Question 1

The Lerner Index is derived from the profit-maximizing condition of a firm.

Accepted Answer

A) True 
 B)False

Question 2

The more elastic the demand curve,a monopoly

Accepted Answer

A)  will have a larger Lerner Index. 
B)  will face a lower marginal cost. 
C)  will earn more profit. 
D)  will lose more sales as it raises its price. 
A)  will have a larger Lerner Index. 
B)  will face a lower marginal cost. 
C)  will earn more profit. 
D)  will lose more sales as it raises its price.

Question 3

Regulation is guaranteed to be more efficient than a monopoly.

Accepted Answer

A)  True, the government is able to internalize the dead weight loss of the monopoly. 
B)  True, the consumers are better off if government provides the product rather than a private firm. 
C)  False, the government does not always have sufficient information to provide a more efficient market outcome. 
D)  False, the consumers are worse off under government regulation. 
A)  True, the government is able to internalize the dead weight loss of the monopoly. 
B)  True, the consumers are better off if government provides the product rather than a private firm. 
C)  False, the government does not always have sufficient information to provide a more efficient market outcome. 
D)  False, the consumers are worse off under government regulation.

Question 4

If the inverse demand curve a monopoly faces is p = 100 - 2Q,MC is constant at 16,and the government imposes an $8 per unit specific tax on the monopoly,the deadweight loss solely due to the tax is

Accepted Answer

A)  $88. 
B)  $152. 
C)  $361. 
D)  $441. 
A)  $88. 
B)  $152. 
C)  $361. 
D)  $441.

Question 5

If the inverse demand function for a monopoly's product is p = a - bQ,then the firm's marginal revenue function is

Accepted Answer

A)  a. 
B)  a - (1/2)bQ. 
C)  a - bQ. 
D)  a - 2bQ. 
A)  a. 
B)  a - (1/2)bQ. 
C)  a - bQ. 
D)  a - 2bQ.

Question 6

Market power guarantees profit.

Accepted Answer

A)  True, which is why firm's locate as far away from each other as possible. 
B)  False, market power guarantees price greater than marginal cost. 
C)  True, market power guarantees price greater than average cost. 
D)  False, market power guarantees price equal to average cost. 
A)  True, which is why firm's locate as far away from each other as possible. 
B)  False, market power guarantees price greater than marginal cost. 
C)  True, market power guarantees price greater than average cost. 
D)  False, market power guarantees price equal to average cost.

Question 7

If the inverse demand curve a monopoly faces is p = 100 - 2Q,and MC is constant at 16,then maximum profit

Accepted Answer

A)  equals $336. 
B)  equals $882. 
C)  equals $1,218. 
D)  cannot be determined solely from the information provided. 
A)  equals $336. 
B)  equals $882. 
C)  equals $1,218. 
D)  cannot be determined solely from the information provided.

Question 8

What is one reason patents are required?

Accepted Answer

A)  Information concerning innovation is private and secure. 
B)  Human nature is corrupt. 
C)  Information concerning innovation is generally not private and secure. 
D)  The patent only makes things better in the short-run. 
A)  Information concerning innovation is private and secure. 
B)  Human nature is corrupt. 
C)  Information concerning innovation is generally not private and secure. 
D)  The patent only makes things better in the short-run.

Question 9

Suppose a patent is granted for a product that has the linear demand curve P = a - b Q.The constant marginal cost of producing this product is $50 per unit,a unit sells for $150,and consumers purchase 100 units of the good at that price.If the monopoly is maximizing profit,the deadweight loss is

Accepted Answer

A)  $5000. 
B)  $2500. 
C)  $7500. 
D)  $10000. 
A)  $5000. 
B)  $2500. 
C)  $7500. 
D)  $10000.

Question 10

A monopolist faces the inverse demand curve P = 60 - Q.It has variable costs of Q2 so that its marginal costs are 2Q,and it has fixed costs of 30.The monopoly's maximum profit is

Accepted Answer

A)  220. 
B)  370. 
C)  420. 
D)  510. 
A)  220. 
B)  370. 
C)  420. 
D)  510.

Question 11

If the government wants to regulate a natural monopoly,it will force the firm to set price equal to

Accepted Answer

A)  average cost. 
B)  marginal cost. 
C)  marginal revenue. 
D)  None of the above. 
A)  average cost. 
B)  marginal cost. 
C)  marginal revenue. 
D)  None of the above.

Question 12

A profit maximizing monopolist

Accepted Answer

A)  is guaranteed to lose money because of a lack of competition. 
B)  is not guaranteed to make a positive profit. 
C)  is guaranteed to make a positive profit, hence the desire to be a monopolist. 
D)  is guaranteed to make a non-negative profit, otherwise government would step in to assist. 
A)  is guaranteed to lose money because of a lack of competition. 
B)  is not guaranteed to make a positive profit. 
C)  is guaranteed to make a positive profit, hence the desire to be a monopolist. 
D)  is guaranteed to make a non-negative profit, otherwise government would step in to assist.

Question 13

In spring 2008,the U.S.Congress proposed to tax oil companies because of their near-monopoly status.This could have the unintended consequence of

Accepted Answer

A)  increasing the equilibrium price by more than the tax. 
B)  destroying the oil companies and leaving the United States without oil. 
C)  increasing the profit of the best oil company. 
D)  decreasing the power of the U.S. Congress. 
A)  increasing the equilibrium price by more than the tax. 
B)  destroying the oil companies and leaving the United States without oil. 
C)  increasing the profit of the best oil company. 
D)  decreasing the power of the U.S. Congress.

Question 14

-The above figure shows the demand and cost curves facing a monopoly.If the firm is a profit maximizer,its Lerner Index will equal

Accepted Answer

A)  1. 
B)  1/3. 
C)  1.5. 
D)  3. 
A)  1. 
B)  1/3. 
C)  1.5. 
D)  3.

Question 15

If the demand curve a monopolist faces is perfectly elastic,then the ratio of the firm's price to the marginal cost is

Accepted Answer

A)  0. 
B)  1. 
C)  2. 
D)  None of the above-the answer cannot be determined. 
A)  0. 
B)  1. 
C)  2. 
D)  None of the above-the answer cannot be determined.

Question 16

The monopoly maximizes profit by setting

Accepted Answer

A)  price equal to marginal cost. 
B)  price equal to marginal revenue. 
C)  marginal revenue equal to marginal cost. 
D)  marginal revenue equal to zero. 
A)  price equal to marginal cost. 
B)  price equal to marginal revenue. 
C)  marginal revenue equal to marginal cost. 
D)  marginal revenue equal to zero.

Question 17

For a monopoly,marginal revenue is less than price because

Accepted Answer

A)  the demand for the firm's output is downward sloping. 
B)  the firm has no supply curve. 
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 demand for the firm's output is downward sloping. 
B)  the firm has no supply curve. 
C)  the firm can sell all of its output at any price. 
D)  the demand for the firm's output is perfectly elastic.

Question 18

If the demand for a firm's output is perfectly elastic,then the firm's Lerner Index equals

Accepted Answer

A)  zero. 
B)  one. 
C)  infinity. 
D)  one-half. 
A)  zero. 
B)  one. 
C)  infinity. 
D)  one-half.

The Lerner Index is derived from the profit-maximizing condition of a firm.

The more elastic the demand curve,a monopoly

Regulation is guaranteed to be more efficient than a monopoly.

If the inverse demand curve a monopoly faces is p = 100 - 2Q,MC is constant at 16,and the government imposes an $8 per unit specific tax on the monopoly,the deadweight loss solely due to the tax is

If the inverse demand function for a monopoly's product is p = a - bQ,then the firm's marginal revenue function is

Market power guarantees profit.

If the inverse demand curve a monopoly faces is p = 100 - 2Q,and MC is constant at 16,then maximum profit

What is one reason patents are required?

Suppose a patent is granted for a product that has the linear demand curve P = a - b Q.The constant marginal cost of producing this product is $50 per unit,a unit sells for $150,and consumers purchase 100 units of the good at that price.If the monopoly is maximizing profit,the deadweight loss is

A monopolist faces the inverse demand curve P = 60 - Q.It has variable costs of Q² so that its marginal costs are 2Q,and it has fixed costs of 30.The monopoly's maximum profit is

If the government wants to regulate a natural monopoly,it will force the firm to set price equal to

A profit maximizing monopolist

In spring 2008,the U.S.Congress proposed to tax oil companies because of their near-monopoly status.This could have the unintended consequence of

-The above figure shows the demand and cost curves facing a monopoly.If the firm is a profit maximizer,its Lerner Index will equal

If the demand curve a monopolist faces is perfectly elastic,then the ratio of the firm's price to the marginal cost is

The monopoly maximizes profit by setting

For a monopoly,marginal revenue is less than price because

If the demand for a firm's output is perfectly elastic,then the firm's Lerner Index equals

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

The Lerner Index is derived from the profit-maximizing condition of a firm.

The more elastic the demand curve,a monopoly

Regulation is guaranteed to be more efficient than a monopoly.

If the inverse demand curve a monopoly faces is p = 100 - 2Q,MC is constant at 16,and the government imposes an $8 per unit specific tax on the monopoly,the deadweight loss solely due to the tax is

If the inverse demand function for a monopoly's product is p = a - bQ,then the firm's marginal revenue function is

Market power guarantees profit.

If the inverse demand curve a monopoly faces is p = 100 - 2Q,and MC is constant at 16,then maximum profit

What is one reason patents are required?

Suppose a patent is granted for a product that has the linear demand curve P = a - b Q.The constant marginal cost of producing this product is $50 per unit,a unit sells for $150,and consumers purchase 100 units of the good at that price.If the monopoly is maximizing profit,the deadweight loss is

A monopolist faces the inverse demand curve P = 60 - Q.It has variable costs of Q2 so that its marginal costs are 2Q,and it has fixed costs of 30.The monopoly's maximum profit is

If the government wants to regulate a natural monopoly,it will force the firm to set price equal to

A profit maximizing monopolist

In spring 2008,the U.S.Congress proposed to tax oil companies because of their near-monopoly status.This could have the unintended consequence of

-The above figure shows the demand and cost curves facing a monopoly.If the firm is a profit maximizer,its Lerner Index will equal

If the demand curve a monopolist faces is perfectly elastic,then the ratio of the firm's price to the marginal cost is

The monopoly maximizes profit by setting

For a monopoly,marginal revenue is less than price because

If the demand for a firm's output is perfectly elastic,then the firm's Lerner Index equals

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

A monopolist faces the inverse demand curve P = 60 - Q.It has variable costs of Q² so that its marginal costs are 2Q,and it has fixed costs of 30.The monopoly's maximum profit is