Question 1

Because monopolists charge a price in excess of marginal cost, it must be the case that monopolists:

Accepted Answer

A) earn a positive economic profit. 
B) earn a negative economic profit. 
C) produce more than the socially optimal level of output. 
D) produce less than the socially optimal level of output. 
A) earn a positive economic profit. 
B) earn a negative economic profit. 
C) produce more than the socially optimal level of output. 
D) produce less than the socially optimal level of output.

Question 2

A pure monopoly exists when:

Accepted Answer

A) many firms produce a good with no close substitutes. 
B) a single firm produces a good with no close substitutes. 
C) only a single firm is present in the market. 
D) a single firm produces a good with many close substitutes. 
A) many firms produce a good with no close substitutes. 
B) a single firm produces a good with no close substitutes. 
C) only a single firm is present in the market. 
D) a single firm produces a good with many close substitutes.

Question 3

If a firm is experiencing economies of scale, then as the firm's output rises, its average total cost ________.

Accepted Answer

A) falls 
B) rises 
C) does not change 
D) becomes negative 
A) falls 
B) rises 
C) does not change 
D) becomes negative

Question 4

The essential feature that differentiates imperfectly competitive firms from perfectly competitive firms is that an imperfectly competitive firm:

Accepted Answer

A) produces a good with no close substitutes. 
B) faces high barriers to entry. 
C) coordinates their output decisions with other firms. 
D) faces a downward-sloping demand curve. 
A) produces a good with no close substitutes. 
B) faces high barriers to entry. 
C) coordinates their output decisions with other firms. 
D) faces a downward-sloping demand curve.

Question 5

Imagine that you are an entrepreneur, making designer t-shirts in your garage. Your total cost (in dollars)is given by the equation TC = 300 + 10Q, where Q represents the number of t-shirts you make. Your fixed cost is $________, and your marginal cost is $________.

Accepted Answer

A) 300; 10 
B) 300; Q30 
C) 300; 10Q 
D) 300; Q10 
A) 300; 10 
B) 300; Q30 
C) 300; 10Q 
D) 300; Q10

Question 6

A perfectly price discriminating monopolist's profit is ________ the profit of a monopolist who charges the same price to all of its customers.

Accepted Answer

A) the same as 
B) less than 
C) higher than 
D) sometimes less than and sometimes greater than. 
A) the same as 
B) less than 
C) higher than 
D) sometimes less than and sometimes greater than.

Question 7

If a monopolist's marginal revenue is $25 and its marginal cost is $19, then the monopolist should:

Accepted Answer

A) raise its price. 
B) increase its output. 
C) leave its output and price unchanged. 
D) decrease its output. 
A) raise its price. 
B) increase its output. 
C) leave its output and price unchanged. 
D) decrease its output.

Question 8

A natural monopoly is a monopoly that arises from:

Accepted Answer

A) having an exclusive right to operate in a national park. 
B) having exclusive control over the natural resources used to produce a good. 
C) a firm's natural desire to maximize its profit. 
D) economies of scale. 
A) having an exclusive right to operate in a national park. 
B) having exclusive control over the natural resources used to produce a good. 
C) a firm's natural desire to maximize its profit. 
D) economies of scale.

Question 9

Suppose Island Bikes, a profit-maximizing firm, is the only bike rental company in a small resort town. The marginal cost to Island Bikes of renting out a bike is $3, and Island Bikes has no fixed costs. Each day Island Bikes has six potential customers, whose reservation prices are listed in the table.  
$$\begin{array} { | c | c | } 
\hline \text { Custamer } & \begin{array} { c } 
\text { Reservetion Price } \
\text { (\$ /Rental) }
\end{array} \
\hline \mathrm { A } & 22 \
\hline \mathrm { B } & 16 \
\hline \mathrm { C } & 12 \
\hline \mathrm { D } & \mathrm { 8 } \
\hline \mathrm { E } & 6 \
\hline \mathrm { F } & 4 \
\hline
\end{array}$$ What is the socially optimal number of bikes for Island Bikes to rent out each day?

Accepted Answer

A) 6 
B) 5 
C) 4 
D) 3 
A) 6 
B) 5 
C) 4 
D) 3

Question 10

Economies of scale arise from:

Accepted Answer

A) constant returns to scale. 
B) increasing returns to scale. 
C) decreasing returns to scale. 
D) constant marginal returns to scale. 
A) constant returns to scale. 
B) increasing returns to scale. 
C) decreasing returns to scale. 
D) constant marginal returns to scale.

Question 11

Suppose the accompanying figure shows the demand curve, marginal revenue curve and marginal cost curve for a monopolist.   At the monopolist's profit-maximizing level of output, deadweight loss equals the area:

Accepted Answer

A) C0N 
B) ALN 
C) JLN 
D) JKN 
A) C0N 
B) ALN 
C) JLN 
D) JKN

Question 12

For all firms, the additional revenue collected from the sale of one additional unit of output is termed:

Accepted Answer

A) price. 
B) average revenue. 
C) marginal profit. 
D) marginal revenue. 
A) price. 
B) average revenue. 
C) marginal profit. 
D) marginal revenue.

Question 13

Suppose a monopolist faces the demand curve shown.   If the monopolist's marginal cost is constant and equal to $30, its profit-maximizing level of output is:

Accepted Answer

A) 50 units. 
B) 40 units. 
C) 20 units. 
D) 30 units. 
A) 50 units. 
B) 40 units. 
C) 20 units. 
D) 30 units.

Question 14

If a firm collects $90 in revenue when it sells 4 units, $100 in revenue when it sells 5 units, and $105 in revenue when it sells 6 units, then one can infer the firm is a:

Accepted Answer

A) perfect competitor. 
B) profit maximizer. 
C) price taker. 
D) monopolist. 
A) perfect competitor. 
B) profit maximizer. 
C) price taker. 
D) monopolist.

Question 15

The demand curve for a perfectly competitive firm is ________, while the demand curve for a monopolist is ________.

Accepted Answer

A) perfectly elastic; downward-sloping 
B) vertical; downward-sloping 
C) perfectly elastic; perfectly inelastic 
D) perfectly inelastic; perfectly elastic 
A) perfectly elastic; downward-sloping 
B) vertical; downward-sloping 
C) perfectly elastic; perfectly inelastic 
D) perfectly inelastic; perfectly elastic

Question 16

Economies of scale exist when:

Accepted Answer

A) firms become larger. 
B) input prices are falling. 
C) the average cost of production falls as output rises. 
D) doubling all the inputs leads to less than double the output. 
A) firms become larger. 
B) input prices are falling. 
C) the average cost of production falls as output rises. 
D) doubling all the inputs leads to less than double the output.

Question 17

A firm whose production process exhibits constant returns to scale would find that if it doubled all of its inputs, its output would ________.

Accepted Answer

A) double 
B) more than double 
C) less than double 
D) remain constant 
A) double 
B) more than double 
C) less than double 
D) remain constant

Question 18

A monopoly that results from economies of scale is called a(n):

Accepted Answer

A) antitrust violator. 
B) large-scale monopolist. 
C) natural monopoly. 
D) cost-plus firm. 
A) antitrust violator. 
B) large-scale monopolist. 
C) natural monopoly. 
D) cost-plus firm.

Question 19

Consider an industry with two firms producing similar products. Each firm's total cost (in dollars)is given below. Acme Manufacturing: TC = 100 + 3Q
Generic Industries: TC = 500 + 3Q
When each firm is producing the same quantity, Acme's average total cost is:

Accepted Answer

A) lower than Generic's average total cost. 
B) equal to Generic's average total cost. 
C) higher than Generic's average total cost. 
D) lower than Generic's average total cost at some levels of output, and higher than Generic's average total cost at other levels of output. 
A) lower than Generic's average total cost. 
B) equal to Generic's average total cost. 
C) higher than Generic's average total cost. 
D) lower than Generic's average total cost at some levels of output, and higher than Generic's average total cost at other levels of output.

Question 20

Suppose the accompanying figure shows the demand curve, marginal revenue curve and marginal cost curve for a monopolist.   When this monopolist maximizes its profit, consumer surplus equals the area:

Accepted Answer

A) ABJ. 
B) ACN. 
C) AELJ. 
D) ACKJ. 
A) ABJ. 
B) ACN. 
C) AELJ. 
D) ACKJ.

Exam 8: Monopoly, Oligopoly, and Monopolistic Competition

Because monopolists charge a price in excess of marginal cost, it must be the case that monopolists:

A pure monopoly exists when:

If a firm is experiencing economies of scale, then as the firm's output rises, its average total cost ________.

The essential feature that differentiates imperfectly competitive firms from perfectly competitive firms is that an imperfectly competitive firm:

Imagine that you are an entrepreneur, making designer t-shirts in your garage. Your total cost (in dollars)is given by the equation TC = 300 + 10Q, where Q represents the number of t-shirts you make. Your fixed cost is $________, and your marginal cost is $________.

A perfectly price discriminating monopolist's profit is ________ the profit of a monopolist who charges the same price to all of its customers.

If a monopolist's marginal revenue is $25 and its marginal cost is $19, then the monopolist should:

A natural monopoly is a monopoly that arises from:

Economies of scale arise from:

Suppose the accompanying figure shows the demand curve, marginal revenue curve and marginal cost curve for a monopolist. At the monopolist's profit-maximizing level of output, deadweight loss equals the area:

For all firms, the additional revenue collected from the sale of one additional unit of output is termed:

Suppose a monopolist faces the demand curve shown. If the monopolist's marginal cost is constant and equal to $30, its profit-maximizing level of output is:

If a firm collects $90 in revenue when it sells 4 units, $100 in revenue when it sells 5 units, and $105 in revenue when it sells 6 units, then one can infer the firm is a:

The demand curve for a perfectly competitive firm is ________, while the demand curve for a monopolist is ________.

Economies of scale exist when:

A firm whose production process exhibits constant returns to scale would find that if it doubled all of its inputs, its output would ________.

A monopoly that results from economies of scale is called a(n):

Consider an industry with two firms producing similar products. Each firm's total cost (in dollars)is given below. Acme Manufacturing: TC = 100 + 3Q Generic Industries: TC = 500 + 3Q When each firm is producing the same quantity, Acme's average total cost is:

Suppose the accompanying figure shows the demand curve, marginal revenue curve and marginal cost curve for a monopolist. When this monopolist maximizes its profit, consumer surplus equals the area:

Thinking Like an Economist

Comparative Advantage

Supply and Demand

Elasticity

Demand

Perfectly Competitive Supply

Efficiency, Exchange, and the Invisible Hand in Action

Games and Strategic Behavior

An Introduction to Behavioral Economics

Externalities, Property Rights, and the Environment

The Economics of Information

Labor Markets, Poverty, and Income Distribution

Public Goods and Tax Policy

International Trade and Trade Policy

Macroeconomics: The Birds Eye View of the Economy

Measuring Economic Activity: GDP and Unemployment

Measuring the Price Level and Inflation

Economic Growth, Productivity, and Living Standards

The Labor Market: Workers, Wages, and Unemployment

Saving and Capital Formation

Money Prices and the Federal Reserve

Financial Markets and International Capital Flows

Short-Term Economic Fluctuations: An Introduction

Spending and Output in the Short Run

Stabilizing the Economy: The Role of the Fed

Aggregate Demand, Aggregate Supply, and Inflation

Exchange Rates and the Open Economy

Filters

Imagine that you are an entrepreneur, making designer t-shirts in your garage. Your total cost (in dollars)is given by the equation TC = 300 + 10Q, where Q represents the number of t-shirts you make. Your fixed cost is $, and your marginal cost is $.

The demand curve for a perfectly competitive firm is , while the demand curve for a monopolist is .