Question 1

If the market demand curve has constant price elasticity of -1, the monopolist's price should approach infinity.

Accepted Answer

A) True 
 B)False

Question 2

In the absence of recurring fixed costs, a monopolist will always produce a positive output quantity.

Accepted Answer

A) True 
 B)False

Question 3

Because of the monopoly power that comes with being the only firm to produce a product, it is always more efficient to have multiple firms in an industry.

Accepted Answer

A) True 
 B)False

Question 4

Suppose market demand facing a monopolist is given by   .Then the monopolist's marginal revenue curve (in the absence of price discrimination) is

Accepted Answer

A)    
B)    
C)    
D)    
E)    F)None of the above 
A)    
B)    
C)    
D)    
E)    F)None of the above

Question 5

Depending on the shape of the marginal cost curve, a monopolist might produce an output level on the elastic or the inelastic part of demand.

Accepted Answer

A) True 
 B)False

Question 6

Suppose a monopolist has marginal cost of zero but recurring fixed costs.Then the monopolist will produce the efficient level of output so long as he can first degree price discriminate.

Accepted Answer

A) True 
 B)False

Question 7

Explain why the deadweight loss from monopoly power may be exacerbated if the barrier to entry that creates monopoly power is created through exclusive government granting of a monopoly.For what types of government grants of monopoly power might this not be the case?

Accepted Answer

The firm that gets the right to be a mon

Question 8

When perfect price discrimination comes in the form of a two-part tariff, one part of the "tariff" just covers marginal costs.

Accepted Answer

A) True 
 B)False

Question 9

If a monopolist has no marginal costs and only recurring fixed costs, then, if he produces, any quantity that he produces is profit maximizing if the price elasticity of market demand is -1.

Accepted Answer

A) True 
 B)False

Question 10

If a monopolist has downward sloping average costs, he will not produce if he cannot price discriminate.

Accepted Answer

A) True 
 B)False

Question 11

Low demand consumers are indifferent between second degree and first degree price discrimination.

Accepted Answer

A) True 
 B)False

Question 12

Suppose a monopolist produces a positive level of output.If marginal costs are zero, this output level will occur where price elasticity of demand is exactly -1 unless there are recurring fixed costs.

Accepted Answer

A) True 
 B)False

Question 13

Explain what the Saudi oil minister meant when he warned OPEC of using its market power too much by saying "Remember, the Stone Age did not end because we ran out of stones."

Accepted Answer

The oil minister warned that if OPEC use

Question 14

In the presence of positive production externalities, a monopolist might produce the efficient output level.

Accepted Answer

A) True 
 B)False

Question 15

Suppose a monopolist has zero marginal cost but positive recurring fixed costs.Then, if it is efficient to produce, the efficient quantity to produce occurs where demand crosses the horizontal (quantity) axis.

Accepted Answer

A) True 
 B)False

Question 16

Under second degree price discrimination, the average price per unit paid by high demand consumers is not equal to marginal willingness to pay for one additional unit.

Accepted Answer

A) True 
 B)False

Question 17

Suppose you observe that output in an industry occurs on the inelastic part of the market demand curve.Which of the following can you conclude from this?

Accepted Answer

A) The industry is definitely behaving as a monopoly that is protected by barriers to entry. 
B) The industry is definitely not behaving as a monopoly that is protected by barriers to entry. 
C) The industry could be perfectly competitive. 
D) The industry is definitely not perfectly competitive. 
E) Both (a) and (d)
F)Both (b) and (c)
G)Both (b) and (d)
H)None of the above 
A) The industry is definitely behaving as a monopoly that is protected by barriers to entry. 
B) The industry is definitely not behaving as a monopoly that is protected by barriers to entry. 
C) The industry could be perfectly competitive. 
D) The industry is definitely not perfectly competitive. 
E) Both (a) and (d)
F)Both (b) and (c)
G)Both (b) and (d)
H)None of the above

Question 18

How would a regulator of a monopoly think differently about regulating price discrimination depending on whether the regulator's objective is to maximize efficiency or to maximize consumer surplus?

Accepted Answer

This is most clearly demonstrated for th

Exam 23: Monopoly

If the market demand curve has constant price elasticity of -1, the monopolist's price should approach infinity.

In the absence of recurring fixed costs, a monopolist will always produce a positive output quantity.

Because of the monopoly power that comes with being the only firm to produce a product, it is always more efficient to have multiple firms in an industry.

Suppose market demand facing a monopolist is given by .Then the monopolist's marginal revenue curve (in the absence of price discrimination) is

Depending on the shape of the marginal cost curve, a monopolist might produce an output level on the elastic or the inelastic part of demand.

Suppose a monopolist has marginal cost of zero but recurring fixed costs.Then the monopolist will produce the efficient level of output so long as he can first degree price discriminate.

Explain why the deadweight loss from monopoly power may be exacerbated if the barrier to entry that creates monopoly power is created through exclusive government granting of a monopoly.For what types of government grants of monopoly power might this not be the case?

When perfect price discrimination comes in the form of a two-part tariff, one part of the "tariff" just covers marginal costs.

If a monopolist has no marginal costs and only recurring fixed costs, then, if he produces, any quantity that he produces is profit maximizing if the price elasticity of market demand is -1.

If a monopolist has downward sloping average costs, he will not produce if he cannot price discriminate.

Low demand consumers are indifferent between second degree and first degree price discrimination.

Suppose a monopolist produces a positive level of output.If marginal costs are zero, this output level will occur where price elasticity of demand is exactly -1 unless there are recurring fixed costs.

Explain what the Saudi oil minister meant when he warned OPEC of using its market power too much by saying "Remember, the Stone Age did not end because we ran out of stones."

In the presence of positive production externalities, a monopolist might produce the efficient output level.

Suppose a monopolist has zero marginal cost but positive recurring fixed costs.Then, if it is efficient to produce, the efficient quantity to produce occurs where demand crosses the horizontal (quantity) axis.

Under second degree price discrimination, the average price per unit paid by high demand consumers is not equal to marginal willingness to pay for one additional unit.

Suppose you observe that output in an industry occurs on the inelastic part of the market demand curve.Which of the following can you conclude from this?

How would a regulator of a monopoly think differently about regulating price discrimination depending on whether the regulator's objective is to maximize efficiency or to maximize consumer surplus?

Introduction

A Consumers Economic Circumstances

Economic Circumstances in Labor and Financial Markets

Tastes and Indifference Curves

Different Types of Tastes

Doing the Best We Can

Income and Substitution Effects in Consumer Goods Markets

Wealth and Substitution Effects in Labor and Capital Markets

Demand for Goods and Supply of Labor and Capital

Consumer Surplus and Deadweight Loss

One Input and One Output: a Short-Run Producer Model

Production With Multiple Inputs

Production Decisions in the Short and Long Run

Competitive Market Equilibrium

The Invisible Hand and the First Welfare Theorem

General Equilibrium

Choice and Markets in the Presence of Risk

Elasticities, Price-Distorting Policies, and Non-Price Rationing

Distortionary Taxes and Subsidies

Prices and Distortions Across Markets

Externalities in Competitive Markets

Asymmetric Information in Competitive Markets

Strategic Thinking and Game Theory

Oligopoly

Product Differentiation and Innovation in Markets

Public Goods

Governments and Politics

What Is Good Challenges From Psychology and Philosophy

Filters