Question 1

When the marginal revenue curve cuts the horizontal axis,

Accepted Answer

A)  demand is relatively elastic. 
B)  demand is relatively inelastic. 
C)  demand is perfectly elastic. 
D)  demand is unitary elastic. 
A)  demand is relatively elastic. 
B)  demand is relatively inelastic. 
C)  demand is perfectly elastic. 
D)  demand is unitary elastic.

Question 2

It is a conventional practice among apparel retailers to set the retail price of clothing at twice the cost paid to the manufacturer.For example,if the retailer pays $7 for a pair of jeans,the jeans will retail for $14.What must the price elasticity of demand be for this practice to be profit maximizing?

Accepted Answer

Since price is twice marginal

Question 3

If a firm in an industry experiences very high fixed costs and constant marginal cost,it is a good candidate for a natural monopoly.

Accepted Answer

A) True 
 B)False

Question 4

A justification for patents is that without patents consumer surplus would be

Accepted Answer

A)  larger than with the patent. 
B)  zero since the product would not be invented. 
C)  only slightly smaller than with the patent. 
D)  zero since the monopoly would be a revenue maximizer. 
A)  larger than with the patent. 
B)  zero since the product would not be invented. 
C)  only slightly smaller than with the patent. 
D)  zero since the monopoly would be a revenue maximizer.

Question 5

If the inverse demand curve a monopoly faces is p = 100 - 2Q,and MC is constant at 16,then the firm's Lerner Index equals

Accepted Answer

A)  58/16. 
B)  16/42. 
C)  58/42. 
D)  42/58. 
A)  58/16. 
B)  16/42. 
C)  58/42. 
D)  42/58.

Question 6

-The above figure shows the demand and cost curves facing a monopoly.If a $100 per unit tax is charged,the loss in welfare resulting from the tax is

Accepted Answer

A)  $250. 
B)  $312.50. 
C)  $1,250. 
D)  $1,562.50. 
A)  $250. 
B)  $312.50. 
C)  $1,250. 
D)  $1,562.50.

Question 7

The government forcing a monopoly telecommunications company to allow other firms to use its cables is an attempt to

Accepted Answer

A)  regulate prices. 
B)  decrease the monopoly market power by eliminating a natural monopoly. 
C)  decrease the monopoly market power by increasing competition. 
D)  None of the above. 
A)  regulate prices. 
B)  decrease the monopoly market power by eliminating a natural monopoly. 
C)  decrease the monopoly market power by increasing competition. 
D)  None of the above.

Question 8

For profit-maximizing monopolies,explain why the boundaries on the Lerner Index are 0 and 1.

Accepted Answer

The Lerner Index equals (p - MC)/p.Becau

Question 9

If a monopoly discovers that the demand for its output has become more elastic at the original output level,then it will respond by

Accepted Answer

A)  producing more and setting a higher price. 
B)  setting a lower price. 
C)  setting a higher price. 
D)  producing more while leaving price unchanged. 
A)  producing more and setting a higher price. 
B)  setting a lower price. 
C)  setting a higher price. 
D)  producing more while leaving price unchanged.

Question 10

Which of the following is most likely the most beneficial form of monopoly advantage?

Accepted Answer

A)  better production methods 
B)  input hoarding 
C)  decreasing returns to scale 
D)  government protection 
A)  better production methods 
B)  input hoarding 
C)  decreasing returns to scale 
D)  government protection

Question 11

The ability of a monopoly to charge a price that exceeds marginal cost depends on

Accepted Answer

A)  the price elasticity of supply. 
B)  price elasticity of demand. 
C)  slope of the demand curve. 
D)  shape of the marginal cost curve. 
A)  the price elasticity of supply. 
B)  price elasticity of demand. 
C)  slope of the demand curve. 
D)  shape of the marginal cost curve.

Question 12

The SSS Co.has a patent on a particular medication.The medication sells for $1 per daily dose and marginal cost is estimated to be a constant at $0.20.Assuming linear demand and marginal cost curves,use this information to estimate the deadweight loss from monopoly pricing if the firm currently sells 1,000 doses per day.Can this loss be justified?

Accepted Answer

The firm's Lerner Index equals 0.8 which

Question 13

As other firms enter a monopoly's market,the monopoly's market power

Accepted Answer

A)  is unaffected. 
B)  declines. 
C)  increases. 
D)  increases according to the Lerner Index but decreases according to the price/marginal cost ratio. 
A)  is unaffected. 
B)  declines. 
C)  increases. 
D)  increases according to the Lerner Index but decreases according to the price/marginal cost ratio.

Question 14

A flour mill holding exclusive contracts to 95% of the wheat in a large geographic area may operate as a flour producing monopoly locally because

Accepted Answer

A)  the mill has a very inelastic supply curve. 
B)  the mill is a natural monopoly. 
C)  the mill controls a key input. 
D)  the government will declare it a monopoly. 
A)  the mill has a very inelastic supply curve. 
B)  the mill is a natural monopoly. 
C)  the mill controls a key input. 
D)  the government will declare it a monopoly.

Question 15

If a firm is able to influence its price,

Accepted Answer

A)  it is a monopoly. 
B)  it has constant marginal revenue. 
C)  it sells its output at a constant price. 
D)  it faces a downward-sloping demand curve. 
A)  it is a monopoly. 
B)  it has constant marginal revenue. 
C)  it sells its output at a constant price. 
D)  it faces a downward-sloping demand curve.

Question 16

A monopoly can be formed by a bandwagon effect.Which of the following products would most closely match the bandwagon effect?

Accepted Answer

A)  the Atlanta Braves baseball club 
B)  the Dell Computer 
C)  the Apple iPod 
D)  the Chevrolet Corvette 
A)  the Atlanta Braves baseball club 
B)  the Dell Computer 
C)  the Apple iPod 
D)  the Chevrolet Corvette

Question 17

The loss associated with the fact that at the profit-maximizing quantity consumers value the goods more than it cost to produce them is called

Accepted Answer

A)  deadweight loss. 
B)  comparative loss. 
C)  Lerner Loss. 
D)  Consumer Value Loss. 
A)  deadweight loss. 
B)  comparative loss. 
C)  Lerner Loss. 
D)  Consumer Value Loss.

Question 18

The situation in which a person places greater value on a good as more and more people possess it is called the

Accepted Answer

A)  Bandwagon Effect. 
B)  Greater Value Effect. 
C)  Snob Effect. 
D)  Behavioral Effect. 
A)  Bandwagon Effect. 
B)  Greater Value Effect. 
C)  Snob Effect. 
D)  Behavioral Effect.

Question 19

-The above figure shows the demand and cost curves facing a monopoly.Maximum profit equals

Accepted Answer

A)  $0. 
B)  $100. 
C)  $1,000. 
D)  $2,500. 
A)  $0. 
B)  $100. 
C)  $1,000. 
D)  $2,500.

Question 20

The fact that a monopoly has to take the shapes of marginal cost AND marginal revenue into account when making decisions is reflected in the fact that

Accepted Answer

A)  monopolies don't have a supply curve. 
B)  monopolies don't have a demand curve. 
C)  monopolies have the same supply curve as perfectly competitive firms. 
D)  monopolies maximize profit. 
A)  monopolies don't have a supply curve. 
B)  monopolies don't have a demand curve. 
C)  monopolies have the same supply curve as perfectly competitive firms. 
D)  monopolies maximize profit.

When the marginal revenue curve cuts the horizontal axis,

If a firm in an industry experiences very high fixed costs and constant marginal cost,it is a good candidate for a natural monopoly.

A justification for patents is that without patents consumer surplus would be

If the inverse demand curve a monopoly faces is p = 100 - 2Q,and MC is constant at 16,then the firm's Lerner Index equals

-The above figure shows the demand and cost curves facing a monopoly.If a $100 per unit tax is charged,the loss in welfare resulting from the tax is

The government forcing a monopoly telecommunications company to allow other firms to use its cables is an attempt to

For profit-maximizing monopolies,explain why the boundaries on the Lerner Index are 0 and 1.

If a monopoly discovers that the demand for its output has become more elastic at the original output level,then it will respond by

Which of the following is most likely the most beneficial form of monopoly advantage?

The ability of a monopoly to charge a price that exceeds marginal cost depends on

As other firms enter a monopoly's market,the monopoly's market power

A flour mill holding exclusive contracts to 95% of the wheat in a large geographic area may operate as a flour producing monopoly locally because

If a firm is able to influence its price,

A monopoly can be formed by a bandwagon effect.Which of the following products would most closely match the bandwagon effect?

The loss associated with the fact that at the profit-maximizing quantity consumers value the goods more than it cost to produce them is called

The situation in which a person places greater value on a good as more and more people possess it is called the

-The above figure shows the demand and cost curves facing a monopoly.Maximum profit equals

The fact that a monopoly has to take the shapes of marginal cost AND marginal revenue into account when making decisions is reflected in the fact that

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

When the marginal revenue curve cuts the horizontal axis,

If a firm in an industry experiences very high fixed costs and constant marginal cost,it is a good candidate for a natural monopoly.

A justification for patents is that without patents consumer surplus would be

If the inverse demand curve a monopoly faces is p = 100 - 2Q,and MC is constant at 16,then the firm's Lerner Index equals

-The above figure shows the demand and cost curves facing a monopoly.If a $100 per unit tax is charged,the loss in welfare resulting from the tax is

The government forcing a monopoly telecommunications company to allow other firms to use its cables is an attempt to

For profit-maximizing monopolies,explain why the boundaries on the Lerner Index are 0 and 1.

If a monopoly discovers that the demand for its output has become more elastic at the original output level,then it will respond by

Which of the following is most likely the most beneficial form of monopoly advantage?

The ability of a monopoly to charge a price that exceeds marginal cost depends on

As other firms enter a monopoly's market,the monopoly's market power

A flour mill holding exclusive contracts to 95% of the wheat in a large geographic area may operate as a flour producing monopoly locally because

If a firm is able to influence its price,

A monopoly can be formed by a bandwagon effect.Which of the following products would most closely match the bandwagon effect?

The loss associated with the fact that at the profit-maximizing quantity consumers value the goods more than it cost to produce them is called

The situation in which a person places greater value on a good as more and more people possess it is called the

-The above figure shows the demand and cost curves facing a monopoly.Maximum profit equals

The fact that a monopoly has to take the shapes of marginal cost AND marginal revenue into account when making decisions is reflected in the fact that

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