Question 1

Which of the following statements about a monopolist is FALSE?

Accepted Answer

A)  A pure monopolist is the sole supplier of one product, good, or service. 
B)  The monopolist faces a demand curve for the entire market for that good. 
C)  A pure monopolist is not the same as a perfect competitor. 
D)  The monopolist faces the industry demand curve, which is upward sloping. 
A)  A pure monopolist is the sole supplier of one product, good, or service. 
B)  The monopolist faces a demand curve for the entire market for that good. 
C)  A pure monopolist is not the same as a perfect competitor. 
D)  The monopolist faces the industry demand curve, which is upward sloping.

Question 2

A monopolist is

Accepted Answer

A)  a firm with annual sales over $50 million. 
B)  a single supplier of a good for which there is no close substitute. 
C)  a large firm that makes all the other firms in the industry do what it wants. 
D)  a supplier of a good that everyone needs with the result that it makes large profits. 
A)  a firm with annual sales over $50 million. 
B)  a single supplier of a good for which there is no close substitute. 
C)  a large firm that makes all the other firms in the industry do what it wants. 
D)  a supplier of a good that everyone needs with the result that it makes large profits.

Question 3

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

Accepted Answer

A)  Gasoline stations charge more for gasoline with higher octane and additional additives. 
B)  Colleges give some students more financial aid than they do other students. 
C)  Airlines charge more for people who don't stay over a Saturday night. 
D)  College bookstore gives a price discount to faculty. 
A)  Gasoline stations charge more for gasoline with higher octane and additional additives. 
B)  Colleges give some students more financial aid than they do other students. 
C)  Airlines charge more for people who don't stay over a Saturday night. 
D)  College bookstore gives a price discount to faculty.

Question 4

-Refer to the above figure. The profit maximizing quantity for this firm is

Accepted Answer

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

Question 5

Unlike a perfectly competitive firm, a monopolist faces a demand curve that is

Accepted Answer

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

Question 6

A monopoly sells 5 units of output at $20. If the MR of the 6th unit is $14, then the price of the 6th unit is

Accepted Answer

A)  also $14. 
B)  $17. 
C)  greater than $20. 
D)  $19. 
A)  also $14. 
B)  $17. 
C)  greater than $20. 
D)  $19.

Question 7

For the monopolist, marginal revenue is

Accepted Answer

A)  equal to price. 
B)  less than average revenue since price must be lowered to sell additional units. 
C)  greater than price. 
D)  not a consideration in the firm's pricing. 
A)  equal to price. 
B)  less than average revenue since price must be lowered to sell additional units. 
C)  greater than price. 
D)  not a consideration in the firm's pricing.

Question 8

A natural monopoly exists when

Accepted Answer

A)  the firm holds a patent. 
B)  there are governmental entry restrictions. 
C)  the firm owns all of the raw materials needed to produce the product. 
D)  economies of scale occur. 
A)  the firm holds a patent. 
B)  there are governmental entry restrictions. 
C)  the firm owns all of the raw materials needed to produce the product. 
D)  economies of scale occur.

Question 9

The profit maximizing behavior of a monopoly is different from that of a perfectly competitive firm in that a monopoly can

Accepted Answer

A)  only choose the desired output, while a competitive firm can control only price. 
B)  only choose the desired price, while a competitive firm can control only output. 
C)  control the position of its demand schedule, but a competitive firm cannot. 
D)  control the desired price and output to maximize profits, but a perfectly competitive firm can only choose the desired output. 
A)  only choose the desired output, while a competitive firm can control only price. 
B)  only choose the desired price, while a competitive firm can control only output. 
C)  control the position of its demand schedule, but a competitive firm cannot. 
D)  control the desired price and output to maximize profits, but a perfectly competitive firm can only choose the desired output.

Question 10

The demand curve facing a monopolist is

Accepted Answer

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

Question 11

For a profit-maximizing monopolist,

Accepted Answer

A)  P > MC. 
B)  P = MC. 
C)  P = MR. 
D)  P = ATC. 
A)  P > MC. 
B)  P = MC. 
C)  P = MR. 
D)  P = ATC.

Question 12

Price differentiation is a situation in which

Accepted Answer

A)  there are different prices for similar products reflecting differences in the marginal cost of providing the commodities to different groups of buyers. 
B)  there are different prices for the same product that are not due to differences in the marginal cost of providing the commodity to different groups of buyers. 
C)  consumers' comparison-shop. 
D)  the demand curve is vertical. 
A)  there are different prices for similar products reflecting differences in the marginal cost of providing the commodities to different groups of buyers. 
B)  there are different prices for the same product that are not due to differences in the marginal cost of providing the commodity to different groups of buyers. 
C)  consumers' comparison-shop. 
D)  the demand curve is vertical.

Question 13

Which of the following regarding a monopolist is INCORRECT?

Accepted Answer

A)  The monopolist is a single supplier of a good or service. 
B)  The monopolist constitutes the entire industry. 
C)  Only expensive products are produced by monopolies. 
D)  There are barriers to entry that allow monopoly. 
A)  The monopolist is a single supplier of a good or service. 
B)  The monopolist constitutes the entire industry. 
C)  Only expensive products are produced by monopolies. 
D)  There are barriers to entry that allow monopoly.

Question 14

A monopolist charges a price that is ________ and produces ________ than a perfect competitor.

Accepted Answer

A)  lower; less 
B)  higher; less 
C)  higher; more 
D)  lower; more 
A)  lower; less 
B)  higher; less 
C)  higher; more 
D)  lower; more

Question 15

The profit-maximizing monopolist will never operate in a price range over which

Accepted Answer

A)  the demand curve slopes downward. 
B)  demand is inelastic. 
C)  P > MR. 
D)  P > MC. 
A)  the demand curve slopes downward. 
B)  demand is inelastic. 
C)  P > MR. 
D)  P > MC.

Question 16

-According to the above figure, when the monopolist maximizes profits, its profits are equal to the area given by

Accepted Answer

A)  AKMC. 
B)  AKOD. 
C)  BLPE. 
D)  EPRF. 
A)  AKMC. 
B)  AKOD. 
C)  BLPE. 
D)  EPRF.

Question 17

Which of the following is a TRUE statement about monopoly and perfect competition?

Accepted Answer

A)  Price is always higher and output higher under monopoly than under perfect competition. 
B)  Because costs do not depend on market structure, price is usually higher and output is always lower under monopoly than perfect competition. 
C)  If there are substantial economies of scale, price may be lower and output greater under monopoly than under perfect competition. 
D)  If there are substantial economies of scale, price may be lower and output greater under monopoly than under perfect competition, and price may be below marginal cost instead of equal to marginal cost. 
A)  Price is always higher and output higher under monopoly than under perfect competition. 
B)  Because costs do not depend on market structure, price is usually higher and output is always lower under monopoly than perfect competition. 
C)  If there are substantial economies of scale, price may be lower and output greater under monopoly than under perfect competition. 
D)  If there are substantial economies of scale, price may be lower and output greater under monopoly than under perfect competition, and price may be below marginal cost instead of equal to marginal cost.

Question 18

For a monopolist, the reason that marginal revenue is less than price is

Accepted Answer

A)  because of the perfectly elastic demand curve that the monopolist faces. 
B)  because the monopolist must lower the price of the good in order to sell an additional unit. 
C)  because of the U-shaped average revenue curve. 
D)  because of the lack of competition in the market. 
A)  because of the perfectly elastic demand curve that the monopolist faces. 
B)  because the monopolist must lower the price of the good in order to sell an additional unit. 
C)  because of the U-shaped average revenue curve. 
D)  because of the lack of competition in the market.

Question 19

For a firm to be able to engage in price discrimination, it must

Accepted Answer

A)  face a downward sloping demand curve. 
B)  produce more than one product. 
C)  have customers of different levels of wealth and age. 
D)  have economies of scale. 
A)  face a downward sloping demand curve. 
B)  produce more than one product. 
C)  have customers of different levels of wealth and age. 
D)  have economies of scale.

Question 20

-The profit-maximizing price of the monopolist compared to the perfectly competitive industry in the above figure are, respectively

Accepted Answer

A)  P1 and P3. 
B)  P1 and P5. 
C)  P1 and P2. 
D)  P2 and P5. 
A)  P1 and P3. 
B)  P1 and P5. 
C)  P1 and P2. 
D)  P2 and P5.

Exam 24: Monopoly

Which of the following statements about a monopolist is FALSE?

A monopolist is

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

-Refer to the above figure. The profit maximizing quantity for this firm is

Unlike a perfectly competitive firm, a monopolist faces a demand curve that is

A monopoly sells 5 units of output at $20. If the MR of the 6th unit is $14, then the price of the 6th unit is

For the monopolist, marginal revenue is

A natural monopoly exists when

The profit maximizing behavior of a monopoly is different from that of a perfectly competitive firm in that a monopoly can

The demand curve facing a monopolist is

For a profit-maximizing monopolist,

Price differentiation is a situation in which

Which of the following regarding a monopolist is INCORRECT?

A monopolist charges a price that is ________ and produces ________ than a perfect competitor.

The profit-maximizing monopolist will never operate in a price range over which

-According to the above figure, when the monopolist maximizes profits, its profits are equal to the area given by

Which of the following is a TRUE statement about monopoly and perfect competition?

For a monopolist, the reason that marginal revenue is less than price is

For a firm to be able to engage in price discrimination, it must

-The profit-maximizing price of the monopolist compared to the perfectly competitive industry in the above figure are, respectively

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

Filters

A monopolist charges a price that is and produces than a perfect competitor.