Question 1

A monopolist finds the price-output combination that maximizes its profits by

Accepted Answer

A)  equating total revenue and total cost. 
B)  equating marginal revenue and marginal cost. 
C)  finding the combination for which the difference between marginal revenue and marginal cost is the greatest. 
D)  equating price and marginal cost. 
A)  equating total revenue and total cost. 
B)  equating marginal revenue and marginal cost. 
C)  finding the combination for which the difference between marginal revenue and marginal cost is the greatest. 
D)  equating price and marginal cost.

Question 2

What is deadweight loss? Whose loss is it? Explain.

Accepted Answer

Deadweight loss is the portion of consum

Question 3

A monopolist faces

Accepted Answer

A)  a perfectly elastic demand curve. 
B)  a perfectly inelastic demand curve. 
C)  the market demand curve. 
D)  a two-tiered demand curve. 
A)  a perfectly elastic demand curve. 
B)  a perfectly inelastic demand curve. 
C)  the market demand curve. 
D)  a two-tiered demand curve.

Question 4

Barriers to entry enable many monopolists to

Accepted Answer

A)  charge as high a price as they want. 
B)  make people buy more of a good than they really want. 
C)  earn economic profits in the long run. 
D)  manipulate the government into providing special favors for themselves. 
A)  charge as high a price as they want. 
B)  make people buy more of a good than they really want. 
C)  earn economic profits in the long run. 
D)  manipulate the government into providing special favors for themselves.

Question 5

A profit-maximizing monopolist will receive zero profits when

Accepted Answer

A)  the average total cost curve lies above the demand curve for all possible rates of output. 
B)  the average total cost curve is tangent to the demand curve at the profit maximizing price. 
C)  marginal revenue, marginal cost, and average total cost are all equal. 
D)  a second firm enters the industry. 
A)  the average total cost curve lies above the demand curve for all possible rates of output. 
B)  the average total cost curve is tangent to the demand curve at the profit maximizing price. 
C)  marginal revenue, marginal cost, and average total cost are all equal. 
D)  a second firm enters the industry.

Question 6

-Referring to the above graphic, which of the following statements is FALSE?

Accepted Answer

A)  In panel (a), a competitive situation is shown in which equilibrium is established at the intersection of D and S at point E. 
B)  In panel (a), the equilibrium price is   and the equilibrium quantity   . 
C)  The price the monopolist charges in panel (b) at   is lower than the price that the competitive producer charges. 
D)  The monopolist produces at   , and charges a price of   , while maximizing profits at the intersection of MC and MR. 
A)  In panel (a), a competitive situation is shown in which equilibrium is established at the intersection of D and S at point E. 
B)  In panel (a), the equilibrium price is   and the equilibrium quantity   . 
C)  The price the monopolist charges in panel (b) at   is lower than the price that the competitive producer charges. 
D)  The monopolist produces at   , and charges a price of   , while maximizing profits at the intersection of MC and MR.

Question 7

Suppose that a drug for treating cancer is cleared by the Food and Drug Administration and that the company is successful in obtaining a patent for its product. Which of the following is then true?

Accepted Answer

A)  The patent holder now faces barriers to entry. 
B)  The method of producing the product would not be considered intellectual property. 
C)  The patent holder has a monopoly. 
D)  The drug would have many close substitutes. 
A)  The patent holder now faces barriers to entry. 
B)  The method of producing the product would not be considered intellectual property. 
C)  The patent holder has a monopoly. 
D)  The drug would have many close substitutes.

Question 8

-In the above figure, suppose the monopolist is producing at Q3. 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 9

-According to the above figure, the maximum profit the monopolist can receive is

Accepted Answer

A)  0. 
B)  $1,500 per day. 
C)  $9,000 per day. 
D)  $7,500 per day. 
A)  0. 
B)  $1,500 per day. 
C)  $9,000 per day. 
D)  $7,500 per day.

Question 10

Suppose a monopolist sells 10,000 units of output at $22 per unit. The firm's total revenue is

Accepted Answer

A)  $2,200. 
B)  $22,000. 
C)  $220,000. 
D)  $2,200,000. 
A)  $2,200. 
B)  $22,000. 
C)  $220,000. 
D)  $2,200,000.

Question 11

If a monopolist produces to a point at which marginal revenue is more than marginal cost then

Accepted Answer

A)  the firm should increase output. 
B)  the firm should reduce output. 
C)  the firm is maximizing profits. 
D)  we do not know if the firm should increase or reduce without more information. 
A)  the firm should increase output. 
B)  the firm should reduce output. 
C)  the firm is maximizing profits. 
D)  we do not know if the firm should increase or reduce without more information.

Question 12

-Refer to the above figure. The firm is currently producing at   . The firm should

Accepted Answer

A)  reduce production. 
B)  leave production as it is. 
C)  increase production. 
D)  shut down. 
A)  reduce production. 
B)  leave production as it is. 
C)  increase production. 
D)  shut down.

Question 13

A monopoly will maximize profits at the level of output at which

Accepted Answer

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

Question 14

-In the above figure, marginal cost and marginal revenue are equal at output

Accepted Answer

A)  Q5. 
B)  Q1. 
C)  Q3. 
D)  Q2. 
A)  Q5. 
B)  Q1. 
C)  Q3. 
D)  Q2.

Question 15

-Given the data in the above table, what is the marginal revenue when the 12th unit is sold?

Accepted Answer

A)  $7.00 
B)  $5.00 
C)  $3.00 
D)  $1.00 
A)  $7.00 
B)  $5.00 
C)  $3.00 
D)  $1.00

Question 16

For a monopolist,

Accepted Answer

A)  marginal revenue is less than price. 
B)  marginal revenue equals price. 
C)  marginal revenue is greater than price. 
D)  marginal revenue equals average revenue. 
A)  marginal revenue is less than price. 
B)  marginal revenue equals price. 
C)  marginal revenue is greater than price. 
D)  marginal revenue equals average revenue.

Question 17

A monopolist will maximize its profits by charging a higher price for customers with a price elasticity of

Accepted Answer

A)  0.1. 
B)  1. 
C)  1.5. 
D)  10. 
A)  0.1. 
B)  1. 
C)  1.5. 
D)  10.

Question 18

When a firm experiences declining long-run average total costs as it produces more output, there are

Accepted Answer

A)  increasing marginal returns to variable inputs. 
B)  economies of scale. 
C)  diseconomies of scale. 
D)  constant returns to scale. 
A)  increasing marginal returns to variable inputs. 
B)  economies of scale. 
C)  diseconomies of scale. 
D)  constant returns to scale.

Question 19

The effect of a tariff

Accepted Answer

A)  is negligible since it applies to firms outside the U.S. 
B)  can lead to economies of scale for firms inside the U.S. 
C)  can lead to a monopoly advantage for firms inside the U.S. since they become the sole suppliers inside the U.S. 
D)  will be more beneficial to large firms than to small firms. 
A)  is negligible since it applies to firms outside the U.S. 
B)  can lead to economies of scale for firms inside the U.S. 
C)  can lead to a monopoly advantage for firms inside the U.S. since they become the sole suppliers inside the U.S. 
D)  will be more beneficial to large firms than to small firms.

Question 20

If a monopolist is producing the quantity at which marginal revenue exceeds 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)  reduce 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)  reduce price and keep output unchanged if it wants to maximize profits. 
D)  increase output if it wants to maximize profits.

Exam 24: Monopoly

A monopolist finds the price-output combination that maximizes its profits by

What is deadweight loss? Whose loss is it? Explain.

A monopolist faces

Barriers to entry enable many monopolists to

A profit-maximizing monopolist will receive zero profits when

-Referring to the above graphic, which of the following statements is FALSE?

Suppose that a drug for treating cancer is cleared by the Food and Drug Administration and that the company is successful in obtaining a patent for its product. Which of the following is then true?

-In the above figure, suppose the monopolist is producing at Q3. The firm should

-According to the above figure, the maximum profit the monopolist can receive is

Suppose a monopolist sells 10,000 units of output at $22 per unit. The firm's total revenue is

If a monopolist produces to a point at which marginal revenue is more than marginal cost then

-Refer to the above figure. The firm is currently producing at . The firm should

A monopoly will maximize profits at the level of output at which

-In the above figure, marginal cost and marginal revenue are equal at output

-Given the data in the above table, what is the marginal revenue when the 12th unit is sold?

For a monopolist,

A monopolist will maximize its profits by charging a higher price for customers with a price elasticity of

When a firm experiences declining long-run average total costs as it produces more output, there are

The effect of a tariff

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

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

-In the above figure, suppose the monopolist is producing at Q_3. The firm should