Question 1

Conclusions about the misallocation of resources under conditions of monopoly depend, in part, on the crucial assumption that

Accepted Answer

A)  monopolies are interested in economic profits and competitive firms are not. 
B)  the monopolization of a perfectly competitive industry does not change the cost structure of the industry. 
C)  the economies of scale exist only in perfectly competitive industries. 
D)  the marginal cost curve of a monopolist is different from that of a perfectly competitive firm. 
A)  monopolies are interested in economic profits and competitive firms are not. 
B)  the monopolization of a perfectly competitive industry does not change the cost structure of the industry. 
C)  the economies of scale exist only in perfectly competitive industries. 
D)  the marginal cost curve of a monopolist is different from that of a perfectly competitive firm.

Question 2

-Refer to the above figure. What price-output combination would apply under perfect competition?

Accepted Answer

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

Question 3

Selling a product at different prices when the price difference is unrelated to costs is a practice known as

Accepted Answer

A)  price fixing. 
B)  price monopolization. 
C)  price discrimination. 
D)  price differentiation. 
A)  price fixing. 
B)  price monopolization. 
C)  price discrimination. 
D)  price differentiation.

Question 4

For a firm facing a downward sloping demand curve, marginal revenue

Accepted Answer

A)  is at a minimum at the midpoint of the demand curve. 
B)  is greater at higher prices than at lower prices. 
C)  increases each time prices are lowered. 
D)  falls each time prices are raised. 
A)  is at a minimum at the midpoint of the demand curve. 
B)  is greater at higher prices than at lower prices. 
C)  increases each time prices are lowered. 
D)  falls each time prices are raised.

Question 5

In a monopoly market structure, the firm (the monopolist) always

Accepted Answer

A)  is the whole industry. 
B)  produces too much. 
C)  sells faulty products. 
D)  earns economic profit. 
A)  is the whole industry. 
B)  produces too much. 
C)  sells faulty products. 
D)  earns economic profit.

Question 6

"The social cost of a monopoly comes from the fact that it charges a price higher than what consumers are willing to pay." Do you agree or disagree? Why?

Accepted Answer

Disagree. The social cost of a monopoly

Question 7

If it is not profitable for more than one firm to be in an industry, we have an example of

Accepted Answer

A)  monopoly due to ownership of key resources. 
B)  monopoly due to governmental entry restrictions. 
C)  monopoly due to economies of scale. 
D)  pure competition. 
A)  monopoly due to ownership of key resources. 
B)  monopoly due to governmental entry restrictions. 
C)  monopoly due to economies of scale. 
D)  pure competition.

Question 8

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

Accepted Answer

A)  $3 
B)  $4 
C)  $6 
D)  $7 
A)  $3 
B)  $4 
C)  $6 
D)  $7

Question 9

A profit-maximizing monopolist earns an economic loss whenever

Accepted Answer

A)  it pays taxes to the government on each unit of output it produces. 
B)  the price it charges for its product exceeds average total cost. 
C)  the demand curve lies completely below the ATC curve. 
D)  it produces along the elastic portion of a demand curve. 
A)  it pays taxes to the government on each unit of output it produces. 
B)  the price it charges for its product exceeds average total cost. 
C)  the demand curve lies completely below the ATC curve. 
D)  it produces along the elastic portion of a demand curve.

Question 10

Which of the following is not true about a tariff?

Accepted Answer

A)  It is a barrier to entry in a market. 
B)  It leads to a natural monopoly. 
C)  It is a tax. 
D)  It affects imported goods. 
A)  It is a barrier to entry in a market. 
B)  It leads to a natural monopoly. 
C)  It is a tax. 
D)  It affects imported goods.

Question 11

A monopolist sells a homogeneous good in several distinct submarkets, and the elasticities of demand differ in these submarkets. If the monopolist selects the rate of output to sell in each submarket by equating marginal revenue and marginal cost, then

Accepted Answer

A)  all customers in all markets end up paying the same price. 
B)  it is not price discriminating, but merely price differentiating. 
C)  customers in markets with more elastic demand will pay higher prices than customers in markets with less elastic demand. 
D)  customers in markets with more elastic demand will pay lower prices than customers in markets with less elastic demand. 
A)  all customers in all markets end up paying the same price. 
B)  it is not price discriminating, but merely price differentiating. 
C)  customers in markets with more elastic demand will pay higher prices than customers in markets with less elastic demand. 
D)  customers in markets with more elastic demand will pay lower prices than customers in markets with less elastic demand.

Question 12

-Refer to the above figure. Which of the following statements is true about the demand curves for an individual firm in a perfectly competitive industry and a monopoly?

Accepted Answer

A)  Panel A is the demand curve for a perfectly competitive firm and panel B is the demand curve for a monopoly. 
B)  Panel C is the demand curve for a perfectly competitive firm and panel A is the demand curve for a monopoly. 
C)  Panel C is the demand curve for a perfectly competitive firm and panel B is the demand curve for a monopoly. 
D)  Panel B is the demand curve for a perfectly competitive firm and panel A is the demand curve for a monopoly. 
A)  Panel A is the demand curve for a perfectly competitive firm and panel B is the demand curve for a monopoly. 
B)  Panel C is the demand curve for a perfectly competitive firm and panel A is the demand curve for a monopoly. 
C)  Panel C is the demand curve for a perfectly competitive firm and panel B is the demand curve for a monopoly. 
D)  Panel B is the demand curve for a perfectly competitive firm and panel A is the demand curve for a monopoly.

Question 13

To sell more units, a monopolist

Accepted Answer

A)  simply moves across its horizontal demand curve to a larger quantity. 
B)  moves down its demand curve to a lower price that will increase quantity demand. 
C)  can continue to receive the same price it always has as long as it has its customers' goodwill. 
D)  must be willing to lower the barriers to entry that have protected it. 
A)  simply moves across its horizontal demand curve to a larger quantity. 
B)  moves down its demand curve to a lower price that will increase quantity demand. 
C)  can continue to receive the same price it always has as long as it has its customers' goodwill. 
D)  must be willing to lower the barriers to entry that have protected it.

Question 14

The price elasticity of demand for a good produced by a monopolist

Accepted Answer

A)  equals zero as long as the good has no close substitutes. 
B)  is always inelastic since the demand curve slopes down. 
C)  does not equal zero because there will always be some substitutes, however imperfect they may be. 
D)  does not equal zero because every good has at least one good substitute for it. 
A)  equals zero as long as the good has no close substitutes. 
B)  is always inelastic since the demand curve slopes down. 
C)  does not equal zero because there will always be some substitutes, however imperfect they may be. 
D)  does not equal zero because every good has at least one good substitute for it.

Question 15

-Use the above figure. Maximized economic profits are represented by rectangle

Accepted Answer

A)  "A." 
B)  "B." 
C)  "C." 
D)  "A" + "B." 
A)  "A." 
B)  "B." 
C)  "C." 
D)  "A" + "B."

Question 16

A monopolist will not earn any economic profits when

Accepted Answer

A)  AVC is a minimum. 
B)  AFC is very high. 
C)  ATC lies above the demand curve. 
D)  ATC lies below the demand curve. 
A)  AVC is a minimum. 
B)  AFC is very high. 
C)  ATC lies above the demand curve. 
D)  ATC lies below the demand curve.

Question 17

A firm that must determine the price-output combination that maximizes profit because it faces a downward-sloped demand curve

Accepted Answer

A)  has a perfectly elastic demand curve. 
B)  has a perfectly inelastic demand curve. 
C)  is a price-taker. 
D)  is a price searcher. 
A)  has a perfectly elastic demand curve. 
B)  has a perfectly inelastic demand curve. 
C)  is a price-taker. 
D)  is a price searcher.

Question 18

Shortly after the turn of the century, U.S. Steel owned most of the iron ore reserves in the country. This is an example of

Accepted Answer

A)  monopoly due to government restrictions. 
B)  a barrier to entry from owning an important resource. 
C)  a barrier to entry from scale economies. 
D)  monopoly due to governmental entry restrictions. 
A)  monopoly due to government restrictions. 
B)  a barrier to entry from owning an important resource. 
C)  a barrier to entry from scale economies. 
D)  monopoly due to governmental entry restrictions.

Question 19

In a perfectly competitive market, consumer surplus typically is

Accepted Answer

A)  positive. 
B)  negative. 
C)  zero. 
D)  undefined. 
A)  positive. 
B)  negative. 
C)  zero. 
D)  undefined.

Question 20

Which of the following is NOT a precondition for price discrimination?

Accepted Answer

A)  The product cannot be resold to another customer. 
B)  The price elasticities of demand are different for each group of consumers. 
C)  The product is a durable good. 
D)  The seller must have some market power. 
A)  The product cannot be resold to another customer. 
B)  The price elasticities of demand are different for each group of consumers. 
C)  The product is a durable good. 
D)  The seller must have some market power.

Exam 24: Monopoly

Conclusions about the misallocation of resources under conditions of monopoly depend, in part, on the crucial assumption that

-Refer to the above figure. What price-output combination would apply under perfect competition?

Selling a product at different prices when the price difference is unrelated to costs is a practice known as

For a firm facing a downward sloping demand curve, marginal revenue

In a monopoly market structure, the firm (the monopolist) always

"The social cost of a monopoly comes from the fact that it charges a price higher than what consumers are willing to pay." Do you agree or disagree? Why?

If it is not profitable for more than one firm to be in an industry, we have an example of

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

A profit-maximizing monopolist earns an economic loss whenever

Which of the following is not true about a tariff?

A monopolist sells a homogeneous good in several distinct submarkets, and the elasticities of demand differ in these submarkets. If the monopolist selects the rate of output to sell in each submarket by equating marginal revenue and marginal cost, then

-Refer to the above figure. Which of the following statements is true about the demand curves for an individual firm in a perfectly competitive industry and a monopoly?

To sell more units, a monopolist

The price elasticity of demand for a good produced by a monopolist

-Use the above figure. Maximized economic profits are represented by rectangle

A monopolist will not earn any economic profits when

A firm that must determine the price-output combination that maximizes profit because it faces a downward-sloped demand curve

Shortly after the turn of the century, U.S. Steel owned most of the iron ore reserves in the country. This is an example of

In a perfectly competitive market, consumer surplus typically is

Which of the following is NOT a precondition for price discrimination?

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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