market demand curve.

A profit-maximizing monopolist will continue expanding output as long as:

The monopolist faces the market demand curve.

A profit maximizing monopolist sets price and output so that it always operates on the elastic portion of its straight-line demand curve when in equilibrium.

Which of the following firms best fits the definition of a monopoly?

Alcoa had a monopoly in the U.S.aluminum market from the late nineteenth century until the end of World War II.Which barrier to entry was the source of Alcoa's monopoly power?

If a monopolist finds that at the present level of output marginal revenue exceeds marginal cost,the firm should:

Exhibit 8-2 Demand and cost information for a monopoly -The marginal revenue of the second unit of output in Exhibit 8-2 is:

The strategy underlying price discrimination is to:

Because monopolists are protected by high barriers to entry,they:

A monopolist will charge a lower price and produce more output than if it was operating in a competitive market.

Monopoly is a market structure characterized by a:

A monopolist maximizes total revenue.

There is only one gas station within hundreds of miles.The owner finds that when she charges $3 a gallon,she sells 199 gallons a day,and when she charges $2.99 a gallon,she sells 200 gallons a day.The marginal revenue of the 200th gallon of gas is:

Exhibit 8-6 Monopoly -When the monopolist is maximizing total profit in Exhibit 8-6,the average total cost of producing that output level is:

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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