Question 1

Explain why a monopolist has no supply curve.

Accepted Answer

By definition,a supply curve shows the a

Question 2

The government forcing a monopoly telecommunications company to allow other firms to use its cables is an attempt to

Accepted Answer

A)  regulate prices. 
B)  decrease the monopoly market power by eliminating a natural monopoly. 
C)  decrease the monopoly market power by increasing competition. 
D)  None of the above. 
A)  regulate prices. 
B)  decrease the monopoly market power by eliminating a natural monopoly. 
C)  decrease the monopoly market power by increasing competition. 
D)  None of the above.

Question 3

At an output level of 100,a monopolist faces MC = 15 and MR = 17.At output level q = 101,the monopolist's MC = 16 and MR = 15.To maximize profits,the firm

Accepted Answer

A)  should produce 100 units. 
B)  should produce 101 units. 
C)  cannot maximize profits. 
D)  is not a monopoly. 
A)  should produce 100 units. 
B)  should produce 101 units. 
C)  cannot maximize profits. 
D)  is not a monopoly.

Question 4

Which of the following average cost functions suggests the presence of a natural monopoly?

Accepted Answer

A)  AC = 2 
B)  AC = 100/Q + 2 
C)  TC = 100/Q + 2Q 
D)  All of the above. 
A)  AC = 2 
B)  AC = 100/Q + 2 
C)  TC = 100/Q + 2Q 
D)  All of the above.

Question 5

It is a conventional practice among apparel retailers to set the retail price of clothing at twice the cost paid to the manufacturer.For example,if the retailer pays $7 for a pair of jeans,the jeans will retail for $14.What must the price elasticity of demand be for this practice to be profit maximizing?

Accepted Answer

Since price is twice marginal

Question 6

If a monopoly discovers that the demand for its output has become more elastic at the original output level,then it will respond by

Accepted Answer

A)  producing more and setting a higher price. 
B)  setting a lower price. 
C)  setting a higher price. 
D)  producing more while leaving price unchanged. 
A)  producing more and setting a higher price. 
B)  setting a lower price. 
C)  setting a higher price. 
D)  producing more while leaving price unchanged.

Question 7

Which is an ironic solution to the government protected monopoly?

Accepted Answer

A)  The government might try to "force" less competition in the market. 
B)  The government might "do more" by "doing less," i.e., by removing the monopoly's protection. 
C)  The dead weight loss goes to the government. 
D)  The inherent unfairness of monopoly can only be solved by dictatorship. 
A)  The government might try to "force" less competition in the market. 
B)  The government might "do more" by "doing less," i.e., by removing the monopoly's protection. 
C)  The dead weight loss goes to the government. 
D)  The inherent unfairness of monopoly can only be solved by dictatorship.

Question 8

When the marginal revenue curve cuts the horizontal axis,

Accepted Answer

A)  demand is relatively elastic. 
B)  demand is relatively inelastic. 
C)  demand is perfectly elastic. 
D)  demand is unitary elastic. 
A)  demand is relatively elastic. 
B)  demand is relatively inelastic. 
C)  demand is perfectly elastic. 
D)  demand is unitary elastic.

Question 9

If a firm is a profit maximizer and faces positive marginal costs,

Accepted Answer

A)  there is a natural limit to the size of the firm, where MR = 0. 
B)  there is no natural limit to the size of the firm; it can be as large as it wants to be. 
C)  there is a natural limit to the size of the firm, where MR > 0. 
D)  there is no natural limit to the size of the firm, hence the need for government regulation. 
A)  there is a natural limit to the size of the firm, where MR = 0. 
B)  there is no natural limit to the size of the firm; it can be as large as it wants to be. 
C)  there is a natural limit to the size of the firm, where MR > 0. 
D)  there is no natural limit to the size of the firm, hence the need for government regulation.

Question 10

In spring 2008,the U.S.Congress proposed to tax oil companies because of their near-monopoly status.This could have the unintended consequence of

Accepted Answer

A)  increasing the equilibrium price by more than the tax. 
B)  destroying the oil companies and leaving the United States without oil. 
C)  increasing the profit of the best oil company. 
D)  decreasing the power of the U.S. Congress. 
A)  increasing the equilibrium price by more than the tax. 
B)  destroying the oil companies and leaving the United States without oil. 
C)  increasing the profit of the best oil company. 
D)  decreasing the power of the U.S. Congress.

Question 11

If the government regulates the price a monopoly can charge,and the price ceiling is set below what the competitive market price would be,then

Accepted Answer

A)  a shortage will exist. 
B)  a surplus will exist. 
C)  producer surplus is maximized. 
D)  consumer surplus is maximized. 
A)  a shortage will exist. 
B)  a surplus will exist. 
C)  producer surplus is maximized. 
D)  consumer surplus is maximized.

Question 12

If the government imposes a specific tax on a monopoly,the consumer's tax incidence

Accepted Answer

A)  can exceed 100%. 
B)  will always be between 0-100%. 
C)  may be negative. 
D)  will be the same as when the tax is imposed on a perfectly competitive firm. 
A)  can exceed 100%. 
B)  will always be between 0-100%. 
C)  may be negative. 
D)  will be the same as when the tax is imposed on a perfectly competitive firm.

Question 13

The introduction of satellite television systems would cause the demand curve for cable television to be

Accepted Answer

A)  more elastic. 
B)  less elastic. 
C)  perfectly inelastic. 
D)  unchanged. 
A)  more elastic. 
B)  less elastic. 
C)  perfectly inelastic. 
D)  unchanged.

Question 14

The loss associated with the fact that at the profit-maximizing quantity consumers value the goods more than it cost to produce them is called

Accepted Answer

A)  deadweight loss. 
B)  comparative loss. 
C)  Lerner Loss. 
D)  Consumer Value Loss. 
A)  deadweight loss. 
B)  comparative loss. 
C)  Lerner Loss. 
D)  Consumer Value Loss.

Question 15

A profit-maximizing monopolist will never operate in the portion of the demand curve with price elasticity equal to

Accepted Answer

A)  -3. 
B)  -1. 
C)  -1/3. 
D)  Any of the above-the price elasticity does not matter. 
A)  -3. 
B)  -1. 
C)  -1/3. 
D)  Any of the above-the price elasticity does not matter.

Question 16

Which of the following is most likely the most beneficial form of monopoly advantage?

Accepted Answer

A)  better production methods 
B)  input hoarding 
C)  decreasing returns to scale 
D)  government protection 
A)  better production methods 
B)  input hoarding 
C)  decreasing returns to scale 
D)  government protection

Question 17

Optimal price regulation sets price equal to

Accepted Answer

A)  marginal cost. 
B)  average variable cost. 
C)  average cost. 
D)  minimum average cost. 
A)  marginal cost. 
B)  average variable cost. 
C)  average cost. 
D)  minimum average cost.

Question 18

If the inverse demand curve a monopoly faces is p = 100 - 2Q,and MC is constant at 16,then profit maximization

Accepted Answer

A)  is achieved when 21 units are produced. 
B)  is achieved by setting price equal to 21. 
C)  is achieved only by shutting down in the short run. 
D)  cannot be determined solely from the information provided. 
A)  is achieved when 21 units are produced. 
B)  is achieved by setting price equal to 21. 
C)  is achieved only by shutting down in the short run. 
D)  cannot be determined solely from the information provided.

Question 19

Government actions that create monopolies

Accepted Answer

A)  spur product innovation by the monopoly. 
B)  create deadweight loss. 
C)  result in lower average costs of production. 
D)  ensure that firms price at marginal cost. 
A)  spur product innovation by the monopoly. 
B)  create deadweight loss. 
C)  result in lower average costs of production. 
D)  ensure that firms price at marginal cost.

Question 20

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 so that it created the smallest deadweight loss without causing the monopolist to have negative economic profits,this 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.

Explain why a monopolist has no supply curve.

The government forcing a monopoly telecommunications company to allow other firms to use its cables is an attempt to

At an output level of 100,a monopolist faces MC = 15 and MR = 17.At output level q = 101,the monopolist's MC = 16 and MR = 15.To maximize profits,the firm

Which of the following average cost functions suggests the presence of a natural monopoly?

If a monopoly discovers that the demand for its output has become more elastic at the original output level,then it will respond by

Which is an ironic solution to the government protected monopoly?

When the marginal revenue curve cuts the horizontal axis,

If a firm is a profit maximizer and faces positive marginal costs,

In spring 2008,the U.S.Congress proposed to tax oil companies because of their near-monopoly status.This could have the unintended consequence of

If the government regulates the price a monopoly can charge,and the price ceiling is set below what the competitive market price would be,then

If the government imposes a specific tax on a monopoly,the consumer's tax incidence

The introduction of satellite television systems would cause the demand curve for cable television to be

The loss associated with the fact that at the profit-maximizing quantity consumers value the goods more than it cost to produce them is called

A profit-maximizing monopolist will never operate in the portion of the demand curve with price elasticity equal to

Which of the following is most likely the most beneficial form of monopoly advantage?

Optimal price regulation sets price equal to

If the inverse demand curve a monopoly faces is p = 100 - 2Q,and MC is constant at 16,then profit maximization

Government actions that create monopolies

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 so that it created the smallest deadweight loss without causing the monopolist to have negative economic profits,this price would be

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

Explain why a monopolist has no supply curve.

The government forcing a monopoly telecommunications company to allow other firms to use its cables is an attempt to

At an output level of 100,a monopolist faces MC = 15 and MR = 17.At output level q = 101,the monopolist's MC = 16 and MR = 15.To maximize profits,the firm

Which of the following average cost functions suggests the presence of a natural monopoly?

If a monopoly discovers that the demand for its output has become more elastic at the original output level,then it will respond by

Which is an ironic solution to the government protected monopoly?

When the marginal revenue curve cuts the horizontal axis,

If a firm is a profit maximizer and faces positive marginal costs,

In spring 2008,the U.S.Congress proposed to tax oil companies because of their near-monopoly status.This could have the unintended consequence of

If the government regulates the price a monopoly can charge,and the price ceiling is set below what the competitive market price would be,then

If the government imposes a specific tax on a monopoly,the consumer's tax incidence

The introduction of satellite television systems would cause the demand curve for cable television to be

The loss associated with the fact that at the profit-maximizing quantity consumers value the goods more than it cost to produce them is called

A profit-maximizing monopolist will never operate in the portion of the demand curve with price elasticity equal to

Which of the following is most likely the most beneficial form of monopoly advantage?

Optimal price regulation sets price equal to

If the inverse demand curve a monopoly faces is p = 100 - 2Q,and MC is constant at 16,then profit maximization

Government actions that create monopolies

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 so that it created the smallest deadweight loss without causing the monopolist to have negative economic profits,this price would be

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