Question 1

-The profit-maximizing price and quantity established by the unregulated monopolist in the above figure are

Accepted Answer

A)  Q1 units of output and a price of P5. 
B)  Q3 units of output and a price of P3. 
C)  Q1 units of output and a price of P1. 
D)  Q4 units of output and a price of P4. 
A)  Q1 units of output and a price of P5. 
B)  Q3 units of output and a price of P3. 
C)  Q1 units of output and a price of P1. 
D)  Q4 units of output and a price of P4.

Question 2

Which of the following statements with respect to the monopolist is FALSE?

Accepted Answer

A)  A monopolist can make higher profits if it can price discriminate. 
B)  A monopoly tends to result in a lower quantity being sold than perfect competition does. 
C)  Monopoly is a situation in which a single firm dominates. 
D)  A monopoly arises in a situation with few barriers to entry into the marketplace. 
A)  A monopolist can make higher profits if it can price discriminate. 
B)  A monopoly tends to result in a lower quantity being sold than perfect competition does. 
C)  Monopoly is a situation in which a single firm dominates. 
D)  A monopoly arises in a situation with few barriers to entry into the marketplace.

Question 3

Compared to perfect competition, a monopoly will produce ________ output, and charge a ________ price.

Accepted Answer

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

Question 4

Price discrimination is more likely in the case of services than in the case of goods because

Accepted Answer

A)  producers of goods usually do not face downward sloping demand curves. 
B)  it is easier to distinguish customers with different elasticities of demand with respect to services than with goods. 
C)  elasticities of demand vary more with services than with goods. 
D)  it is more difficult to resell services. 
A)  producers of goods usually do not face downward sloping demand curves. 
B)  it is easier to distinguish customers with different elasticities of demand with respect to services than with goods. 
C)  elasticities of demand vary more with services than with goods. 
D)  it is more difficult to resell services.

Question 5

A monopolist faces a demand curve that

Accepted Answer

A)  is perfectly horizontal at the market price. 
B)  is below the marginal revenue curve. 
C)  is downward sloping. 
D)  coincides with the industry supply. 
A)  is perfectly horizontal at the market price. 
B)  is below the marginal revenue curve. 
C)  is downward sloping. 
D)  coincides with the industry supply.

Question 6

According to the text, government licensing frequently enables monopoly in

Accepted Answer

A)  agriculture. 
B)  electricity production. 
C)  mining. 
D)  retail sales. 
A)  agriculture. 
B)  electricity production. 
C)  mining. 
D)  retail sales.

Question 7

-In the above figure, if the firm is producing at Q3 and charging a price of P3, it 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 8

Monopolies are discouraged in the United States because

Accepted Answer

A)  they are more efficient than other industries. 
B)  they can produce at lower cost in the short run. 
C)  they restrict output and boost prices. 
D)  they hire too many workers. 
A)  they are more efficient than other industries. 
B)  they can produce at lower cost in the short run. 
C)  they restrict output and boost prices. 
D)  they hire too many workers.

Question 9

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

Accepted Answer

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

Question 10

If marginal cost is constant, what happens to a market if it alters from perfect competition to monopoly without any change in the position of the market demand curve or any variation in costs?

Accepted Answer

A)  Consumer surplus increases, and the previously existing deadweight loss decreases. 
B)  Consumer surplus increases, and the previously existing deadweight loss increases. 
C)  Consumer surplus is eliminated, and an equal-sized deadweight loss is created. 
D)  Consumer surplus decreases in size, and a deadweight loss is created. 
A)  Consumer surplus increases, and the previously existing deadweight loss decreases. 
B)  Consumer surplus increases, and the previously existing deadweight loss increases. 
C)  Consumer surplus is eliminated, and an equal-sized deadweight loss is created. 
D)  Consumer surplus decreases in size, and a deadweight loss is created.

Question 11

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

Accepted Answer

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

Question 12

To induce an increase in the quantity demanded of its product, a monopolist must reduce the

Accepted Answer

A)  quality of its product and thereby generate a downward shift its ATC curve. 
B)  price of its product and thereby generate a rightward shift in its demand curve. 
C)  price of its product and thereby generate a rightward movement along its demand curve. 
D)  quality of its product and thereby generate a downward movement along its ATC curve. 
A)  quality of its product and thereby generate a downward shift its ATC curve. 
B)  price of its product and thereby generate a rightward shift in its demand curve. 
C)  price of its product and thereby generate a rightward movement along its demand curve. 
D)  quality of its product and thereby generate a downward movement along its ATC curve.

Question 13

-Refer to the above figure. Suppose this industry was perfectly competitive and then merged into one monopolistic firm. The monopoly would

Accepted Answer

A)  raise price from   to   . 
B)  reduce output from   to   . 
C)  reduce output from   to   and raise price from   to   . 
D)  raise price from   to   . 
A)  raise price from   to   . 
B)  reduce output from   to   . 
C)  reduce output from   to   and raise price from   to   . 
D)  raise price from   to   .

Question 14

The demand curve faced by the monopolist

Accepted Answer

A)  is perfectly elastic. 
B)  is perfectly inelastic. 
C)  slopes downward. 
D)  slopes upward. 
A)  is perfectly elastic. 
B)  is perfectly inelastic. 
C)  slopes downward. 
D)  slopes upward.

Question 15

Governments and legislatures can erect barriers to entry. Which of the following would NOT be one of them?

Accepted Answer

A)  Licenses 
B)  Tariffs 
C)  Patents 
D)  Laws that ensure property rights 
A)  Licenses 
B)  Tariffs 
C)  Patents 
D)  Laws that ensure property rights

Question 16

Compared to an efficient perfectly competitive industry, the monopolist will

Accepted Answer

A)  produce less output at a higher total cost. 
B)  produce less output and charge a higher price. 
C)  produce more output at a higher price and higher profit. 
D)  produce more output at a lower price. 
A)  produce less output at a higher total cost. 
B)  produce less output and charge a higher price. 
C)  produce more output at a higher price and higher profit. 
D)  produce more output at a lower price.

Question 17

For a monopolist, marginal revenue is always

Accepted Answer

A)  greater than price. 
B)  equal to price. 
C)  equal to zero. 
D)  less than price. 
A)  greater than price. 
B)  equal to price. 
C)  equal to zero. 
D)  less than price.

Question 18

A monopolist who is maximizing profits produces to the point at which

Accepted Answer

A)  marginal cost and average total cost are equal. 
B)  price, marginal cost and average variable cost are equal. 
C)  price is greater than marginal cost. 
D)  price is greater than average total cost. 
A)  marginal cost and average total cost are equal. 
B)  price, marginal cost and average variable cost are equal. 
C)  price is greater than marginal cost. 
D)  price is greater than average total cost.

Question 19

When the marginal cost curve of the monopolist shifts upward, there will be

Accepted Answer

A)  an increase in both price and quantity. 
B)  an increase in price but a decrease in quantity. 
C)  a decrease in price and in marginal revenue. 
D)  a decrease in quantity and a decrease in marginal revenue. 
A)  an increase in both price and quantity. 
B)  an increase in price but a decrease in quantity. 
C)  a decrease in price and in marginal revenue. 
D)  a decrease in quantity and a decrease in marginal revenue.

Question 20

If the price elasticity of demand for airline tickets is 2.0 for a leisure traveler and 0.5 for a business traveler, then a price-discriminating monopolist would charge

Accepted Answer

A)  a higher price for the business traveler than the leisure traveler. 
B)  the same price for both travelers. 
C)  a lower price for the business traveler than the leisure traveler. 
D)  a less profitable price for the business traveler than the leisure traveler. 
A)  a higher price for the business traveler than the leisure traveler. 
B)  the same price for both travelers. 
C)  a lower price for the business traveler than the leisure traveler. 
D)  a less profitable price for the business traveler than the leisure traveler.

Exam 24: Monopoly

-The profit-maximizing price and quantity established by the unregulated monopolist in the above figure are

Which of the following statements with respect to the monopolist is FALSE?

Compared to perfect competition, a monopoly will produce ________ output, and charge a ________ price.

Price discrimination is more likely in the case of services than in the case of goods because

A monopolist faces a demand curve that

According to the text, government licensing frequently enables monopoly in

-In the above figure, if the firm is producing at Q3 and charging a price of P3, it should

Monopolies are discouraged in the United States because

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

If marginal cost is constant, what happens to a market if it alters from perfect competition to monopoly without any change in the position of the market demand curve or any variation in costs?

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

To induce an increase in the quantity demanded of its product, a monopolist must reduce the

-Refer to the above figure. Suppose this industry was perfectly competitive and then merged into one monopolistic firm. The monopoly would

The demand curve faced by the monopolist

Governments and legislatures can erect barriers to entry. Which of the following would NOT be one of them?

Compared to an efficient perfectly competitive industry, the monopolist will

For a monopolist, marginal revenue is always

A monopolist who is maximizing profits produces to the point at which

When the marginal cost curve of the monopolist shifts upward, there will be

If the price elasticity of demand for airline tickets is 2.0 for a leisure traveler and 0.5 for a business traveler, then a price-discriminating monopolist would charge

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

Compared to perfect competition, a monopoly will produce output, and charge a price.

-In the above figure, if the firm is producing at Q₃ and charging a price of P₃, it should