Question 1

If a monopolist wishes to increase its output and quantity sold,

Accepted Answer

A)  it must reduce its price, so its marginal revenue is greater than its price. 
B)  it must reduce its price, so its marginal revenue is less than its price. 
C)  it must raise its price, so its marginal revenue is greater than its price. 
D)  it must raise its price, so its marginal revenue is less than its price. 
A)  it must reduce its price, so its marginal revenue is greater than its price. 
B)  it must reduce its price, so its marginal revenue is less than its price. 
C)  it must raise its price, so its marginal revenue is greater than its price. 
D)  it must raise its price, so its marginal revenue is less than its price.

Question 2

The social cost attached to monopolies is reflected by the fact that

Accepted Answer

A)  monopolies produce more output than consumers desire to buy. 
B)  consumers pay prices that exceed the marginal cost of production. 
C)  the demand for a monopolist's product is always lower than the demand for the products of perfectly competitive firms. 
D)  consumers are always willing to pay lower prices for a monopolist's product than for the products of perfectly competitive firms. 
A)  monopolies produce more output than consumers desire to buy. 
B)  consumers pay prices that exceed the marginal cost of production. 
C)  the demand for a monopolist's product is always lower than the demand for the products of perfectly competitive firms. 
D)  consumers are always willing to pay lower prices for a monopolist's product than for the products of perfectly competitive firms.

Question 3

"All monopolies operate with positive economic profits." Do you agree or disagree? Why?

Accepted Answer

Disagree. Monopolies can receive negativ

Question 4

An important difference between perfect competition and monopoly is

Accepted Answer

A)  a monopoly is profitable and a perfect competitor is not. 
B)  the monopoly faces a downward sloping demand curve and the perfect competitor faces a horizontal demand curve. 
C)  the monopoly faces an inelastic demand curve and the perfect competitor faces an elastic demand curve. 
D)  a monopoly is not regulated by the market, while a perfect competitor is regulated by the market. 
A)  a monopoly is profitable and a perfect competitor is not. 
B)  the monopoly faces a downward sloping demand curve and the perfect competitor faces a horizontal demand curve. 
C)  the monopoly faces an inelastic demand curve and the perfect competitor faces an elastic demand curve. 
D)  a monopoly is not regulated by the market, while a perfect competitor is regulated by the market.

Question 5

In order for a firm to receive monopoly profits, there must be

Accepted Answer

A)  homogeneous products. 
B)  barriers to market entry. 
C)  mutual interdependence among firms. 
D)  free entry and exit to the market. 
A)  homogeneous products. 
B)  barriers to market entry. 
C)  mutual interdependence among firms. 
D)  free entry and exit to the market.

Question 6

Which of the following is LEAST likely to be able to regularly engage in price discrimination?

Accepted Answer

A)  a farmer 
B)  an airline 
C)  a university 
D)  a producer of copyrighted computer software 
A)  a farmer 
B)  an airline 
C)  a university 
D)  a producer of copyrighted computer software

Question 7

What is the social cost of a monopoly? Explain.

Accepted Answer

The social cost of a monopoly comes from

Question 8

When grocery stores issue special discount membership cards for shoppers effectively offering different prices based on quantities consumed, this is an example of

Accepted Answer

A)  price discrimination. 
B)  price differentiation. 
C)  product differentiation. 
D)  patent protection. 
A)  price discrimination. 
B)  price differentiation. 
C)  product differentiation. 
D)  patent protection.

Question 9

In order to sell more goods and/or services, what must a monopoly do?

Accepted Answer

A)  Reduce price and increase output 
B)  Increase output 
C)  Increase price 
D)  Nothing, since it is the market 
A)  Reduce price and increase output 
B)  Increase output 
C)  Increase price 
D)  Nothing, since it is the market

Question 10

An important difference between a perfectly competitive firm and a monopolist is

Accepted Answer

A)  the size of the firms. 
B)  the shape of the demand curve each faces. 
C)  the goals of the owners of the firms. 
D)  a monopolist normally produces a service, while a perfect competitor normally produces a good. 
A)  the size of the firms. 
B)  the shape of the demand curve each faces. 
C)  the goals of the owners of the firms. 
D)  a monopolist normally produces a service, while a perfect competitor normally produces a good.

Question 11

The MR curve of a monopolist is

Accepted Answer

A)  downward sloping and below the demand curve. 
B)  downsloping and identical to the demand curve. 
C)  downsloping and above the demand curve. 
D)  horizontal and same as the market demand curve. 
A)  downward sloping and below the demand curve. 
B)  downsloping and identical to the demand curve. 
C)  downsloping and above the demand curve. 
D)  horizontal and same as the market demand curve.

Question 12

Which of the following is NOT a barrier to entry?

Accepted Answer

A)  Patents 
B)  Licenses 
C)  Economies of scale 
D)  U.S. antitrust legislation 
A)  Patents 
B)  Licenses 
C)  Economies of scale 
D)  U.S. antitrust legislation

Question 13

Which of the following statements about a monopolist is TRUE?

Accepted Answer

A)  Monopolies tend to misallocate resources. 
B)  All monopolies are unlawful in the United States. 
C)  Monopolies tend to allocate resources in a socially optimal manner. 
D)  Monopolies will always make a profit in the long run. 
A)  Monopolies tend to misallocate resources. 
B)  All monopolies are unlawful in the United States. 
C)  Monopolies tend to allocate resources in a socially optimal manner. 
D)  Monopolies will always make a profit in the long run.

Question 14

Economies of scale will lead to only one firm in the industry because

Accepted Answer

A)  by increasing output a firm is able to lower the cost per unit and change lower prices driving smaller firms out of business. 
B)  one firm has an average cost curve, which has shifted below the average cost curves of its competitors. 
C)  there are governmental entry restrictions. 
D)  of government licensing. 
A)  by increasing output a firm is able to lower the cost per unit and change lower prices driving smaller firms out of business. 
B)  one firm has an average cost curve, which has shifted below the average cost curves of its competitors. 
C)  there are governmental entry restrictions. 
D)  of government licensing.

Question 15

Explain how a monopolist can increase profits by price discriminating. What are the conditions necessary for price discrimination?

Accepted Answer

A monopolist can increase profits by pri

Question 16

-Refer to the above figure. What is the socially optimal point of production?

Accepted Answer

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

Question 17

-Refer to the above table. Given the demand and cost schedules, what is the profit maximizing quantity for this monopolist?

Accepted Answer

A)  15 
B)  20 
C)  25 
D)  30 
A)  15 
B)  20 
C)  25 
D)  30

Question 18

Which of the barriers to entry can last indefinitely and which are more likely to eventually erode such that a new entry can take place?

Accepted Answer

Barriers such as economies of scale and

Question 19

Suppose that the profit maximizing level of output for the monopolist is 10 units, and price = $50, ATC = $35, and AVC = $25. What is the monopoly's profit?

Accepted Answer

A)  $50 
B)  $150 
C)  $250 
D)  $500 
A)  $50 
B)  $150 
C)  $250 
D)  $500

Question 20

In order to price discriminate, a firm must

Accepted Answer

A)  produce a product that is a close substitute for products of other firms. 
B)  have different marginal costs for serving different customers. 
C)  sell to customers with identical price elasticities of demand. 
D)  be able to prevent resale of its product. 
A)  produce a product that is a close substitute for products of other firms. 
B)  have different marginal costs for serving different customers. 
C)  sell to customers with identical price elasticities of demand. 
D)  be able to prevent resale of its product.

Exam 24: Monopoly

If a monopolist wishes to increase its output and quantity sold,

The social cost attached to monopolies is reflected by the fact that

"All monopolies operate with positive economic profits." Do you agree or disagree? Why?

An important difference between perfect competition and monopoly is

In order for a firm to receive monopoly profits, there must be

Which of the following is LEAST likely to be able to regularly engage in price discrimination?

What is the social cost of a monopoly? Explain.

When grocery stores issue special discount membership cards for shoppers effectively offering different prices based on quantities consumed, this is an example of

In order to sell more goods and/or services, what must a monopoly do?

An important difference between a perfectly competitive firm and a monopolist is

The MR curve of a monopolist is

Which of the following is NOT a barrier to entry?

Which of the following statements about a monopolist is TRUE?

Economies of scale will lead to only one firm in the industry because

Explain how a monopolist can increase profits by price discriminating. What are the conditions necessary for price discrimination?

-Refer to the above figure. What is the socially optimal point of production?

-Refer to the above table. Given the demand and cost schedules, what is the profit maximizing quantity for this monopolist?

Which of the barriers to entry can last indefinitely and which are more likely to eventually erode such that a new entry can take place?

Suppose that the profit maximizing level of output for the monopolist is 10 units, and price = $50, ATC = $35, and AVC = $25. What is the monopoly's profit?

In order to price discriminate, a firm must

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

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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

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Environmental Economics

Comparative Advantage and the Open Economy

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