Question 1

A single-price monopoly is characterized by a marginal revenue curve that is

Accepted Answer

A)  upward sloping. 
B)  downward sloping. 
C)  horizontal. 
D)  vertical. 
A)  upward sloping. 
B)  downward sloping. 
C)  horizontal. 
D)  vertical.

Question 2

A patent grants

Accepted Answer

A)  a guarantee of quality to consumers. 
B)  the right to practice a profession. 
C)  an exclusive right to an inventor of a product. 
D)  control over a unique source or supply of raw materials. 
A)  a guarantee of quality to consumers. 
B)  the right to practice a profession. 
C)  an exclusive right to an inventor of a product. 
D)  control over a unique source or supply of raw materials.

Question 3

"A profit-maximizing monopoly never produces an output in the inelastic range of its demand curve." True or false? Explain.

Accepted Answer

The statement is True. The profit maximi

Question 4

Which of the following types of economic regulation is most likely to encourage firms to inflate their costs?

Accepted Answer

A)  price cap regulation 
B)  rate of return regulation 
C)  cartel regulation 
D)  earnings sharing and price cap regulation 
A)  price cap regulation 
B)  rate of return regulation 
C)  cartel regulation 
D)  earnings sharing and price cap regulation

Question 5

-If a marginal cost pricing rule is imposed on the firm in the figure above, the price will be

Accepted Answer

A)  $5 per unit. 
B)  $25 per unit. 
C)  $40 per unit. 
D)  $20 per unit. 
A)  $5 per unit. 
B)  $25 per unit. 
C)  $40 per unit. 
D)  $20 per unit.

Question 6

If the price elasticity of demand is less than 1, a monopoly's

Accepted Answer

A)  total revenue increases when the firm lowers its price. 
B)  total revenue decreases when the firm lowers its price. 
C)  marginal revenue is undefined. 
D)  marginal revenue is zero. 
A)  total revenue increases when the firm lowers its price. 
B)  total revenue decreases when the firm lowers its price. 
C)  marginal revenue is undefined. 
D)  marginal revenue is zero.

Question 7

"If a natural monopoly is regulated using a marginal cost pricing rule, the firm makes zero economic profit." Is the previous statement correct or incorrect?

Accepted Answer

The statement is incorrect. If

Question 8

-If the firm in the figure above is unregulated, it will produce

Accepted Answer

A)  5 units. 
B)  20 units. 
C)  30 units. 
D)  40 units. 
A)  5 units. 
B)  20 units. 
C)  30 units. 
D)  40 units.

Question 9

A single-price monopolist

Accepted Answer

A)  sets its price where its demand is inelastic. 
B)  can always increase its profits by increasing its price. 
C)  has its marginal revenue less than its price. 
D)  is guaranteed an economic profit. 
A)  sets its price where its demand is inelastic. 
B)  can always increase its profits by increasing its price. 
C)  has its marginal revenue less than its price. 
D)  is guaranteed an economic profit.

Question 10

A natural monopoly

Accepted Answer

A)  is not protected by any barrier to entry. 
B)  exists because of legal barriers to entry. 
C)  is an industry in which economies of scale exist so that one firm can supply the market at the lowest possible cost.. 
D)  is an industry where two or more smaller firms can supply the market at a lower cost than one big firm could. 
A)  is not protected by any barrier to entry. 
B)  exists because of legal barriers to entry. 
C)  is an industry in which economies of scale exist so that one firm can supply the market at the lowest possible cost.. 
D)  is an industry where two or more smaller firms can supply the market at a lower cost than one big firm could.

Question 11

-If a marginal cost pricing rule is imposed on the firm in the figure above, the total surplus will be

Accepted Answer

A)  zero. 
B)  $800. 
C)  $400. 
D)  $200. 
A)  zero. 
B)  $800. 
C)  $400. 
D)  $200.

Question 12

If the local cable TV company is a natural monopoly and required by regulators to set its price equal to marginal cost, it makes zero profit and produces the efficient level of output.

Accepted Answer

A) True 
 B)False

Question 13

The monopolist always maximizes its profits by producing the amount of output that sets the marginal revenue equal to zero.

Accepted Answer

A) True 
 B)False

Question 14

Under rate of return regulation, a regulated firm has an incentive to

Accepted Answer

A)  use an efficient amount of capital. 
B)  set its price equal to its marginal cost. 
C)  hide losses from bad debts. 
D)  inflate its costs. 
A)  use an efficient amount of capital. 
B)  set its price equal to its marginal cost. 
C)  hide losses from bad debts. 
D)  inflate its costs.

Question 15

-In the figure above, what is the loss of consumer surplus if the firm is a perfectly price-discriminating monopoly instead of a perfectly competitive industry?

Accepted Answer

A)  $0 
B)  $22.50 
C)  $45.00 
D)  $90.00 
A)  $0 
B)  $22.50 
C)  $45.00 
D)  $90.00

Question 16

Patents create monopolies by restricting

Accepted Answer

A)  demand. 
B)  prices. 
C)  entry. 
D)  profit. 
A)  demand. 
B)  prices. 
C)  entry. 
D)  profit.

Question 17

Perfect price discrimination

Accepted Answer

A)  turns all the producer surplus into consumer surplus. 
B)  turns all the consumer surplus into economic profit. 
C)  creates a deadweight loss. 
D)  cannot result in profit maximization. 
A)  turns all the producer surplus into consumer surplus. 
B)  turns all the consumer surplus into economic profit. 
C)  creates a deadweight loss. 
D)  cannot result in profit maximization.

Question 18

-In the above figure, which area is the deadweight loss from a single-price monopoly?

Accepted Answer

A)  E 
B)  E + H 
C)  E + H + K 
D)  E + H + K + J 
A)  E 
B)  E + H 
C)  E + H + K 
D)  E + H + K + J

Question 19

If a monopolist lowers its price and its demand is inelastic, then its

Accepted Answer

A)  total revenue increases. 
B)  total revenue decreases. 
C)  total revenue does not change. 
D)  total revenue is negative. 
A)  total revenue increases. 
B)  total revenue decreases. 
C)  total revenue does not change. 
D)  total revenue is negative.

Question 20

-Consider the market for cable television, a natural monopoly, shown in the figure above. If the regulator imposes an average cost pricing rule, the firm provides service to

Accepted Answer

A)  3.5 million households. 
B)  6 million households. 
C)  10.5 million households. 
D)  12.5 million households. 
A)  3.5 million households. 
B)  6 million households. 
C)  10.5 million households. 
D)  12.5 million households.

A single-price monopoly is characterized by a marginal revenue curve that is

A patent grants

"A profit-maximizing monopoly never produces an output in the inelastic range of its demand curve." True or false? Explain.

Which of the following types of economic regulation is most likely to encourage firms to inflate their costs?

-If a marginal cost pricing rule is imposed on the firm in the figure above, the price will be

If the price elasticity of demand is less than 1, a monopoly's

"If a natural monopoly is regulated using a marginal cost pricing rule, the firm makes zero economic profit." Is the previous statement correct or incorrect?

-If the firm in the figure above is unregulated, it will produce

A single-price monopolist

A natural monopoly

-If a marginal cost pricing rule is imposed on the firm in the figure above, the total surplus will be

If the local cable TV company is a natural monopoly and required by regulators to set its price equal to marginal cost, it makes zero profit and produces the efficient level of output.

The monopolist always maximizes its profits by producing the amount of output that sets the marginal revenue equal to zero.

Under rate of return regulation, a regulated firm has an incentive to

-In the figure above, what is the loss of consumer surplus if the firm is a perfectly price-discriminating monopoly instead of a perfectly competitive industry?

Patents create monopolies by restricting

Perfect price discrimination

-In the above figure, which area is the deadweight loss from a single-price monopoly?

If a monopolist lowers its price and its demand is inelastic, then its

-Consider the market for cable television, a natural monopoly, shown in the figure above. If the regulator imposes an average cost pricing rule, the firm provides service to

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters

Exam 13: Monopoly

A single-price monopoly is characterized by a marginal revenue curve that is

A patent grants

"A profit-maximizing monopoly never produces an output in the inelastic range of its demand curve." True or false? Explain.

Which of the following types of economic regulation is most likely to encourage firms to inflate their costs?

-If a marginal cost pricing rule is imposed on the firm in the figure above, the price will be

If the price elasticity of demand is less than 1, a monopoly's

"If a natural monopoly is regulated using a marginal cost pricing rule, the firm makes zero economic profit." Is the previous statement correct or incorrect?

-If the firm in the figure above is unregulated, it will produce

A single-price monopolist

A natural monopoly

-If a marginal cost pricing rule is imposed on the firm in the figure above, the total surplus will be

If the local cable TV company is a natural monopoly and required by regulators to set its price equal to marginal cost, it makes zero profit and produces the efficient level of output.

The monopolist always maximizes its profits by producing the amount of output that sets the marginal revenue equal to zero.

Under rate of return regulation, a regulated firm has an incentive to

-In the figure above, what is the loss of consumer surplus if the firm is a perfectly price-discriminating monopoly instead of a perfectly competitive industry?

Patents create monopolies by restricting

Perfect price discrimination

-In the above figure, which area is the deadweight loss from a single-price monopoly?

If a monopolist lowers its price and its demand is inelastic, then its

-Consider the market for cable television, a natural monopoly, shown in the figure above. If the regulator imposes an average cost pricing rule, the firm provides service to

What Is Economics

The Economic Problem

Demand and Supply

Elasticity

Efficiency and Equity

Government Actions in Markets

Global Markets in Action

Utility and Demand

Possibilities, Preferences, and Choices

Organizing Production

Output and Costs

Perfect Competition

Monopolistic Competition

Oligopoly

Public Choices, Public Goods, and Healthcare

Externalities

Markets for Factors of Production

Economic Inequality

Uncertainty and Information

Filters