Question 1

When considering marginal revenue for the monopolist, which of the following is FALSE?

Accepted Answer

A)  To sell more of a particular product, given the industry demand curve, the monopoly firm must lower the price. 
B)  An essential point for the monopolist, marginal revenue is always less than price. 
C)  Marginal revenue is always less than price because price must be reduced on all units to sell more. 
D)  The more the monopolist wants to sell, the higher the price it has to charge in order to make more profits. 
A)  To sell more of a particular product, given the industry demand curve, the monopoly firm must lower the price. 
B)  An essential point for the monopolist, marginal revenue is always less than price. 
C)  Marginal revenue is always less than price because price must be reduced on all units to sell more. 
D)  The more the monopolist wants to sell, the higher the price it has to charge in order to make more profits. D

Question 2

Suppose that the profit maximizing level of output for the monopolist is 100 units, and ATC = $45.00; MC = $35.00; MR = $35.00; P = $45.00. What is the monopoly's profit?

Accepted Answer

A)  -$1000 
B)  $4500 
C)  $0 
D)  $3500 
A)  -$1000 
B)  $4500 
C)  $0 
D)  $3500 C

Question 3

-In the above figure, the area of rectangle ABHG represents the monopolist's

Accepted Answer

A)  maximized economic profits. 
B)  maximized total revenue. 
C)  average total profits. 
D)  total costs. 
A)  maximized economic profits. 
B)  maximized total revenue. 
C)  average total profits. 
D)  total costs. A

Question 4

Which of the following conditions is not necessary for a firm to be able to engage in price discrimination? I. The firm must be able to produce to the point at which price equals marginal revenue.
II) The firm must easily be able to identify consumers with different demand elasticities.
III) The firm must be able to prevent resale of the item it produces and sells.

Accepted Answer

A)  I only 
B)  III only 
C)  Both I and II only 
D)  Both II and III only 
A)  I only 
B)  III only 
C)  Both I and II only 
D)  Both II and III only

Question 5

Which of the following is not true about a certificate of convenience and public necessity?

Accepted Answer

A)  It is a barrier to entry. 
B)  It is a patent. 
C)  It is issued by a government agency. 
D)  It limits competition. 
A)  It is a barrier to entry. 
B)  It is a patent. 
C)  It is issued by a government agency. 
D)  It limits competition.

Question 6

A monopolist

Accepted Answer

A)  is a price searcher. 
B)  is a price taker. 
C)  faces an upward sloping demand curve. 
D)  faces a vertical demand curve. 
A)  is a price searcher. 
B)  is a price taker. 
C)  faces an upward sloping demand curve. 
D)  faces a vertical demand curve.

Question 7

Other things being equal, a price-discriminating firm will charge less to the customers who

Accepted Answer

A)  have the lowest incomes. 
B)  have the least elastic demand for its product. 
C)  have the most elastic demand for the product. 
D)  are the most rational in making their decisions. 
A)  have the lowest incomes. 
B)  have the least elastic demand for its product. 
C)  have the most elastic demand for the product. 
D)  are the most rational in making their decisions.

Question 8

Why is price less than marginal revenue for a monopolist?

Accepted Answer

@#IMG-DLM& Consider the above figure. If the monop

Question 9

Which of the following would NOT be a barrier to entry for a particular market?

Accepted Answer

A)  Ownership of a patent 
B)  Low cost of obtaining initial capital 
C)  The presence of economies of scale 
D)  Government regulation 
A)  Ownership of a patent 
B)  Low cost of obtaining initial capital 
C)  The presence of economies of scale 
D)  Government regulation

Question 10

A monopolist will not be able to receive a positive economic profit at any price-output combination at which

Accepted Answer

A)  marginal cost is less than average total cost when the monopolist has equated marginal revenue and marginal cost. 
B)  the average total cost curve is everywhere above the demand curve. 
C)  marginal cost is less than average variable cost when the monopolist has equated marginal revenue and marginal cost. 
D)  marginal revenue falls at a faster rate than marginal cost increases. 
A)  marginal cost is less than average total cost when the monopolist has equated marginal revenue and marginal cost. 
B)  the average total cost curve is everywhere above the demand curve. 
C)  marginal cost is less than average variable cost when the monopolist has equated marginal revenue and marginal cost. 
D)  marginal revenue falls at a faster rate than marginal cost increases.

Question 11

If the marginal cost curve of all identical firms in a perfectly competitive industry are horizontal at the same per-unit cost, then the market's consumer surplus equals the area

Accepted Answer

A)  beneath the demand curve and above the marginal cost curve. 
B)  above the demand curve and beneath the marginal cost curve. 
C)  below the marginal cost curve. 
D)  above the demand curve. 
A)  beneath the demand curve and above the marginal cost curve. 
B)  above the demand curve and beneath the marginal cost curve. 
C)  below the marginal cost curve. 
D)  above the demand curve.

Question 12

-Refer to the above figure. Profits for this firm are

Accepted Answer

A)  negative. 
B)  zero. 
C)  positive. 
D)  undetermined without more information. 
A)  negative. 
B)  zero. 
C)  positive. 
D)  undetermined without more information.

Question 13

A natural monopoly usually arises when

Accepted Answer

A)  there are diseconomies of scale in an industry. 
B)  the government allows unrestricted access to a market. 
C)  there are large economies of scale relative to the industry's demand. 
D)  companies band together to form a larger company. 
A)  there are diseconomies of scale in an industry. 
B)  the government allows unrestricted access to a market. 
C)  there are large economies of scale relative to the industry's demand. 
D)  companies band together to form a larger company.

Question 14

-Refer to the above figure. Which of the following statements is true?

Accepted Answer

A)  Under perfect competition, the efficient price is charged, which is the lowest price possible (   ) while under monopoly output is too large (   ) and price is too high (   ). 
B)  Under perfect competition price equals marginal cost (   ) while under monopoly price (   ) is greater than marginal cost (   ). 
C)  The rate of output is the same under both monopoly and perfect competition (   ), but price is higher under monopoly (   rather than   ). 
D)  Price equals marginal cost under both monopoly and perfect competition, but output is too low under monopoly (   instead of   ). 
A)  Under perfect competition, the efficient price is charged, which is the lowest price possible (   ) while under monopoly output is too large (   ) and price is too high (   ). 
B)  Under perfect competition price equals marginal cost (   ) while under monopoly price (   ) is greater than marginal cost (   ). 
C)  The rate of output is the same under both monopoly and perfect competition (   ), but price is higher under monopoly (   rather than   ). 
D)  Price equals marginal cost under both monopoly and perfect competition, but output is too low under monopoly (   instead of   ).

Question 15

A firm that can determine the price-output combination in order to maximize profit is known as a

Accepted Answer

A)  price searcher. 
B)  price taker. 
C)  demand searcher. 
D)  cost taker. 
A)  price searcher. 
B)  price taker. 
C)  demand searcher. 
D)  cost taker.

Question 16

-Given the data in the above table, the marginal revenue curve

Accepted Answer

A)  lies below the demand curve. 
B)  lies above the demand curve. 
C)  intersects the demand curve. 
D)  is equal to the demand curve. 
A)  lies below the demand curve. 
B)  lies above the demand curve. 
C)  intersects the demand curve. 
D)  is equal to the demand curve.

Question 17

Which of the following is NOT an example of price discrimination?

Accepted Answer

A)  Student discount at a local movie theater. 
B)  Breakfast cereal makers sending coupons to select buyers. 
C)  Pharmaceutical companies charge customers living in wealthier countries higher prices than for identical drugs in poorer nations. 
D)  A hard cover book selling for more than the same book in electronic form. 
A)  Student discount at a local movie theater. 
B)  Breakfast cereal makers sending coupons to select buyers. 
C)  Pharmaceutical companies charge customers living in wealthier countries higher prices than for identical drugs in poorer nations. 
D)  A hard cover book selling for more than the same book in electronic form.

Question 18

From the date a U.S. patent is granted to a firm, it ceases to be a potential source of monopoly profits after

Accepted Answer

A)  20 years. 
B)  14 years. 
C)  10 years. 
D)  7 years. 
A)  20 years. 
B)  14 years. 
C)  10 years. 
D)  7 years.

Question 19

A monopolist engages in price discrimination

Accepted Answer

A)  by charging a higher price to consumers whose demand is more elastic. 
B)  by charging a higher price when marginal cost is lower. 
C)  by charging a lower price to consumers whose demand is more elastic. 
D)  by charging the same price to all consumers. 
A)  by charging a higher price to consumers whose demand is more elastic. 
B)  by charging a higher price when marginal cost is lower. 
C)  by charging a lower price to consumers whose demand is more elastic. 
D)  by charging the same price to all consumers.

Question 20

When a firm sells a given product at more than one price and the price difference is NOT caused by differences in cost then there is

Accepted Answer

A)  price discrimination. 
B)  price differentiation. 
C)  price demarcation. 
D)  price delineation. 
A)  price discrimination. 
B)  price differentiation. 
C)  price demarcation. 
D)  price delineation.

Exam 24: Monopoly

When considering marginal revenue for the monopolist, which of the following is FALSE?

Suppose that the profit maximizing level of output for the monopolist is 100 units, and ATC = $45.00; MC = $35.00; MR = $35.00; P = $45.00. What is the monopoly's profit?

-In the above figure, the area of rectangle ABHG represents the monopolist's

Which of the following is not true about a certificate of convenience and public necessity?

A monopolist

Other things being equal, a price-discriminating firm will charge less to the customers who

Why is price less than marginal revenue for a monopolist?

Which of the following would NOT be a barrier to entry for a particular market?

A monopolist will not be able to receive a positive economic profit at any price-output combination at which

If the marginal cost curve of all identical firms in a perfectly competitive industry are horizontal at the same per-unit cost, then the market's consumer surplus equals the area

-Refer to the above figure. Profits for this firm are

A natural monopoly usually arises when

-Refer to the above figure. Which of the following statements is true?

A firm that can determine the price-output combination in order to maximize profit is known as a

-Given the data in the above table, the marginal revenue curve

Which of the following is NOT an example of price discrimination?

From the date a U.S. patent is granted to a firm, it ceases to be a potential source of monopoly profits after

A monopolist engages in price discrimination

When a firm sells a given product at more than one price and the price difference is NOT caused by differences in cost then there is

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