Question 1

If a firm functions in an oligopoly, it is:

Accepted Answer

A) one of a small number of firms that produce goods that are either close or perfect substitutes. 
B) the only firm that produces a good with no close substitutes. 
C) one of a large number of firms that produce goods that are either close or perfect substitutes. 
D) one of a large number of firms that produce a good with no close substitute. 
A) one of a small number of firms that produce goods that are either close or perfect substitutes. 
B) the only firm that produces a good with no close substitutes. 
C) one of a large number of firms that produce goods that are either close or perfect substitutes. 
D) one of a large number of firms that produce a good with no close substitute.

Question 2

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 reservations prices are listed in the table.  
$$\begin{array} { | c | c | } 
\hline \text { Custamer } & \begin{array} { c } 
\text { Reservetion Price } \
\text { (\$ /Rental) }
\end{array} \
\hline \mathrm { A } & 22 \
\hline \mathrm { B } & 16 \
\hline \mathrm { C } & 12 \
\hline \mathrm { D } & \mathrm { 8 } \
\hline \mathrm { E } & 6 \
\hline \mathrm { F } & 4 \
\hline
\end{array}$$ Suppose Island Bikes knows that customers whose reservation prices are at least $10 always rent bikes before noon, while those whose reservation prices are below $10 never do so. If Island bikes can charge a different price in the morning and in the afternoon, then in the afternoon, it will rent out ________ bike(s)and charge ________ per bike.

Accepted Answer

A) 1; $8 
B) 2; $6 
C) 3; $4 
D) 5; $10 
A) 1; $8 
B) 2; $6 
C) 3; $4 
D) 5; $10

Question 3

Suppose the accompanying table describes the relationship between price and quantity demanded for a monopolist.  
$$\begin{array} { | c | c | } 
\hline \text { Quntity } & \text { Price } \
\hline 1 & \$ 10 \
\hline 2 & \$ 9 \
\hline 3 & \$ 8 \
\hline 4 & \$ 7 \
\hline 5 & \$ 6 \
\hline 6 & \$ 5 \
\hline 7 & \$ 4 \
\hline 8 & \$ 3 \
\hline
\end{array}$$ The marginal revenue of the fifth unit of output is:

Accepted Answer

A) $30. 
B) $6. 
C) $2. 
D) ?$2. 
A) $30. 
B) $6. 
C) $2. 
D) ?$2.

Question 4

Suppose Campus Books, a profit-maximizing firm, is the only supplier of the textbook for a given class. The marginal cost of supplying each book is constant and equal to $10, and Campus Books has no fixed costs. The table shows the reservation prices of the eight students enrolled in the class.  
$$\begin{array} { | c | c | } 
\hline \text { Custamer } & \begin{array} { c } 
\text { Reservutian Price } \
\text { (S/Bank) }
\end{array} \
\hline \mathrm { Q } & 60 \
\hline \mathrm { R } & 54 \
\hline \mathrm { S } & 48 \
\hline \mathrm { T } & 42 \
\hline \mathrm { U } & 36 \
\hline \mathrm { V } & 30 \
\hline \mathrm { W } & 24 \
\hline \mathrm { X } & 18 \
\hline
\end{array}$$ If Campus Books is permitted to charge 2 prices, and the bookstore knows customers with a reservation price above $30 never bother with coupons, whereas those with a reservation price of $30 or less always use them, then what will be the bookstore's total economic profit?

Accepted Answer

A) $158 
B) $154 
C) $150 
D) $130 
A) $158 
B) $154 
C) $150 
D) $130

Question 5

A good is characterized by network economies if it:

Accepted Answer

A) can be used by more than one person at a time. 
B) becomes cheaper to produce as more people buy it. 
C) becomes more valuable as more people own it. 
D) is widely advertised on television. 
A) can be used by more than one person at a time. 
B) becomes cheaper to produce as more people buy it. 
C) becomes more valuable as more people own it. 
D) is widely advertised on television.

Question 6

In exchange for a share of the revenues earned on campus, State U has granted CheapFizz the exclusive right to sell soft drinks in the student union and in vending machines on campus. Prior to the deal, three soft drink companies sold beverages on campus; now no other soft drink company is allowed to sell its products on campus. CheapFizz now has market power due to:

Accepted Answer

A) economies of scale in the production of soda. 
B) its exclusive ownership of an input. 
C) its exclusive license to sell soda. 
D) network economies in the consumption of soda. 
A) economies of scale in the production of soda. 
B) its exclusive ownership of an input. 
C) its exclusive license to sell soda. 
D) network economies in the consumption of soda.

Question 7

Suppose the accompanying table describes the demand for a good produced by monopolist.  
$$\begin{array} { | c | c | } 
\hline \text { Price } & \text { Quantity } \
\hline \$ 10 & 1 \
\hline \$ 9 & 2 \
\hline \$ 8 & 3 \
\hline \$ 7 & 4 \
\hline \$ 6 & 5 \
\hline \$ 5 & 6 \
\hline \$ 4 & 7 \
\hline
\end{array}$$ The monopolist's total revenue from selling 3 units is ________, and the monopolist's marginal revenue from selling the 3ʳᵈ unit is ________.

Accepted Answer

A) $28; 8 
B) $24; 6 
C) $52; 1 
D) $24; 8 
A) $28; 8 
B) $24; 6 
C) $52; 1 
D) $24; 8

Question 8

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. If you make 1,000 t-shirts, your average total cost is ________.

Accepted Answer

A) $3 
B) $3.10 
C) $10.30 
D) $1.03 
A) $3 
B) $3.10 
C) $10.30 
D) $1.03

Question 9

A consumer goes to purchase a TV advertised for $300. As he is checking out, the clerk informs him of a $20 rebate offer for the TV, which he fills out and receives in 3 months. What can one can infer about the consumer's reservation price?

Accepted Answer

A) It was at least $300. 
B) It was at most $280. 
C) It was exactly $300. 
D) It was at least $280 but less than $300. 
A) It was at least $300. 
B) It was at most $280. 
C) It was exactly $300. 
D) It was at least $280 but less than $300.

Question 10

Suppose Campus Books, a profit-maximizing firm, is the only supplier of the textbook for a given class. The marginal cost of supplying each book is constant and equal to $10, and Campus Books has no fixed costs. The table shows the reservation prices of the eight students enrolled in the class.  
$$\begin{array} { | c | c | } 
\hline \text { Custamer } & \begin{array} { c } 
\text { Reservutian Price } \
\text { (S/Bank) }
\end{array} \
\hline \mathrm { Q } & 60 \
\hline \mathrm { R } & 54 \
\hline \mathrm { S } & 48 \
\hline \mathrm { T } & 42 \
\hline \mathrm { U } & 36 \
\hline \mathrm { V } & 30 \
\hline \mathrm { W } & 24 \
\hline \mathrm { X } & 18 \
\hline
\end{array}$$ How many books will Campus Books sell if it must charge a single price to all of its customers?

Accepted Answer

A) 3 
B) 4 
C) 5 
D) 7 
A) 3 
B) 4 
C) 5 
D) 7

Question 11

If the demand curve facing the monopolist is P = 70 − 14Q, then the slope of its marginal revenue curve is:

Accepted Answer

A) −28. 
B) −14. 
C) −7. 
D) −35. 
A) −28. 
B) −14. 
C) −7. 
D) −35.

Question 12

Suppose the accompanying table describes the demand for a good produced by monopolist.  
$$\begin{array} { | c | c | } 
\hline \text { Price } & \text { Quantity } \
\hline \$ 10 & 1 \
\hline \$ 9 & 2 \
\hline \$ 8 & 3 \
\hline \$ 7 & 4 \
\hline \$ 6 & 5 \
\hline \$ 5 & 6 \
\hline \$ 4 & 7 \
\hline
\end{array}$$
 The total revenue from selling 6 units is ________, and the marginal revenue of selling the 6?? unit is ________.

Accepted Answer

A) $5; 5 
B) $30; 0 
C) $24; $5 
D) $30; $1 
A) $5; 5 
B) $30; 0 
C) $24; $5 
D) $30; $1

Question 13

To sell an extra unit of output, a perfectly competitive firm ________, and an imperfectly competitive firm ________.

Accepted Answer

A) need not alter its price; must lower its price 
B) must hope the market price falls; must lower its price 
C) need not alter its price; need not alter its price 
D) must lower its price; must lower its price 
A) need not alter its price; must lower its price 
B) must hope the market price falls; must lower its price 
C) need not alter its price; need not alter its price 
D) must lower its price; must lower its price

Question 14

The accompanying figure shows the demand curve, marginal revenue curve, marginal cost curve and average total cost curve for a monopolist.   This monopolist maximizes its profit by producing ________ units per day and charging a price of ________ per unit.

Accepted Answer

A) 4; $6 
B) 8; $6 
C) 4; $18 
D) 8; $14 
A) 4; $6 
B) 8; $6 
C) 4; $18 
D) 8; $14

Question 15

In exchange for a share of the revenues earned on campus, State U has granted CheapFizz the exclusive right to sell soft drinks in the student union and in vending machines on campus. Prior to the deal, three soft drink companies sold beverages on campus; now no other soft drink company is allowed to sell its products on campus. The beneficiaries of this deal is/are ________.

Accepted Answer

A) the students at State U 
B) State U 
C) State U and CheapFizz 
D) CheapFizz 
A) the students at State U 
B) State U 
C) State U and CheapFizz 
D) CheapFizz

Question 16

When a perfectly competitive firm sells additional units of output, ________, and when a monopolist sells additional units of output, ________.

Accepted Answer

A) total revenue always rises; total revenue could rise, fall, or remain unchanged 
B) total revenue does not change; total revenue rises 
C) marginal revenue stays the same; marginal revenue rises 
D) total revenue rises; total revenue falls 
A) total revenue always rises; total revenue could rise, fall, or remain unchanged 
B) total revenue does not change; total revenue rises 
C) marginal revenue stays the same; marginal revenue rises 
D) total revenue rises; total revenue falls

Question 17

According to the textbook, the most important and enduring source of market power is:

Accepted Answer

A) government franchises. 
B) patents. 
C) copyrights. 
D) economies of scale. 
A) government franchises. 
B) patents. 
C) copyrights. 
D) economies of scale.

Question 18

Under cost-plus regulation, a regulated firm is permitted to charge prices that cover the explicit cost of production plus a markup to cover the:

Accepted Answer

A) opportunity cost of the resources supplied by the firm's owners. 
B) extra cost associated with the state ownership of natural monopolies. 
C) cost of winning a government contract. 
D) owner's economic rent. 
A) opportunity cost of the resources supplied by the firm's owners. 
B) extra cost associated with the state ownership of natural monopolies. 
C) cost of winning a government contract. 
D) owner's economic rent.

Question 19

Which of the following is NOT an example of a good with network economies?

Accepted Answer

A) A cell phone 
B) Internet service 
C) A computer printer 
D) Facebook 
A) A cell phone 
B) Internet service 
C) A computer printer 
D) Facebook

Question 20

Imperfect price discrimination occurs when a monopolist:

Accepted Answer

A) charges a single price to all buyers. 
B) price discriminates but some buyers pay less than their reservation price. 
C) price discriminates but some buyers pay more than their reservation price. 
D) charges all buyers exactly their reservation price. 
A) charges a single price to all buyers. 
B) price discriminates but some buyers pay less than their reservation price. 
C) price discriminates but some buyers pay more than their reservation price. 
D) charges all buyers exactly their reservation price.

Exam 8: Monopoly, Oligopoly, and Monopolistic Competition

If a firm functions in an oligopoly, it is:

Suppose the accompanying table describes the relationship between price and quantity demanded for a monopolist. Quntity Price 1 \ 10 2 \ 9 3 \ 8 4 \ 7 5 \ 6 6 \ 5 7 \ 4 8 \ 3 The marginal revenue of the fifth unit of output is:

A good is characterized by network economies if it:

Suppose the accompanying table describes the demand for a good produced by monopolist. Price Quantity \ 10 1 \ 9 2 \ 8 3 \ 7 4 \ 6 5 \ 5 6 \ 4 7 The monopolist's total revenue from selling 3 units is ________, and the monopolist's marginal revenue from selling the 3ʳᵈ unit is ________.

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. If you make 1,000 t-shirts, your average total cost is ________.

A consumer goes to purchase a TV advertised for $300. As he is checking out, the clerk informs him of a $20 rebate offer for the TV, which he fills out and receives in 3 months. What can one can infer about the consumer's reservation price?

If the demand curve facing the monopolist is P = 70 − 14Q, then the slope of its marginal revenue curve is:

Suppose the accompanying table describes the demand for a good produced by monopolist. Price Quantity \ 10 1 \ 9 2 \ 8 3 \ 7 4 \ 6 5 \ 5 6 \ 4 7 The total revenue from selling 6 units is ________, and the marginal revenue of selling the 6?? unit is ________.

To sell an extra unit of output, a perfectly competitive firm ________, and an imperfectly competitive firm ________.

The accompanying figure shows the demand curve, marginal revenue curve, marginal cost curve and average total cost curve for a monopolist. This monopolist maximizes its profit by producing ________ units per day and charging a price of ________ per unit.

When a perfectly competitive firm sells additional units of output, ________, and when a monopolist sells additional units of output, ________.

According to the textbook, the most important and enduring source of market power is:

Under cost-plus regulation, a regulated firm is permitted to charge prices that cover the explicit cost of production plus a markup to cover the:

Which of the following is NOT an example of a good with network economies?

Imperfect price discrimination occurs when a monopolist:

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

Suppose the accompanying table describes the demand for a good produced by monopolist. Price Quantity \ 10 1 \ 9 2 \ 8 3 \ 7 4 \ 6 5 \ 5 6 \ 4 7 The monopolist's total revenue from selling 3 units is , and the monopolist's marginal revenue from selling the 3ʳᵈ unit is .

Suppose the accompanying table describes the demand for a good produced by monopolist. Price Quantity \ 10 1 \ 9 2 \ 8 3 \ 7 4 \ 6 5 \ 5 6 \ 4 7 The total revenue from selling 6 units is , and the marginal revenue of selling the 6?? unit is .

To sell an extra unit of output, a perfectly competitive firm , and an imperfectly competitive firm .

The accompanying figure shows the demand curve, marginal revenue curve, marginal cost curve and average total cost curve for a monopolist. This monopolist maximizes its profit by producing units per day and charging a price of per unit.

When a perfectly competitive firm sells additional units of output, , and when a monopolist sells additional units of output, .