Question 1

Discount coupons have the ability to help a grocery store:

Accepted Answer

A)  maximise its profit 
B)  price discriminate 
C)  target their customers based on their individual willingness to pay 
D)  do all of the above 
A)  maximise its profit 
B)  price discriminate 
C)  target their customers based on their individual willingness to pay 
D)  do all of the above

Question 2

When a monopolist reduces the amount of output that it sells, the price of its output:

Accepted Answer

A)  increases 
B)  decreases 
C)  stays the same 
D)  may increase or decrease, depending on the elasticity of demand 
A)  increases 
B)  decreases 
C)  stays the same 
D)  may increase or decrease, depending on the elasticity of demand

Question 3

Graph 15-6
   This graph depicts the demand, marginal-revenue and marginal-cost curves of a profit-maximising monopolist. Use the graph to answer the following question(s).
-Refer to Graph 15-6. Monopoly profit with perfect price discrimination equals:

Accepted Answer

A)  ABC 
B)  BDEC 
C)  ADEC 
D)  ADF 
A)  ABC 
B)  BDEC 
C)  ADEC 
D)  ADF

Question 4

C.R. Evans, a transportation corporation, has just completed the development of a new subway system in Melbourne. Currently there are plenty of seats on the subway, and it is never crowded. Its capacity well exceeds the needs of the city. After just a few years of operation, the shareholders of C.R. Evans common stock are experiencing incredible rates of return on their investment, due to the profitability of the corporation.
-According to the information provided, which of the following statements are most likely to be true? (i) C.R. Evans is a natural monopoly
(ii) new entrants to the market know they will earn a smaller piece of the market than C.R. Evans currently has
(iii) C.R. Evans is most likely experiencing increasing average total cost

Accepted Answer

A)  (i) and (ii) 
B)  (ii) and (iii) 
C)  (i) and (iii) 
D)  (i), (ii) and (iii) 
A)  (i) and (ii) 
B)  (ii) and (iii) 
C)  (i) and (iii) 
D)  (i), (ii) and (iii)

Question 5

Suppose a pesticide company discovers and patents a new weed killer. This patent gives the company:

Accepted Answer

A)  a monopoly right to sell the weed killer for an unlimited number of years 
B)  a monopoly right to sell the weed killer for a limited number of years 
C)  partial ownership of the right to sell the weed killer for a limited number of years 
D)  partial ownership of the right to sell the weed killer for an unlimited number of years 
A)  a monopoly right to sell the weed killer for an unlimited number of years 
B)  a monopoly right to sell the weed killer for a limited number of years 
C)  partial ownership of the right to sell the weed killer for a limited number of years 
D)  partial ownership of the right to sell the weed killer for an unlimited number of years

Question 6

The simplest way for a monopoly to arise is for a single firm to:

Accepted Answer

A)  own a key resource 
B)  inflate its prices 
C)  cut production to increase demand for a product 
D)  collude with the other producers in town 
A)  own a key resource 
B)  inflate its prices 
C)  cut production to increase demand for a product 
D)  collude with the other producers in town

Question 7

Supply curves tell us how much producers are willing to supply at any given price. Hence monopoly firms have:

Accepted Answer

A)  steeper supply curves than competitive firms 
B)  flatter supply curves than competitive firms 
C)  vertical supply curves 
D)  no supply curves 
A)  steeper supply curves than competitive firms 
B)  flatter supply curves than competitive firms 
C)  vertical supply curves 
D)  no supply curves

Question 8

Graph 15-3
   This graph reflects the cost and revenue structure for a monopoly firm. Use the graph to answer the following question(s).
-Refer to Graph 15-3. Profit on a typical unit sold for a profit-maximising monopoly would equal:

Accepted Answer

A)  P3 - P2 
B)  P3 - P0 
C)  P2 - P1 
D)  P2 - P0 
A)  P3 - P2 
B)  P3 - P0 
C)  P2 - P1 
D)  P2 - P0

Question 9

The difference in total surplus between a socially efficient level of production and a monopolist's level of production is:

Accepted Answer

A)  offset by regulatory revenues 
B)  usually small and insignificant 
C)  a deadweight loss 
D)  all of the above 
A)  offset by regulatory revenues 
B)  usually small and insignificant 
C)  a deadweight loss 
D)  all of the above

Question 10

In the market for home heating, consumers typically have several options (e.g. electricity, heating fuel, natural gas, propane, etc.), yet we often think of firms in this industry as behaving like monopolists. Using your understanding of monopoly, discuss the context in which your electricity provider is a monopolist. Is this characterisation universally applicable? Carefully explain your answer.

Accepted Answer

In this case, the firms are monopolists

Question 11

If there are no close substitutes for the monopoly's product, the monopoly has increased market power.

Accepted Answer

A) True 
 B)False

Question 12

Average revenue for a monopoly is the marginal revenue divided by the quantity produced.

Accepted Answer

A) True 
 B)False

Question 13

Price discrimination adds to social welfare in the form of which of the following? (i) increased profits to the monopolist
(ii) increased consumer surplus
(iii) increased total surplus

Accepted Answer

A)  (i) and (ii) 
B)  (ii) and (iii) 
C)  (i) and (iii) 
D)  (i), (ii) and (iii) 
A)  (i) and (ii) 
B)  (ii) and (iii) 
C)  (i) and (iii) 
D)  (i), (ii) and (iii)

Question 14

Monopoly firms have:

Accepted Answer

A)  horizontal demand curves and can sell only a limited amount at each price 
B)  horizontal demand curves and can sell as much as they want at each price 
C)  downward-sloping demand curves and can sell as much as they want at each price 
D)  downward-sloping demand curves and can sell only a limited amount at each price 
A)  horizontal demand curves and can sell only a limited amount at each price 
B)  horizontal demand curves and can sell as much as they want at each price 
C)  downward-sloping demand curves and can sell as much as they want at each price 
D)  downward-sloping demand curves and can sell only a limited amount at each price

Question 15

Graph 15-2
   This graph reflects the cost and revenue structure for a monopoly firm. Use the graph to answer the following question(s).
-Refer to Graph 15-2. Profit will be maximised by charging a price equal to:

Accepted Answer

A)  P0 
B)  P1 
C)  P2 
D)  P3 
A)  P0 
B)  P1 
C)  P2 
D)  P3

Question 16

Graph 15-6
   This graph depicts the demand, marginal-revenue and marginal-cost curves of a profit-maximising monopolist. Use the graph to answer the following question(s).
-Refer to Graph 15-6. Monopoly profit without price discrimination equals:

Accepted Answer

A)  ABC 
B)  BDEC 
C)  ADEC 
D)  ADF 
A)  ABC 
B)  BDEC 
C)  ADEC 
D)  ADF

Question 17

Graph 15-2
   This graph reflects the cost and revenue structure for a monopoly firm. Use the graph to answer the following question(s).
-Refer to Graph 15-2. If the monopoly firm is currently producing output at a level of Q3, reducing output will always cause profit to:

Accepted Answer

A)  increase as long as output is at least Q2 
B)  increase as long as output is at least Q1 
C)  remain unchanged 
D)  decrease 
A)  increase as long as output is at least Q2 
B)  increase as long as output is at least Q1 
C)  remain unchanged 
D)  decrease

Question 18

When a monopolist is able to sell its product at different prices, it is engaging in:

Accepted Answer

A)  exploitation of consumers 
B)  predatory pricing 
C)  price discrimination 
D)  price differentiation 
A)  exploitation of consumers 
B)  predatory pricing 
C)  price discrimination 
D)  price differentiation

Question 19

During the life of a drug patent, the monopoly pharmaceutical firm maximises profit by producing the quantity at which marginal revenue is greater than marginal cost.

Accepted Answer

A) True 
 B)False

Question 20

Given that monopoly firms do not have to compete with other firms, the outcome in a monopoly market is best described as:

Accepted Answer

A)  not in the best interest of society 
B)  where excessive pollution occurs 
C)  efficient, but not equitable 
D)  all of the above 
A)  not in the best interest of society 
B)  where excessive pollution occurs 
C)  efficient, but not equitable 
D)  all of the above

Exam 15: Monopoly

Discount coupons have the ability to help a grocery store:

When a monopolist reduces the amount of output that it sells, the price of its output:

Graph 15-6 This graph depicts the demand, marginal-revenue and marginal-cost curves of a profit-maximising monopolist. Use the graph to answer the following question(s). -Refer to Graph 15-6. Monopoly profit with perfect price discrimination equals:

Suppose a pesticide company discovers and patents a new weed killer. This patent gives the company:

The simplest way for a monopoly to arise is for a single firm to:

Supply curves tell us how much producers are willing to supply at any given price. Hence monopoly firms have:

Graph 15-3 This graph reflects the cost and revenue structure for a monopoly firm. Use the graph to answer the following question(s). -Refer to Graph 15-3. Profit on a typical unit sold for a profit-maximising monopoly would equal:

The difference in total surplus between a socially efficient level of production and a monopolist's level of production is:

If there are no close substitutes for the monopoly's product, the monopoly has increased market power.

Average revenue for a monopoly is the marginal revenue divided by the quantity produced.

Price discrimination adds to social welfare in the form of which of the following? (i) increased profits to the monopolist (ii) increased consumer surplus (iii) increased total surplus

Monopoly firms have:

Graph 15-2 This graph reflects the cost and revenue structure for a monopoly firm. Use the graph to answer the following question(s). -Refer to Graph 15-2. Profit will be maximised by charging a price equal to:

Graph 15-6 This graph depicts the demand, marginal-revenue and marginal-cost curves of a profit-maximising monopolist. Use the graph to answer the following question(s). -Refer to Graph 15-6. Monopoly profit without price discrimination equals:

Graph 15-2 This graph reflects the cost and revenue structure for a monopoly firm. Use the graph to answer the following question(s). -Refer to Graph 15-2. If the monopoly firm is currently producing output at a level of Q3, reducing output will always cause profit to:

When a monopolist is able to sell its product at different prices, it is engaging in:

During the life of a drug patent, the monopoly pharmaceutical firm maximises profit by producing the quantity at which marginal revenue is greater than marginal cost.

Given that monopoly firms do not have to compete with other firms, the outcome in a monopoly market is best described as:

Ten Lessons From Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand and Government Policies

Consumers, Producers and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Business Strategy

Competition Policy

Monopolistic Competition

The Markets for the Factors of Production

Earnings, Unions and Discrimination

Income Inequity and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment and the Financial System

The Natural Rate of Unemployment

The Monetary System

Inflation: Its Causes and Costs

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Five Debates Over Macroeconomic Policy

Filters

Graph 15-2 This graph reflects the cost and revenue structure for a monopoly firm. Use the graph to answer the following question(s). -Refer to Graph 15-2. If the monopoly firm is currently producing output at a level of Q₃, reducing output will always cause profit to: