Question 1

If a monopolist can sell 3 units at price of $150 per unit and 4 units at a price of $140 per unit, its marginal revenue at an output of 4 is

Accepted Answer

A)  $-10.00. 
B)  $10.00. 
C)  $560.00. 
D)  $110.00. 
A)  $-10.00. 
B)  $10.00. 
C)  $560.00. 
D)  $110.00.

Question 2

A monopolist has four distinct groups of customers. Group A has an elasticity of demand of 0.2, B has an elasticity of demand of 0.8, C has an elasticity of demand of 1.0, and D has an elasticity of demand of 2.0. The group paying the highest price for the product will be

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  D. 
A)  A. 
B)  B. 
C)  C. 
D)  D.

Question 3

"A monopolist refers to any firm that is large in size." Do you agree or disagree? Why?

Accepted Answer

Disagree. A monopolist does no

Question 4

A firm that faces a downward sloping demand curve is known as a

Accepted Answer

A)  price taker. 
B)  utility maximizer. 
C)  price searcher. 
D)  perfect competitor. 
A)  price taker. 
B)  utility maximizer. 
C)  price searcher. 
D)  perfect competitor.

Question 5

Suppose a monopolist's costs and revenues are as follows: ATC = $50.00; MC = $45.00; MR = $40.00; P = $55.00. The firm should

Accepted Answer

A)  increase output and decrease price. 
B)  decrease output and increase price. 
C)  not change output or price. 
D)  shut down. 
A)  increase output and decrease price. 
B)  decrease output and increase price. 
C)  not change output or price. 
D)  shut down.

Question 6

Which of the following is NOT necessary in order for a monopolist to practice effective price discrimination?

Accepted Answer

A)  The marginal cost of providing the same good to different groups of buyers must be different. 
B)  The monopolist must be able to segregate its market into different submarkets. 
C)  The buyers in various markets must face different price elasticities of demand. 
D)  The monopolist must have a downward sloping demand curve. 
A)  The marginal cost of providing the same good to different groups of buyers must be different. 
B)  The monopolist must be able to segregate its market into different submarkets. 
C)  The buyers in various markets must face different price elasticities of demand. 
D)  The monopolist must have a downward sloping demand curve.

Question 7

A tax that is imposed on an imported good is called a

Accepted Answer

A)  tariff. 
B)  quota. 
C)  government license. 
D)  patent. 
A)  tariff. 
B)  quota. 
C)  government license. 
D)  patent.

Question 8

A monopolist's marginal revenue curve is

Accepted Answer

A)  the same as a perfectly competitive firm's marginal revenue curve. 
B)  higher than the monopolist's demand curve. 
C)  below the firm's demand curve. 
D)  a horizontal line at the market price. 
A)  the same as a perfectly competitive firm's marginal revenue curve. 
B)  higher than the monopolist's demand curve. 
C)  below the firm's demand curve. 
D)  a horizontal line at the market price.

Question 9

The monopolist's marginal revenue is less than price since

Accepted Answer

A)  additional units can only be sold if the price is lowered on all units sold. 
B)  the demand function is horizontal. 
C)  average revenue is also less than price. 
D)  average total cost is declining. 
A)  additional units can only be sold if the price is lowered on all units sold. 
B)  the demand function is horizontal. 
C)  average revenue is also less than price. 
D)  average total cost is declining.

Question 10

A monopolist would not be able to make a positive profit at any price output combination when

Accepted Answer

A)  marginal cost is less than average total cost for one more unit of output. 
B)  the average variable cost curve is everywhere above the marginal revenue curve. 
C)  the minimum point of the average total cost curve lies to the right of the minimum of the average variable cost curve. 
D)  the average total cost curve is everywhere above the demand curve. 
A)  marginal cost is less than average total cost for one more unit of output. 
B)  the average variable cost curve is everywhere above the marginal revenue curve. 
C)  the minimum point of the average total cost curve lies to the right of the minimum of the average variable cost curve. 
D)  the average total cost curve is everywhere above the demand curve.

Question 11

-Use the above figure. The profit-maximizing output and price is

Accepted Answer

A)  600 and $16, respectively. 
B)  600 and $10, respectively. 
C)  600 and $8, respectively. 
D)  800 and $10, respectively. 
A)  600 and $16, respectively. 
B)  600 and $10, respectively. 
C)  600 and $8, respectively. 
D)  800 and $10, respectively.

Question 12

If a monopolist is producing the quantity at which marginal revenue equals marginal cost, it should

Accepted Answer

A)  continue to produce this amount if it wants to maximize profits. 
B)  reduce output if it wants to maximize profits. 
C)  increase price and keep output unchanged if it wants to maximize profits. 
D)  increase output if it wants to maximize profits. 
A)  continue to produce this amount if it wants to maximize profits. 
B)  reduce output if it wants to maximize profits. 
C)  increase price and keep output unchanged if it wants to maximize profits. 
D)  increase output if it wants to maximize profits.

Question 13

How does a monopoly maximize profits? What price does it charge?

Accepted Answer

A monopoly finds the rate of output at w

Question 14

A firm that faces a downward sloping demand curve is

Accepted Answer

A)  a price taker. 
B)  a price provider. 
C)  a price searcher. 
D)  a price creator. 
A)  a price taker. 
B)  a price provider. 
C)  a price searcher. 
D)  a price creator.

Question 15

A monopolist produces in the elastic segment of its demand curve because when it lowers the price,

Accepted Answer

A)  the percentage change increase in quantity demanded is greater than the percentage change decrease in price and total revenue increases. 
B)  the percentage change increase in quantity demanded is less than the percentage change decrease in price and total revenue increases. 
C)  the percentage change increase in quantity demanded is greater than the percentage change decrease in price and total revenue decreases. 
D)  the percentage change decrease in quantity demanded is less than the percentage change decrease in price and total revenue increases. 
A)  the percentage change increase in quantity demanded is greater than the percentage change decrease in price and total revenue increases. 
B)  the percentage change increase in quantity demanded is less than the percentage change decrease in price and total revenue increases. 
C)  the percentage change increase in quantity demanded is greater than the percentage change decrease in price and total revenue decreases. 
D)  the percentage change decrease in quantity demanded is less than the percentage change decrease in price and total revenue increases.

Question 16

All of the following are considered a barrier to entry into a market EXCEPT

Accepted Answer

A)  ownership of resources without close substitutes. 
B)  when firms can only earn a normal rate of return in a market. 
C)  economies of scale. 
D)  governmental restrictions on a firm's ability enter a market. 
A)  ownership of resources without close substitutes. 
B)  when firms can only earn a normal rate of return in a market. 
C)  economies of scale. 
D)  governmental restrictions on a firm's ability enter a market.

Question 17

A simple way of describing the social cost of monopoly is to say that it

Accepted Answer

A)  produces too much. 
B)  makes too much money. 
C)  has too much political power. 
D)  restricts output and charges a higher price than a perfectly competitive firm. 
A)  produces too much. 
B)  makes too much money. 
C)  has too much political power. 
D)  restricts output and charges a higher price than a perfectly competitive firm.

Question 18

If a monopolist were to produce in the inelastic segment of its demand curve,

Accepted Answer

A)  total revenue would be at a maximum. 
B)  total revenue would be at a minimum. 
C)  the firm would maximize profits. 
D)  a further drop in the price will change quantity demanded less than proportionately. 
A)  total revenue would be at a maximum. 
B)  total revenue would be at a minimum. 
C)  the firm would maximize profits. 
D)  a further drop in the price will change quantity demanded less than proportionately.

Question 19

For a perfectly competitive market in which firms face an identical constant marginal costs, the amount of consumer surplus increases if

Accepted Answer

A)  market demand decreases. 
B)  market demand increases. 
C)  marginal cost increases. 
D)  none of the above: insufficient information to answer. 
A)  market demand decreases. 
B)  market demand increases. 
C)  marginal cost increases. 
D)  none of the above: insufficient information to answer.

Question 20

Which of the following are barriers to entry?

Accepted Answer

A)  Economies of scale 
B)  Patents and copyrights 
C)  Control of resources 
D)  All of the above 
A)  Economies of scale 
B)  Patents and copyrights 
C)  Control of resources 
D)  All of the above

Exam 24: Monopoly

If a monopolist can sell 3 units at price of $150 per unit and 4 units at a price of $140 per unit, its marginal revenue at an output of 4 is

A monopolist has four distinct groups of customers. Group A has an elasticity of demand of 0.2, B has an elasticity of demand of 0.8, C has an elasticity of demand of 1.0, and D has an elasticity of demand of 2.0. The group paying the highest price for the product will be

"A monopolist refers to any firm that is large in size." Do you agree or disagree? Why?

A firm that faces a downward sloping demand curve is known as a

Suppose a monopolist's costs and revenues are as follows: ATC = $50.00; MC = $45.00; MR = $40.00; P = $55.00. The firm should

Which of the following is NOT necessary in order for a monopolist to practice effective price discrimination?

A tax that is imposed on an imported good is called a

A monopolist's marginal revenue curve is

The monopolist's marginal revenue is less than price since

A monopolist would not be able to make a positive profit at any price output combination when

-Use the above figure. The profit-maximizing output and price is

If a monopolist is producing the quantity at which marginal revenue equals marginal cost, it should

How does a monopoly maximize profits? What price does it charge?

A firm that faces a downward sloping demand curve is

A monopolist produces in the elastic segment of its demand curve because when it lowers the price,

All of the following are considered a barrier to entry into a market EXCEPT

A simple way of describing the social cost of monopoly is to say that it

If a monopolist were to produce in the inelastic segment of its demand curve,

For a perfectly competitive market in which firms face an identical constant marginal costs, the amount of consumer surplus increases if

Which of the following are barriers to entry?

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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