Question 1

If a monopoly can produce a good at zero marginal cost,then its Lerner Index is

Accepted Answer

A)  zero. 
B)  one. 
C)  infinity. 
D)  undetermined. 
A)  zero. 
B)  one. 
C)  infinity. 
D)  undetermined.

Question 2

The SSS Co.has a patent on a particular medication.The medication sells for $1 per daily dose and marginal cost is estimated to be a constant at $0.20.Assuming linear demand and marginal cost curves,use this information to estimate the deadweight loss from monopoly pricing if the firm currently sells 1,000 doses per day.Can this loss be justified?

Accepted Answer

The firm's Lerner Index equals 0.8 which

Question 3

The telephone is an example of a product with network externalities.

Accepted Answer

A) True 
 B)False

Question 4

The use of "introductory prices" suggests

Accepted Answer

A)  firms engaged in multi-period decision making. 
B)  firms engaged in price gouging. 
C)  firms engaged in anti-competitive behavior. 
D)  firms engaged in single-period decision making. 
A)  firms engaged in multi-period decision making. 
B)  firms engaged in price gouging. 
C)  firms engaged in anti-competitive behavior. 
D)  firms engaged in single-period decision making.

Question 5

Which of the following is most necessary for a monopolist to survive in the long run?

Accepted Answer

A)  a legal protection from entry 
B)  a perfect product 
C)  a brilliant Chief Operating Officer 
D)  an excellent marketing campaign 
A)  a legal protection from entry 
B)  a perfect product 
C)  a brilliant Chief Operating Officer 
D)  an excellent marketing campaign

Question 6

In the early 1900s,U.S.Steel acted as a dominant firm with over sixty percent (60%)of the market.Many,including the Supreme Court in 1920,viewed U.S.Steel as a "good" monopolist since competitive fringe firms prospered under this arrangement.Graph the market for steel as it might have existed at this time showing that being a member of the competitive fringe can be profitable.Assume a linear market demand and linear MC and AC that slope upward.

Accepted Answer

@#IMG-DLM& See the above figure.The competitive fr

Question 7

Market power is illegal.

Accepted Answer

A)  True, no one is allowed to charge a price greater than marginal cost. 
B)  False, firms can freely choose their prices. 
C)  True, no one is allowed to charge a price greater than average cost. 
D)  False, because market power guarantees price equal to average cost. 
A)  True, no one is allowed to charge a price greater than marginal cost. 
B)  False, firms can freely choose their prices. 
C)  True, no one is allowed to charge a price greater than average cost. 
D)  False, because market power guarantees price equal to average cost.

Question 8

In the two-period dynamic monopoly,if the monopolist succeeds in selling a sufficiently high quantity in the first period,

Accepted Answer

A)  the second-period demand curve will lie close to the price axis. 
B)  the second-period demand curve will become horizontal. 
C)  the second-period demand curve will become unit elastic. 
D)  the second-period demand curve will shift substantially to the right. 
A)  the second-period demand curve will lie close to the price axis. 
B)  the second-period demand curve will become horizontal. 
C)  the second-period demand curve will become unit elastic. 
D)  the second-period demand curve will shift substantially to the right.

Question 9

One difference between a monopoly and a competitive firm is that

Accepted Answer

A)  a monopoly is a price taker. 
B)  a monopoly maximizes profit by setting marginal revenue equal to marginal cost. 
C)  a monopoly faces a downward sloping demand curve. 
D)  None of the above. 
A)  a monopoly is a price taker. 
B)  a monopoly maximizes profit by setting marginal revenue equal to marginal cost. 
C)  a monopoly faces a downward sloping demand curve. 
D)  None of the above.

Question 10

If the government wants to regulate a natural monopoly,it will force the firm to set price equal to

Accepted Answer

A)  average cost. 
B)  marginal cost. 
C)  marginal revenue. 
D)  None of the above. 
A)  average cost. 
B)  marginal cost. 
C)  marginal revenue. 
D)  None of the above.

Question 11

If the inverse demand function for a monopoly's product is p = a - bQ,then the firm's marginal revenue function is

Accepted Answer

A)  a. 
B)  a - (1/2)bQ. 
C)  a - bQ. 
D)  a - 2bQ. 
A)  a. 
B)  a - (1/2)bQ. 
C)  a - bQ. 
D)  a - 2bQ.

Question 12

For profit-maximizing monopolies,explain why the boundaries on the Lerner Index are 0 and 1.

Accepted Answer

The Lerner Index equals (p - MC)/p.Becau

Question 13

A monopoly does not have a supply curve.

Accepted Answer

A) True 
 B)False

Question 14

-The above figure shows the demand and cost curves facing a monopoly.The deadweight loss of this monopoly is

Accepted Answer

A)  $100. 
B)  $250. 
C)  $1,250. 
D)  $2,500. 
A)  $100. 
B)  $250. 
C)  $1,250. 
D)  $2,500.

Question 15

If the government attempts to force a natural monopoly to charge a price equal to marginal cost,

Accepted Answer

A)  the natural monopoly will shut down. 
B)  the natural monopoly will still make high profits. 
C)  the natural monopoly's marginal cost curve will shift up. 
D)  total welfare is maximized. 
A)  the natural monopoly will shut down. 
B)  the natural monopoly will still make high profits. 
C)  the natural monopoly's marginal cost curve will shift up. 
D)  total welfare is maximized.

Question 16

The Lerner Index is

Accepted Answer

A)  the ratio of the difference between price and marginal cost to price. 
B)  equal to (Price - M
C) /Price. 
C)  a measure of market power. 
D)  All of the above. 
A)  the ratio of the difference between price and marginal cost to price. 
B)  equal to (Price - M
C) /Price. 
C)  a measure of market power. 
D)  All of the above.

Question 17

Since there are no close substitutes for the monopoly's product,the monopoly can charge any price it wishes.

Accepted Answer

A) True 
 B)False

Question 18

If the demand for a monopoly's output shifts rightward,the change in quantity produced is NOT predictable because

Accepted Answer

A)  the monopoly is a profit maximizer. 
B)  the monopoly is a price taker. 
C)  the monopoly has no supply curve. 
D)  the monopoly's marginal cost curve might not be upward sloping. 
A)  the monopoly is a profit maximizer. 
B)  the monopoly is a price taker. 
C)  the monopoly has no supply curve. 
D)  the monopoly's marginal cost curve might not be upward sloping.

Question 19

Market power guarantees profit.

Accepted Answer

A)  True, which is why firm's locate as far away from each other as possible. 
B)  False, market power guarantees price greater than marginal cost. 
C)  True, market power guarantees price greater than average cost. 
D)  False, market power guarantees price equal to average cost. 
A)  True, which is why firm's locate as far away from each other as possible. 
B)  False, market power guarantees price greater than marginal cost. 
C)  True, market power guarantees price greater than average cost. 
D)  False, market power guarantees price equal to average cost.

Question 20

The Lerner Index is derived from the profit-maximizing condition of a firm.

Accepted Answer

A) True 
 B)False

If a monopoly can produce a good at zero marginal cost,then its Lerner Index is

The telephone is an example of a product with network externalities.

The use of "introductory prices" suggests

Which of the following is most necessary for a monopolist to survive in the long run?

Market power is illegal.

In the two-period dynamic monopoly,if the monopolist succeeds in selling a sufficiently high quantity in the first period,

One difference between a monopoly and a competitive firm is that

If the government wants to regulate a natural monopoly,it will force the firm to set price equal to

If the inverse demand function for a monopoly's product is p = a - bQ,then the firm's marginal revenue function is

For profit-maximizing monopolies,explain why the boundaries on the Lerner Index are 0 and 1.

A monopoly does not have a supply curve.

-The above figure shows the demand and cost curves facing a monopoly.The deadweight loss of this monopoly is

If the government attempts to force a natural monopoly to charge a price equal to marginal cost,

The Lerner Index is

Since there are no close substitutes for the monopoly's product,the monopoly can charge any price it wishes.

If the demand for a monopoly's output shifts rightward,the change in quantity produced is NOT predictable because

Market power guarantees profit.

The Lerner Index is derived from the profit-maximizing condition of a firm.

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

If a monopoly can produce a good at zero marginal cost,then its Lerner Index is

The telephone is an example of a product with network externalities.

The use of "introductory prices" suggests

Which of the following is most necessary for a monopolist to survive in the long run?

Market power is illegal.

In the two-period dynamic monopoly,if the monopolist succeeds in selling a sufficiently high quantity in the first period,

One difference between a monopoly and a competitive firm is that

If the government wants to regulate a natural monopoly,it will force the firm to set price equal to

If the inverse demand function for a monopoly's product is p = a - bQ,then the firm's marginal revenue function is

For profit-maximizing monopolies,explain why the boundaries on the Lerner Index are 0 and 1.

A monopoly does not have a supply curve.

-The above figure shows the demand and cost curves facing a monopoly.The deadweight loss of this monopoly is

If the government attempts to force a natural monopoly to charge a price equal to marginal cost,

The Lerner Index is

Since there are no close substitutes for the monopoly's product,the monopoly can charge any price it wishes.

If the demand for a monopoly's output shifts rightward,the change in quantity produced is NOT predictable because

Market power guarantees profit.

The Lerner Index is derived from the profit-maximizing condition of a firm.

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