Question 1

What is one problem with trying to regulate a monopoly's price?

Accepted Answer

A)  The government needs information on the monopoly's marginal cost. 
B)  The government needs information on the price people are willing to pay. 
C)  The government needs to identify which firm is a monopolist. 
D)  Anything that the government does is problematic. 
A)  The government needs information on the monopoly's marginal cost. 
B)  The government needs information on the price people are willing to pay. 
C)  The government needs to identify which firm is a monopolist. 
D)  Anything that the government does is problematic.

Question 2

A monopoly faces an inverse demand curve of P = 100 - 2Q.The marginal cost curve is MC = .5Q.What government price ceiling would represent optimal price regulation?

Accepted Answer

Setting P = 100 - 2Q

Question 3

Which of the following DOES NOT contribute to the market power of a firm?

Accepted Answer

A)  number of available substitutes 
B)  the color of the product 
C)  legal protections 
D)  the number of firms in the market 
A)  number of available substitutes 
B)  the color of the product 
C)  legal protections 
D)  the number of firms in the market

Question 4

-The above figure shows the demand and cost curves facing a monopoly.A $100 per unit tax would raise price by

Accepted Answer

A)  $100. 
B)  $50. 
C)  $25. 
D)  $0. 
A)  $100. 
B)  $50. 
C)  $25. 
D)  $0.

Question 5

Why is the monopoly total welfare lower than the competitive total welfare?

Accepted Answer

A monopoly restricts output relative to

Question 6

A monopolist changes price from $1 to $2 and sells 10 fewer units.The marginal revenue is

Accepted Answer

A)  $10 
B)  -$10 
C)  $0 
D)  impossible to determine with the information provided. 
A)  $10 
B)  -$10 
C)  $0 
D)  impossible to determine with the information provided.

Question 7

A monopoly does not have a supply curve.

Accepted Answer

A) True 
 B)False

Question 8

Market power is illegal.

Accepted Answer

A)  True, no one is allowed to charge a price greater than marginal cost. 
B)  False. 
C)  True, no one is allowed to charge a price greater than average cost. 
D)  False, because market power guarantees price equal to average cost. 
A)  True, no one is allowed to charge a price greater than marginal cost. 
B)  False. 
C)  True, no one is allowed to charge a price greater than average cost. 
D)  False, because market power guarantees price equal to average cost.

Question 9

The optimal patent length is equal to 20 years.

Accepted Answer

A) True 
 B)False

Question 10

The average cost for a typical electric-power-production firm is AC = 100 - 10Q + Q2 where Q is measured in billion kilowatt hours per day.At the current regulated price,consumers demand 4 billion kilowatt hours per day.Is this market a natural monopoly? If demand increases to 10 billion kilowatt hours,is this market a natural monopoly? Explain.

Accepted Answer

The firm enjoys economies of scale up to

Question 11

If the inverse demand curve a monopoly faces is p = 100 - 2Q,and MC is constant at 16,then profit maximization is achieved when the monopoly sets price equal to

Accepted Answer

A)  16. 
B)  21. 
C)  25. 
D)  58. 
A)  16. 
B)  21. 
C)  25. 
D)  58.

Question 12

If the demand for a monopoly's output shifts rightward,the change in quantity produced is not predictable because

Accepted Answer

A)  the monopoly is a profit maximizer. 
B)  the monopoly is a price taker. 
C)  the monopoly has no supply curve. 
D)  the monopoly's marginal cost curve might not be upward sloping. 
A)  the monopoly is a profit maximizer. 
B)  the monopoly is a price taker. 
C)  the monopoly has no supply curve. 
D)  the monopoly's marginal cost curve might not be upward sloping.

Question 13

If a monopoly can produce a good at zero marginal cost,then its Lerner Index is

Accepted Answer

A)  zero. 
B)  one. 
C)  infinity. 
D)  undetermined. 
A)  zero. 
B)  one. 
C)  infinity. 
D)  undetermined.

Question 14

The producer surplus to a monopolist must be

Accepted Answer

A)  less than zero or the firm is in violation of anti-trust statutes. 
B)  at least as great as the producer surplus in a competitive market. 
C)  positive, otherwise why would the monopoly produce? 
D)  the same as for a competitive market. 
A)  less than zero or the firm is in violation of anti-trust statutes. 
B)  at least as great as the producer surplus in a competitive market. 
C)  positive, otherwise why would the monopoly produce? 
D)  the same as for a competitive market.

Question 15

For a monopoly,marginal revenue is less than price because

Accepted Answer

A)  the firm is a price taker. 
B)  the firm must lower price if it wishes to sell more output. 
C)  the firm can sell all of its output at any price. 
D)  the demand for the firm's output is perfectly elastic. 
A)  the firm is a price taker. 
B)  the firm must lower price if it wishes to sell more output. 
C)  the firm can sell all of its output at any price. 
D)  the demand for the firm's output is perfectly elastic.

Question 16

Since there are no close substitutes for the monopoly's product,the monopoly can charge any price it wishes.

Accepted Answer

A) True 
 B)False

Question 17

The existence of a deadweight loss associated with a monopoly can be seen because

Accepted Answer

A)  consumers are willing to pay more for the last unit of output than it costs to produce. 
B)  the cost of the last unit produced is more than consumers are willing to pay for it. 
C)  the producer surplus is larger than in a competitive market. 
D)  None of the above. 
A)  consumers are willing to pay more for the last unit of output than it costs to produce. 
B)  the cost of the last unit produced is more than consumers are willing to pay for it. 
C)  the producer surplus is larger than in a competitive market. 
D)  None of the above.

Question 18

When attempting price regulation,a government faces what problem(s)?

Accepted Answer

A)  limited information 
B)  bribes 
C)  uncooperative firms 
D)  All of the above. 
A)  limited information 
B)  bribes 
C)  uncooperative firms 
D)  All of the above.

Question 19

If the government regulates the price a monopoly can charge,and the price ceiling is set below what the competitive market price would be,then

Accepted Answer

A)  a shortage will exist. 
B)  a surplus will exist. 
C)  producer surplus is maximized. 
D)  consumer surplus is maximized. 
A)  a shortage will exist. 
B)  a surplus will exist. 
C)  producer surplus is maximized. 
D)  consumer surplus is maximized.

Question 20

When generic drugs enter the market after the patent for a brand name drug expires,the price of the brand name drug often increases.This is usually due to

Accepted Answer

A)  the demand curve for the brand name drug shifting in but becoming more inelastic. 
B)  the demand curve for the brand name drug not shifting, but the marginal cost of producing the good increases. 
C)  the demand curve for the brand name drug shifting in but becoming more elastic. 
D)  the demand curve for the brand name drug not shifting, but loyal customers are willing to pay a higher price for the brand name drug. 
A)  the demand curve for the brand name drug shifting in but becoming more inelastic. 
B)  the demand curve for the brand name drug not shifting, but the marginal cost of producing the good increases. 
C)  the demand curve for the brand name drug shifting in but becoming more elastic. 
D)  the demand curve for the brand name drug not shifting, but loyal customers are willing to pay a higher price for the brand name drug.

What is one problem with trying to regulate a monopoly's price?

A monopoly faces an inverse demand curve of P = 100 - 2Q.The marginal cost curve is MC = .5Q.What government price ceiling would represent optimal price regulation?

Which of the following DOES NOT contribute to the market power of a firm?

-The above figure shows the demand and cost curves facing a monopoly.A $100 per unit tax would raise price by

Why is the monopoly total welfare lower than the competitive total welfare?

A monopolist changes price from $1 to $2 and sells 10 fewer units.The marginal revenue is

A monopoly does not have a supply curve.

Market power is illegal.

The optimal patent length is equal to 20 years.

If the inverse demand curve a monopoly faces is p = 100 - 2Q,and MC is constant at 16,then profit maximization is achieved when the monopoly sets price equal to

If the demand for a monopoly's output shifts rightward,the change in quantity produced is not predictable because

If a monopoly can produce a good at zero marginal cost,then its Lerner Index is

The producer surplus to a monopolist must be

For a monopoly,marginal revenue is less than price because

Since there are no close substitutes for the monopoly's product,the monopoly can charge any price it wishes.

The existence of a deadweight loss associated with a monopoly can be seen because

When attempting price regulation,a government faces what problem(s)?

If the government regulates the price a monopoly can charge,and the price ceiling is set below what the competitive market price would be,then

When generic drugs enter the market after the patent for a brand name drug expires,the price of the brand name drug often increases.This is usually due to

Introduction

Supply and Demand

Applying the Supply and Demand Model

Consumer Choice

Applying Consumer Theory

Firms and Production

Costs

Competitive Firms and Markets

Applying the Competitive Model

General Equilibrium and Economic Welfare

Pricing and Advertising

Oligopoly and Monopolistic Competition

Game Theory

Factor Markets

Interest Rates, Investments, and Capital Markets

Uncertainty

Externalities, Open-Access, and Public Goods

Asymmetric Information

Contracts and Moral Hazards

Filters

Exam 11: Monopoly

What is one problem with trying to regulate a monopoly's price?

A monopoly faces an inverse demand curve of P = 100 - 2Q.The marginal cost curve is MC = .5Q.What government price ceiling would represent optimal price regulation?

Which of the following DOES NOT contribute to the market power of a firm?

-The above figure shows the demand and cost curves facing a monopoly.A $100 per unit tax would raise price by

Why is the monopoly total welfare lower than the competitive total welfare?

A monopolist changes price from $1 to $2 and sells 10 fewer units.The marginal revenue is

A monopoly does not have a supply curve.

Market power is illegal.

The optimal patent length is equal to 20 years.

If the inverse demand curve a monopoly faces is p = 100 - 2Q,and MC is constant at 16,then profit maximization is achieved when the monopoly sets price equal to

If the demand for a monopoly's output shifts rightward,the change in quantity produced is not predictable because

If a monopoly can produce a good at zero marginal cost,then its Lerner Index is

The producer surplus to a monopolist must be

For a monopoly,marginal revenue is less than price because

Since there are no close substitutes for the monopoly's product,the monopoly can charge any price it wishes.

The existence of a deadweight loss associated with a monopoly can be seen because

When attempting price regulation,a government faces what problem(s)?

If the government regulates the price a monopoly can charge,and the price ceiling is set below what the competitive market price would be,then

When generic drugs enter the market after the patent for a brand name drug expires,the price of the brand name drug often increases.This is usually due to

Introduction

Supply and Demand

Applying the Supply and Demand Model

Consumer Choice

Applying Consumer Theory

Firms and Production

Costs

Competitive Firms and Markets

Applying the Competitive Model

General Equilibrium and Economic Welfare

Pricing and Advertising

Oligopoly and Monopolistic Competition

Game Theory

Factor Markets

Interest Rates, Investments, and Capital Markets

Uncertainty

Externalities, Open-Access, and Public Goods

Asymmetric Information

Contracts and Moral Hazards

Filters