Question 1

Price discrimination requires:

Accepted Answer

A)  a firm to be a competitive firm. 
B)  a firm to be able to segment its customers based on different price elasticities of demand. 
C)  arbitrage. 
D)  that the product can be easily resold. 
A)  a firm to be a competitive firm. 
B)  a firm to be able to segment its customers based on different price elasticities of demand. 
C)  arbitrage. 
D)  that the product can be easily resold.

Question 2

What is the shut-down rule for any firm?

Accepted Answer

Any firm should shut down if losses are

Question 3

Which of the following is not associated with the monopoly market structure?

Accepted Answer

A)  Many sellers. 
B)  A single seller. 
C)  A unique product. 
D)  Impossible entry into the market. 
A)  Many sellers. 
B)  A single seller. 
C)  A unique product. 
D)  Impossible entry into the market.

Question 4

Exhibit 8-10 A monopolist
  
-In Exhibit 8-10,the monopolist would charge which of the following prices to maximize profit or minimize its loss?

Accepted Answer

A)  $10. 
B)  $20. 
C)  $30. 
D)  $35. 
E)  $50. 
A)  $10. 
B)  $20. 
C)  $30. 
D)  $35. 
E)  $50.

Question 5

The demand curve a monopolist faces:

Accepted Answer

A)  is more elastic than a perfectly competitive firm's demand curve. 
B)  is the market demand curve. 
C)  is as elastic as a perfectly competitive firm's demand curve. 
D)  is not affected by the prices of complements. 
E)  will not shift in response to a change in consumer tastes. 
A)  is more elastic than a perfectly competitive firm's demand curve. 
B)  is the market demand curve. 
C)  is as elastic as a perfectly competitive firm's demand curve. 
D)  is not affected by the prices of complements. 
E)  will not shift in response to a change in consumer tastes.

Question 6

Graphically,the marginal revenue curve of a monopolist:

Accepted Answer

A)  will sometimes lie below the demand curve of the monopolist. 
B)  will always lie below the demand curve of the monopolist. 
C)  is the same as the demand curve of the monopolist. 
D)  will equal -1 when the elasticity of demand is unitary. 
A)  will sometimes lie below the demand curve of the monopolist. 
B)  will always lie below the demand curve of the monopolist. 
C)  is the same as the demand curve of the monopolist. 
D)  will equal -1 when the elasticity of demand is unitary.

Question 7

Exhibit 8-5 Demand and cost data for a monopolist
  
-By calculating the data provided in Exhibit 8-5,how much is the profit if the firm decides to produce 7 units?

Accepted Answer

A)  0. 
B)  24. 
C)  16. 
D)  12. 
E)  6. 
A)  0. 
B)  24. 
C)  16. 
D)  12. 
E)  6.

Question 8

What is a natural monopoly? Why is government justified in regulating a natural monopoly?

Accepted Answer

A natural monopoly is a monopoly that re

Question 9

The goal of any monopolist is to maximize:

Accepted Answer

A)  economic profits. 
B)  normal profits. 
C)  price. 
D)  consumer welfare. 
E)  output. 
A)  economic profits. 
B)  normal profits. 
C)  price. 
D)  consumer welfare. 
E)  output.

Question 10

Which of the following is true for a pure monopolist?

Accepted Answer

A)  The firm has a perfectly elastic demand curve. 
B)  The firm will always earn an economic profit. 
C)  The demand curve is above the marginal revenue curve. 
D)  None of the above is true. 
A)  The firm has a perfectly elastic demand curve. 
B)  The firm will always earn an economic profit. 
C)  The demand curve is above the marginal revenue curve. 
D)  None of the above is true.

Question 11

A monopolist will earn economic profits as long as his price exceeds:

Accepted Answer

A)  marginal revenue. 
B)  average fixed cost. 
C)  average variable cost. 
D)  average total cost. 
A)  marginal revenue. 
B)  average fixed cost. 
C)  average variable cost. 
D)  average total cost.

Question 12

Monopolists are criticized because they are inefficient.What is meant by this statement?

Accepted Answer

A)  Monopolists charge too high a price. 
B)  Monopolists don't innovate enough to control pollution. 
C)  Monopolists produce a large quantity of waste. 
D)  Monopolists usually don't produce at the minimum of the ATC. 
E)  Monopolists could use their resources better elsewhere. 
A)  Monopolists charge too high a price. 
B)  Monopolists don't innovate enough to control pollution. 
C)  Monopolists produce a large quantity of waste. 
D)  Monopolists usually don't produce at the minimum of the ATC. 
E)  Monopolists could use their resources better elsewhere.

Question 13

Exhibit 8-4 Demand and cost curves for a monopolist
  
-What should a profit maximizing monopolist do if she is currently producing where MC < MR?

Accepted Answer

A)  Increase output until MC = MR. 
B)  Decrease output until MC = MR. 
C)  Shut down in the long run. 
D)  Keep producing at this level. 
E)  Operate only in the short run. 
A)  Increase output until MC = MR. 
B)  Decrease output until MC = MR. 
C)  Shut down in the long run. 
D)  Keep producing at this level. 
E)  Operate only in the short run.

Question 14

Suppose a monopolist and a perfectly competitive firm have the same cost curves.The monopolistic firm would:

Accepted Answer

A)  charge a lower price than the perfectly competitive firm. 
B)  charge a higher price than the perfectly competitive firm. 
C)  charge the same price as the perfectly competitive firm. 
D)  refuse to operate in the short run unless an economic profit could be made. 
E)  refuse to operate in the short run if an economic loss was present. 
A)  charge a lower price than the perfectly competitive firm. 
B)  charge a higher price than the perfectly competitive firm. 
C)  charge the same price as the perfectly competitive firm. 
D)  refuse to operate in the short run unless an economic profit could be made. 
E)  refuse to operate in the short run if an economic loss was present.

Question 15

Exhibit 8-6 Monopoly
  
-The monopoly price that maximizes profits in Exhibit 8-6 is:

Accepted Answer

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

Question 16

A monopoly firm can sell its fourth unit of output for a price of $250.In order to sell more than five units,it must expect to receive a price:

Accepted Answer

A)  equal to $250. 
B)  greater than $250. 
C)  less than $250. 
D)  equal to $340. 
E)  the price is impossible to calculate with the information given. 
A)  equal to $250. 
B)  greater than $250. 
C)  less than $250. 
D)  equal to $340. 
E)  the price is impossible to calculate with the information given.

Question 17

Which of the following is true for the monopolist?

Accepted Answer

A)  Marginal revenue is less than the price charged. 
B)  Economic profit is possible in the long-run. 
C)  Profit maximizing or loss minimizing occurs when marginal revenue equals marginal cost. 
D)  All of the above. 
E)  None of the above. 
A)  Marginal revenue is less than the price charged. 
B)  Economic profit is possible in the long-run. 
C)  Profit maximizing or loss minimizing occurs when marginal revenue equals marginal cost. 
D)  All of the above. 
E)  None of the above.

Question 18

To maximize its profit,a monopoly should choose a price where demand is:

Accepted Answer

A)  elastic. 
B)  inelastic. 
C)  unitary elastic. 
D)  vertical. 
A)  elastic. 
B)  inelastic. 
C)  unitary elastic. 
D)  vertical.

Question 19

A monopoly sets a market price that is higher than the marginal cost of production.This fact implies that a monopoly's allocation of resources is:

Accepted Answer

A)  unfair. 
B)  inefficient. 
C)  discriminatory. 
D)  excessive. 
A)  unfair. 
B)  inefficient. 
C)  discriminatory. 
D)  excessive.

Question 20

The two theoretical extremes of the market structure spectrum are occupied at one end by perfect competition and on the other end by monopoly.

Accepted Answer

A) True 
 B)False

Exam 8: Monopoly

Price discrimination requires:

What is the shut-down rule for any firm?

Which of the following is not associated with the monopoly market structure?

Exhibit 8-10 A monopolist -In Exhibit 8-10,the monopolist would charge which of the following prices to maximize profit or minimize its loss?

The demand curve a monopolist faces:

Graphically,the marginal revenue curve of a monopolist:

Exhibit 8-5 Demand and cost data for a monopolist -By calculating the data provided in Exhibit 8-5,how much is the profit if the firm decides to produce 7 units?

What is a natural monopoly? Why is government justified in regulating a natural monopoly?

The goal of any monopolist is to maximize:

Which of the following is true for a pure monopolist?

A monopolist will earn economic profits as long as his price exceeds:

Monopolists are criticized because they are inefficient.What is meant by this statement?

Exhibit 8-4 Demand and cost curves for a monopolist -What should a profit maximizing monopolist do if she is currently producing where MC < MR?

Suppose a monopolist and a perfectly competitive firm have the same cost curves.The monopolistic firm would:

Exhibit 8-6 Monopoly -The monopoly price that maximizes profits in Exhibit 8-6 is:

A monopoly firm can sell its fourth unit of output for a price of $250.In order to sell more than five units,it must expect to receive a price:

Which of the following is true for the monopolist?

To maximize its profit,a monopoly should choose a price where demand is:

A monopoly sets a market price that is higher than the marginal cost of production.This fact implies that a monopoly's allocation of resources is:

The two theoretical extremes of the market structure spectrum are occupied at one end by perfect competition and on the other end by monopoly.

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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