Question 1

For a monopolist, when does marginal revenue equal demand?

Accepted Answer

A)  when output is less than profit-maximising output 
B)  when output is greater than profit-maximising output 
C)  when there is a zero output 
D)  marginal revenue is never equal to demand 
A)  when output is less than profit-maximising output 
B)  when output is greater than profit-maximising output 
C)  when there is a zero output 
D)  marginal revenue is never equal to demand

Question 2

Graph 15-1
  
-Refer to Graph 15-1. The shape of the average-total-cost curve in the figure suggests an opportunity for a profit-maximising monopolist to exploit:

Accepted Answer

A)  price discrimination 
B)  average cost pricing 
C)  economies of scale 
D)  diminishing marginal product 
A)  price discrimination 
B)  average cost pricing 
C)  economies of scale 
D)  diminishing marginal product

Question 3

Patent and copyright laws are major sources of:

Accepted Answer

A)  government-created monopolies 
B)  natural monopolies 
C)  research and development 
D)  innovation 
A)  government-created monopolies 
B)  natural monopolies 
C)  research and development 
D)  innovation

Question 4

Which of the following qualify as a social cost of monopoly power? (i) loss of consumer surplus
(ii) loss of producer surplus
(iii) excessive profit earned by the owner of a monopoly

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

A firm in a competitive market sells a product that has many substitutes. This means the demand curve such a firm faces is:

Accepted Answer

A)  unit inelastic 
B)  downward sloping 
C)  perfectly elastic 
D)  above the marginal-revenue curve 
A)  unit inelastic 
B)  downward sloping 
C)  perfectly elastic 
D)  above the marginal-revenue curve

Question 6

Consider the market for water in a small town in Western Australia. Assume that the only source of water is the underground aquifer that lies directly below the town. Wells are used to supply water to the entire town.
-According to the information provided, suppose only one resident owns all the wells in town. Which of the following statements is most likely going to be true of the market for water?

Accepted Answer

A)  the seller will be able to earn unlimited profit 
B)  the price of a gallon of water will be driven to equal its marginal cost 
C)  the price of a gallon of water will exceed its marginal cost 
D)  since water is a necessity of life, there will be no decline in the quantity of water consumed, regardless of how high the price is raised 
A)  the seller will be able to earn unlimited profit 
B)  the price of a gallon of water will be driven to equal its marginal cost 
C)  the price of a gallon of water will exceed its marginal cost 
D)  since water is a necessity of life, there will be no decline in the quantity of water consumed, regardless of how high the price is raised

Question 7

If a monopolist is able to perfectly price discriminate:

Accepted Answer

A)  consumer surplus is increased and deadweight loss is transformed into monopoly profit 
B)  consumer surplus is decreased and deadweight loss is increased 
C)  consumer surplus is increased and deadweight loss is increased 
D)  consumer surplus and deadweight losses are transformed into monopoly profits 
A)  consumer surplus is increased and deadweight loss is transformed into monopoly profit 
B)  consumer surplus is decreased and deadweight loss is increased 
C)  consumer surplus is increased and deadweight loss is increased 
D)  consumer surplus and deadweight losses are transformed into monopoly profits

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. At the profit-maximising level of output, average revenue is equal to:

Accepted Answer

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

Question 9

Allowing an inventor to have the exclusive rights to market her new invention will lead to which of the following? (i) a product that is priced higher than it would be without the exclusive rights
(ii) desirable behaviour in the sense that inventors are encouraged to invent
(iii) higher profits for the inventor

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 10

Arbitrage is the process by which:

Accepted Answer

A)  a good is purchased for a low price in one market and sold for a higher price in another market 
B)  a good is purchased for a high price in one market and sold for a lower price in another market 
C)  a good is purchased for a low price in one market and sold for the same price in the same market 
D)  a good is purchased for a high price in one market and sold for the same price in the same market 
A)  a good is purchased for a low price in one market and sold for a higher price in another market 
B)  a good is purchased for a high price in one market and sold for a lower price in another market 
C)  a good is purchased for a low price in one market and sold for the same price in the same market 
D)  a good is purchased for a high price in one market and sold for the same price in the same market

Question 11

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 can always be increased by decreasing the level of output by one unit if the monopolist is currently operating at which of the following output levels? (i) Q0
(ii) Q1
(iii) Q2
(iv) Q3

Accepted Answer

A)  (i) or (ii) 
B)  (i), (ii) or (iii) 
C)  (iii) or (iv) 
D)  (iv) only 
A)  (i) or (ii) 
B)  (i), (ii) or (iii) 
C)  (iii) or (iv) 
D)  (iv) only

Question 12

A monopoly market:

Accepted Answer

A)  generally fails to maximise total economic wellbeing 
B)  always maximises total economic wellbeing 
C)  always minimises consumer surplus 
D)  generally fails to maximise producer surplus 
A)  generally fails to maximise total economic wellbeing 
B)  always maximises total economic wellbeing 
C)  always minimises consumer surplus 
D)  generally fails to maximise producer surplus

Question 13

For a monopoly market, total surplus can be defined as the value of the good to:

Accepted Answer

A)  consumers minus the costs of making the good 
B)  consumers plus the cost of making the good 
C)  producers minus the cost incurred by consumers 
D)  producer plus the cost incurred by consumers 
A)  consumers minus the costs of making the good 
B)  consumers plus the cost of making the good 
C)  producers minus the cost incurred by consumers 
D)  producer plus the cost incurred by consumers

Question 14

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 can always be increased by decreasing the level of output by one unit if the monopolist is currently operating at a level of output in which:

Accepted Answer

A)  curve C > curve B 
B)  curve B > curve C 
C)  curve B > curve D 
D)  curve D > curve B 
A)  curve C > curve B 
B)  curve B > curve C 
C)  curve B > curve D 
D)  curve D > curve B

Exam 15: Monopoly

For a monopolist, when does marginal revenue equal demand?

Graph 15-1 -Refer to Graph 15-1. The shape of the average-total-cost curve in the figure suggests an opportunity for a profit-maximising monopolist to exploit:

Patent and copyright laws are major sources of:

Which of the following qualify as a social cost of monopoly power? (i) loss of consumer surplus (ii) loss of producer surplus (iii) excessive profit earned by the owner of a monopoly

A firm in a competitive market sells a product that has many substitutes. This means the demand curve such a firm faces is:

If a monopolist is able to perfectly price discriminate:

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. At the profit-maximising level of output, average revenue is equal to:

Arbitrage is the process by which:

A monopoly market:

For a monopoly market, total surplus can be defined as the value of the good to:

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

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