Question 1

As a price searcher, a monopoly firm

Accepted Answer

A)  must only determine the price it charges. 
B)  must determine its optimal price-output combination. 
C)  must determine its output level and then accept the market price for its product. 
D)  must determine the prices it pays for its inputs and accept the market price for its output. 
A)  must only determine the price it charges. 
B)  must determine its optimal price-output combination. 
C)  must determine its output level and then accept the market price for its product. 
D)  must determine the prices it pays for its inputs and accept the market price for its output.

Question 2

A firm can be the only firm in an industry and still not be a monopoly if

Accepted Answer

A)  the firm is not large. 
B)  the firm is not making economic profits. 
C)  the firm produces a good similar to a good in another industry. 
D)  the firm produces a good that is not considered a necessity. 
A)  the firm is not large. 
B)  the firm is not making economic profits. 
C)  the firm produces a good similar to a good in another industry. 
D)  the firm produces a good that is not considered a necessity.

Question 3

Which of the following conditions hold true for both the perfectly competitive firm and the monopoly at the profit-maximizing output level?

Accepted Answer

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

Question 4

If a monopolist can sell 2 units at price of $200 per unit and 3 units at a price of $180 per unit, its marginal revenue at an output of 3 is

Accepted Answer

A)  $-20.00. 
B)  $80.00. 
C)  $140.00. 
D)  $180.00. 
A)  $-20.00. 
B)  $80.00. 
C)  $140.00. 
D)  $180.00.

Question 5

The price elasticity of demand for a monopolist

Accepted Answer

A)  is infinite since the monopolist is the only firm in the market. 
B)  decreases as more competition occurs in the market. 
C)  increases as similar products enter the market. 
D)  is undefined due to the lack of competition. 
A)  is infinite since the monopolist is the only firm in the market. 
B)  decreases as more competition occurs in the market. 
C)  increases as similar products enter the market. 
D)  is undefined due to the lack of competition.

Question 6

A pure monopolist is selling 7 units at a price of $12. If the marginal revenue of the 8th unit is $4, then the price of the 8th unit is

Accepted Answer

A)  $10. 
B)  $11. 
C)  greater than $12. 
D)  $4. 
A)  $10. 
B)  $11. 
C)  greater than $12. 
D)  $4.

Question 7

Which of the following would most likely be classified as a natural monopoly?

Accepted Answer

A)  A city water district 
B)  Microsoft 
C)  Disneyland 
D)  Exxon-Mobil 
A)  A city water district 
B)  Microsoft 
C)  Disneyland 
D)  Exxon-Mobil

Question 8

A monopolist determines the profit-maximizing output

Accepted Answer

A)  at the point at which TR = TC. 
B)  at the point at which MR = MC. 
C)  at any point it wants because it is the only producer of the product. 
D)  at the point at which TR is maximum. 
A)  at the point at which TR = TC. 
B)  at the point at which MR = MC. 
C)  at any point it wants because it is the only producer of the product. 
D)  at the point at which TR is maximum.

Question 9

Which of the following statements is TRUE?

Accepted Answer

A)  At the monopolist's equilibrium, resources are being efficiently allocated. 
B)  With a monopoly, the value to society of the last unit produced is less than it's production cost. 
C)  Monopolists raise the price and restrict production, compared to a competitive situation. 
D)  A monopolist always produces a higher level of output than would be produced if the market were competitive. 
A)  At the monopolist's equilibrium, resources are being efficiently allocated. 
B)  With a monopoly, the value to society of the last unit produced is less than it's production cost. 
C)  Monopolists raise the price and restrict production, compared to a competitive situation. 
D)  A monopolist always produces a higher level of output than would be produced if the market were competitive.

Question 10

A monopolist is producing at an output level at which ATC = $5, P = $6, MC = $4, and MR = $3. We can conclude that

Accepted Answer

A)  economic profit could be increased by producing more. 
B)  economic profit could be increased by producing less. 
C)  economic profit cannot be increased. 
D)  the firm is earning $10 in economic profits. 
A)  economic profit could be increased by producing more. 
B)  economic profit could be increased by producing less. 
C)  economic profit cannot be increased. 
D)  the firm is earning $10 in economic profits.

Question 11

The point of profit maximization for a monopolist is exemplified by

Accepted Answer

A)  TR = TC. 
B)  MR = MC. 
C)    . 
D)  MR > MC. 
A)  TR = TC. 
B)  MR = MC. 
C)    . 
D)  MR > MC.

Question 12

-In the above figure, the distance between A and B represents this monopoly firm's

Accepted Answer

A)  total profit. 
B)  total revenue. 
C)  average profit per unit. 
D)  average cost per unit. 
A)  total profit. 
B)  total revenue. 
C)  average profit per unit. 
D)  average cost per unit.

Question 13

A natural monopoly

Accepted Answer

A)  requires government licensing initially. 
B)  is derived from deposits of natural resources. 
C)  usually arises when there are large economies of scale. 
D)  involves multiple firms selling differentiated products. 
A)  requires government licensing initially. 
B)  is derived from deposits of natural resources. 
C)  usually arises when there are large economies of scale. 
D)  involves multiple firms selling differentiated products.

Question 14

-According to the above figure, what are the profits of the firm if it produces 50,000 units?

Accepted Answer

A)  -$5,000 per day 
B)  -$10,000 per day 
C)  -$7,500 per day 
D)  -$17,500 per day 
A)  -$5,000 per day 
B)  -$10,000 per day 
C)  -$7,500 per day 
D)  -$17,500 per day

Question 15

If a "certificate of convenience and public necessity" protects a monopolist's position, the barrier to entry this firm relies on is called

Accepted Answer

A)  a tariff. 
B)  a government license. 
C)  a patent. 
D)  economies of scale. 
A)  a tariff. 
B)  a government license. 
C)  a patent. 
D)  economies of scale.

Question 16

Suppose that a perfect-maximizing monopolist operates with a horizontal marginal cost curve and no fixed costs. Which of the following would NOT be represented as part of the area between its demand curve and marginal cost curve?

Accepted Answer

A)  total costs 
B)  economic profits 
C)  consumer surplus 
D)  deadweight loss 
A)  total costs 
B)  economic profits 
C)  consumer surplus 
D)  deadweight loss

Question 17

A monopoly's goal using price discrimination is to increase

Accepted Answer

A)  total revenue. 
B)  marginal revenue. 
C)  total profit. 
D)  the per unit profit. 
A)  total revenue. 
B)  marginal revenue. 
C)  total profit. 
D)  the per unit profit.

Question 18

The portion of consumer surplus that no one in society is able to obtain in a situation of monopoly is known as

Accepted Answer

A)  a market failure. 
B)  a deadweight loss. 
C)  an unrealized loss. 
D)  a market externality. 
A)  a market failure. 
B)  a deadweight loss. 
C)  an unrealized loss. 
D)  a market externality.

Question 19

Legal or governmental restrictions that give monopolistic advantages to a firm include all of the following EXCEPT

Accepted Answer

A)  economies of scale. 
B)  tariffs. 
C)  licenses. 
D)  franchises. 
A)  economies of scale. 
B)  tariffs. 
C)  licenses. 
D)  franchises.

Question 20

-In the above figure, what is the profit-maximizing price and output?

Accepted Answer

A)  $9, 14 
B)  $13, 14 
C)  $11, 16 
D)  $10, 17 
A)  $9, 14 
B)  $13, 14 
C)  $11, 16 
D)  $10, 17

Exam 24: Monopoly

As a price searcher, a monopoly firm

A firm can be the only firm in an industry and still not be a monopoly if

Which of the following conditions hold true for both the perfectly competitive firm and the monopoly at the profit-maximizing output level?

If a monopolist can sell 2 units at price of $200 per unit and 3 units at a price of $180 per unit, its marginal revenue at an output of 3 is

The price elasticity of demand for a monopolist

A pure monopolist is selling 7 units at a price of $12. If the marginal revenue of the 8th unit is $4, then the price of the 8th unit is

Which of the following would most likely be classified as a natural monopoly?

A monopolist determines the profit-maximizing output

Which of the following statements is TRUE?

A monopolist is producing at an output level at which ATC = $5, P = $6, MC = $4, and MR = $3. We can conclude that

The point of profit maximization for a monopolist is exemplified by

-In the above figure, the distance between A and B represents this monopoly firm's

A natural monopoly

-According to the above figure, what are the profits of the firm if it produces 50,000 units?

If a "certificate of convenience and public necessity" protects a monopolist's position, the barrier to entry this firm relies on is called

Suppose that a perfect-maximizing monopolist operates with a horizontal marginal cost curve and no fixed costs. Which of the following would NOT be represented as part of the area between its demand curve and marginal cost curve?

A monopoly's goal using price discrimination is to increase

The portion of consumer surplus that no one in society is able to obtain in a situation of monopoly is known as

Legal or governmental restrictions that give monopolistic advantages to a firm include all of the following EXCEPT

-In the above figure, what is the profit-maximizing price and output?

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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