Question 1

The situation in which a person places greater value on a good as more and more people possess it is called the

Accepted Answer

A)  Bandwagon Effect. 
B)  Greater Value Effect. 
C)  Snob Effect. 
D)  Behavioral Effect. 
A)  Bandwagon Effect. 
B)  Greater Value Effect. 
C)  Snob Effect. 
D)  Behavioral Effect. A

Question 2

The government prefers an ad valorem tax to a specific tax that reduces the monopoly output by the same amount because

Accepted Answer

A)  consumers are not harmed by the ad valorem tax. 
B)  the monopoly prefers the ad valorem tax. 
C)  consumers prefer the ad valorem tax. 
D)  the ad valorem tax transfers more revenue from the monopoly to the government. 
A)  consumers are not harmed by the ad valorem tax. 
B)  the monopoly prefers the ad valorem tax. 
C)  consumers prefer the ad valorem tax. 
D)  the ad valorem tax transfers more revenue from the monopoly to the government. D

Question 3

What is one reason patents are required?

Accepted Answer

A)  Information concerning innovation is private and secure. 
B)  Human nature is corrupt. 
C)  Information concerning innovation is generally not private and secure. 
D)  The patent only makes things better in the short run. 
A)  Information concerning innovation is private and secure. 
B)  Human nature is corrupt. 
C)  Information concerning innovation is generally not private and secure. 
D)  The patent only makes things better in the short run. C

Question 4

The ability of a monopoly to charge a price that exceeds marginal cost depends on

Accepted Answer

A)  the price elasticity of supply. 
B)  price elasticity of demand. 
C)  slope of the demand curve. 
D)  shape of the marginal cost curve. 
A)  the price elasticity of supply. 
B)  price elasticity of demand. 
C)  slope of the demand curve. 
D)  shape of the marginal cost curve.

Question 5

The fact that a monopoly has to take the shapes of marginal cost AND marginal revenue into account when making decisions is reflected in the fact that

Accepted Answer

A)  monopolies don't have a supply curve. 
B)  monopolies don't have a demand curve. 
C)  monopolies have the same supply curve as perfectly competitive firms. 
D)  monopolies maximize profit. 
A)  monopolies don't have a supply curve. 
B)  monopolies don't have a demand curve. 
C)  monopolies have the same supply curve as perfectly competitive firms. 
D)  monopolies maximize profit.

Question 6

Why does a patent stimulate research?

Accepted Answer

A)  Patents give firms time to do research. 
B)  Patents give firms the opportunity to recover research costs and thus serve as a profit motive. 
C)  Without patents, firms would not research as much. 
D)  They don't. 
A)  Patents give firms time to do research. 
B)  Patents give firms the opportunity to recover research costs and thus serve as a profit motive. 
C)  Without patents, firms would not research as much. 
D)  They don't.

Question 7

If a firm in an industry experiences very high fixed costs and constant marginal cost,it is a good candidate for a natural monopoly.

Accepted Answer

A) True 
 B)False

Question 8

Suppose a monopolist's demand curve is P = 60 - Q,its cost function is TC = 10Q + 50,and its marginal cost is 10.If a governmental agency wished to set the price that maximized social welfare,that price would be

Accepted Answer

A)  $10.00. 
B)  $11.02. 
C)  $14.57. 
D)  $35.00. 
A)  $10.00. 
B)  $11.02. 
C)  $14.57. 
D)  $35.00.

Question 9

If the inverse demand curve a monopoly faces is p = 100 - 2Q,MC is constant at 16,and the government imposes an $8 per unit specific tax on the monopoly,the deadweight loss due to both the monopoly and the tax is

Accepted Answer

A)  $529. 
B)  $1332. 
C)  $1764. 
D)  $441. 
A)  $529. 
B)  $1332. 
C)  $1764. 
D)  $441.

Question 10

Suppose a patent is granted for a product that has the linear demand curve P = a - b Q.The constant marginal cost of producing this product is $50 per unit,a unit sells for $150,and consumers purchase 100 units of the good at that price.If the monopoly is maximizing profit,b equals

Accepted Answer

A)  1. 
B)  1.5. 
C)  2. 
D)  2.5. 
A)  1. 
B)  1.5. 
C)  2. 
D)  2.5.

Question 11

A dominant firm's residual demand curve is

Accepted Answer

A)  the horizontal difference between the market demand curve and the supply curve of the fringe firms. 
B)  the vertical difference between the market demand curve and the supply curve of the fringe firms. 
C)  the demand curve left for the fringe firms after the dominant firm has determined an output level. 
D)  None of the above. 
A)  the horizontal difference between the market demand curve and the supply curve of the fringe firms. 
B)  the vertical difference between the market demand curve and the supply curve of the fringe firms. 
C)  the demand curve left for the fringe firms after the dominant firm has determined an output level. 
D)  None of the above.

Question 12

A monopolist faces the inverse demand curve P = 60 - Q.It has variable costs of Q2 so that its marginal costs are 2Q,and it has fixed costs of 30.The monopoly's maximum profit is

Accepted Answer

A)  220. 
B)  370. 
C)  420. 
D)  510. 
A)  220. 
B)  370. 
C)  420. 
D)  510.

Question 13

In the dominant firm model as evidenced by the production of iPods by Apple,the entrance of the competitive fringe firms has what effect on the dominant firm?

Accepted Answer

A)  Its price is lower, but it produces more output. 
B)  Its price is lower, and it produces less output. 
C)  Its price is the same, but it produces less output. 
D)  Its price is higher, but it produces more output. 
A)  Its price is lower, but it produces more output. 
B)  Its price is lower, and it produces less output. 
C)  Its price is the same, but it produces less output. 
D)  Its price is higher, but it produces more output.

Question 14

The situation in which a person places greater value on a good as fewer and fewer people possess it is called the

Accepted Answer

A)  Bandwagon Effect. 
B)  Greater Value Effect. 
C)  Snob Effect. 
D)  Behavioral Effect. 
A)  Bandwagon Effect. 
B)  Greater Value Effect. 
C)  Snob Effect. 
D)  Behavioral Effect.

Question 15

Forcing a natural monopoly to charge P = MC will not work.

Accepted Answer

A) True 
 B)False

Question 16

What is one problem with trying to regulate a monopoly's price?

Accepted Answer

A)  The government needs information on the monopoly's marginal cost. 
B)  The government needs information on the price people are willing to pay. 
C)  The government needs to identify which firm is a monopolist. 
D)  Anything that the government does is problematic. 
A)  The government needs information on the monopoly's marginal cost. 
B)  The government needs information on the price people are willing to pay. 
C)  The government needs to identify which firm is a monopolist. 
D)  Anything that the government does is problematic.

Question 17

The monopoly maximizes profit by setting

Accepted Answer

A)  price equal to marginal cost. 
B)  price equal to marginal revenue. 
C)  marginal revenue equal to marginal cost. 
D)  marginal revenue equal to zero. 
A)  price equal to marginal cost. 
B)  price equal to marginal revenue. 
C)  marginal revenue equal to marginal cost. 
D)  marginal revenue equal to zero.

Question 18

The two-period dynamic monopoly model is more useful than the static monopoly model in analyzing monopoly behavior when

Accepted Answer

A)  the product produced requires a bandwagon effect. 
B)  the product produced generates a positive network externality. 
C)  the monopoly initially uses a lower introductory price. 
D)  All of the above situations. 
A)  the product produced requires a bandwagon effect. 
B)  the product produced generates a positive network externality. 
C)  the monopoly initially uses a lower introductory price. 
D)  All of the above situations.

Question 19

-The above figure shows the demand and cost curves facing a monopoly.Maximum profit equals

Accepted Answer

A)  $0. 
B)  $100. 
C)  $1,000. 
D)  $2,500. 
A)  $0. 
B)  $100. 
C)  $1,000. 
D)  $2,500.

Question 20

A monopolist changes price from $1 to $2 and sells 10 fewer units.The marginal revenue is

Accepted Answer

A)  $10. 
B)  -$10. 
C)  $0. 
D)  impossible to determine with the information provided. 
A)  $10. 
B)  -$10. 
C)  $0. 
D)  impossible to determine with the information provided.

The situation in which a person places greater value on a good as more and more people possess it is called the

The government prefers an ad valorem tax to a specific tax that reduces the monopoly output by the same amount because

What is one reason patents are required?

The ability of a monopoly to charge a price that exceeds marginal cost depends on

The fact that a monopoly has to take the shapes of marginal cost AND marginal revenue into account when making decisions is reflected in the fact that

Why does a patent stimulate research?

If a firm in an industry experiences very high fixed costs and constant marginal cost,it is a good candidate for a natural monopoly.

Suppose a monopolist's demand curve is P = 60 - Q,its cost function is TC = 10Q + 50,and its marginal cost is 10.If a governmental agency wished to set the price that maximized social welfare,that price would be

If the inverse demand curve a monopoly faces is p = 100 - 2Q,MC is constant at 16,and the government imposes an $8 per unit specific tax on the monopoly,the deadweight loss due to both the monopoly and the tax is

Suppose a patent is granted for a product that has the linear demand curve P = a - b Q.The constant marginal cost of producing this product is $50 per unit,a unit sells for $150,and consumers purchase 100 units of the good at that price.If the monopoly is maximizing profit,b equals

A dominant firm's residual demand curve is

A monopolist faces the inverse demand curve P = 60 - Q.It has variable costs of Q² so that its marginal costs are 2Q,and it has fixed costs of 30.The monopoly's maximum profit is

In the dominant firm model as evidenced by the production of iPods by Apple,the entrance of the competitive fringe firms has what effect on the dominant firm?

The situation in which a person places greater value on a good as fewer and fewer people possess it is called the

Forcing a natural monopoly to charge P = MC will not work.

What is one problem with trying to regulate a monopoly's price?

The monopoly maximizes profit by setting

The two-period dynamic monopoly model is more useful than the static monopoly model in analyzing monopoly behavior when

-The above figure shows the demand and cost curves facing a monopoly.Maximum profit equals

A monopolist changes price from $1 to $2 and sells 10 fewer units.The marginal revenue is

Introduction

Supply and Demand

Applying the Supply-And-Demand Model

Consumer Choice

Applying Consumer Theory

Firms and Production

Costs

Competitive Firms and Markets

Applying the Competitive Model

General Equilibrium and Economic Welfare

Pricing and Advertising

Oligopoly and Monopolistic Competition

Game Theory

Factor Markets

Interest Rates, Investments, and Capital Markets

Uncertainty

Externalities, Open-Access, and Public Goods

Asymmetric Information

Contracts and Moral Hazards

Filters

Exam 11: Monopoly

The situation in which a person places greater value on a good as more and more people possess it is called the

The government prefers an ad valorem tax to a specific tax that reduces the monopoly output by the same amount because

What is one reason patents are required?

The ability of a monopoly to charge a price that exceeds marginal cost depends on

The fact that a monopoly has to take the shapes of marginal cost AND marginal revenue into account when making decisions is reflected in the fact that

Why does a patent stimulate research?

If a firm in an industry experiences very high fixed costs and constant marginal cost,it is a good candidate for a natural monopoly.

Suppose a monopolist's demand curve is P = 60 - Q,its cost function is TC = 10Q + 50,and its marginal cost is 10.If a governmental agency wished to set the price that maximized social welfare,that price would be

If the inverse demand curve a monopoly faces is p = 100 - 2Q,MC is constant at 16,and the government imposes an $8 per unit specific tax on the monopoly,the deadweight loss due to both the monopoly and the tax is

Suppose a patent is granted for a product that has the linear demand curve P = a - b Q.The constant marginal cost of producing this product is $50 per unit,a unit sells for $150,and consumers purchase 100 units of the good at that price.If the monopoly is maximizing profit,b equals

A dominant firm's residual demand curve is

A monopolist faces the inverse demand curve P = 60 - Q.It has variable costs of Q2 so that its marginal costs are 2Q,and it has fixed costs of 30.The monopoly's maximum profit is

In the dominant firm model as evidenced by the production of iPods by Apple,the entrance of the competitive fringe firms has what effect on the dominant firm?

The situation in which a person places greater value on a good as fewer and fewer people possess it is called the

Forcing a natural monopoly to charge P = MC will not work.

What is one problem with trying to regulate a monopoly's price?

The monopoly maximizes profit by setting

The two-period dynamic monopoly model is more useful than the static monopoly model in analyzing monopoly behavior when

-The above figure shows the demand and cost curves facing a monopoly.Maximum profit equals

A monopolist changes price from $1 to $2 and sells 10 fewer units.The marginal revenue is

Introduction

Supply and Demand

Applying the Supply-And-Demand Model

Consumer Choice

Applying Consumer Theory

Firms and Production

Costs

Competitive Firms and Markets

Applying the Competitive Model

General Equilibrium and Economic Welfare

Pricing and Advertising

Oligopoly and Monopolistic Competition

Game Theory

Factor Markets

Interest Rates, Investments, and Capital Markets

Uncertainty

Externalities, Open-Access, and Public Goods

Asymmetric Information

Contracts and Moral Hazards

Filters

A monopolist faces the inverse demand curve P = 60 - Q.It has variable costs of Q² so that its marginal costs are 2Q,and it has fixed costs of 30.The monopoly's maximum profit is