Question 1

The profit-maximising level of output of a monopoly is determined where the marginal-cost curve crosses the:

Accepted Answer

A)  average-revenue curve 
B)  demand curve 
C)  marginal-revenue curve 
D)  average-variable-cost curve 
A)  average-revenue curve 
B)  demand curve 
C)  marginal-revenue curve 
D)  average-variable-cost curve

Question 2

Graph 15-4
   This graph depicts the demand and marginal-cost curves of a profit-maximising monopolist. Use the graph to answer the following question(s).
-Refer to Graph 15-4. A benevolent social planner would cause the monopoly firm to operate at an output level:

Accepted Answer

A)  above Q0 
B)  equal to Q0 
C)  below Q0 
D)  equal to zero 
A)  above Q0 
B)  equal to Q0 
C)  below Q0 
D)  equal to zero

Question 3

Suppose a drug patent runs out, the market consequences of this are? (i) the price will increase
(ii) the price will converge on the marginal cost
(iii) the quantity sold will increase

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 4

If the monopolist can collect the total surplus from the market as higher profits, it must be engaged in perfect price discrimination.

Accepted Answer

A) True 
 B)False

Question 5

Graph 15-1
  
-Refer to Graph 15-1. The shape of the average-total-cost curve reveals information about the nature of the 'barrier to entry' that might exist in a monopoly market. Which of the following monopoly types best coincides with the figure?

Accepted Answer

A)  natural monopoly 
B)  government-created monopoly 
C)  ownership of a key resource by a single firm 
D)  none of the above 
A)  natural monopoly 
B)  government-created monopoly 
C)  ownership of a key resource by a single firm 
D)  none of the above

Question 6

Consider the following graph of a monopoly.
   
Identify the firm's total revenue, total cost and total profit at the profit-maximising point. What is the value of the unit-profit?

Accepted Answer

Total revenue is P₃ *

Question 7

Consider the following graph of a monopoly.
   Use the graph to identify the marginal-revenue curve, the average-revenue curve, the average-total-cost curve and the marginal-cost curve. Then identify the price a profit-maximising monopolist would charge and the output it would produce.

Accepted Answer

Curve A is the average revenue or demand

Question 8

If a monopoly sells its good at a level that is below the socially optimal level, the price:

Accepted Answer

A)  will equal the intersection of average revenue and marginal cost 
B)  will be inefficiently high 
C)  will be inefficiently low 
D)  may be inefficiently low or high because a monopolist is a price maker 
A)  will equal the intersection of average revenue and marginal cost 
B)  will be inefficiently high 
C)  will be inefficiently low 
D)  may be inefficiently low or high because a monopolist is a price maker

Question 9

Monopoly pricing prevents some mutually beneficial trades from taking place. These unrealised mutually beneficial trades are:

Accepted Answer

A)  a deadweight loss to society 
B)  a sunk cost to society 
C)  of little concern to society because no money was lost 
D)  not considered a cost because they never happened 
A)  a deadweight loss to society 
B)  a sunk cost to society 
C)  of little concern to society because no money was lost 
D)  not considered a cost because they never happened

Question 10

A natural monopoly occurs when:

Accepted Answer

A)  the monopolist product is an organic, pesticide-free product 
B)  firms are characterised by rising marginal-cost curves 
C)  average total cost of production increases as more output is produced 
D)  average total cost of production decreases as more output is produced 
A)  the monopolist product is an organic, pesticide-free product 
B)  firms are characterised by rising marginal-cost curves 
C)  average total cost of production increases as more output is produced 
D)  average total cost of production decreases as more output is produced

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. The marginal-revenue curve for a monopoly firm is depicted by curve:

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  D 
A)  A 
B)  B 
C)  C 
D)  D

Question 12

An important assumption about a monopoly is that it behaves as a:

Accepted Answer

A)  price maximiser 
B)  profit maximiser 
C)  revenue maximiser 
D)  wage minimiser 
A)  price maximiser 
B)  profit maximiser 
C)  revenue maximiser 
D)  wage minimiser

Question 13

Given a monopolist is the sole producer in a market, it is able to change the price of its product: (i) without affecting the quantity sold
(ii) by adjusting the quantity it supplies to the market
(iii) but its profit could increase or decrease as a result

Accepted Answer

A)  (ii) only is true 
B)  (i) and (ii) are true 
C)  (ii) and (iii) are true 
D)  (i) and (iii) are true 
A)  (ii) only is true 
B)  (i) and (ii) are true 
C)  (ii) and (iii) are true 
D)  (i) and (iii) are true

Question 14

The unrealised mutually-beneficial trades resulting from monopoly pricing are not a cost to society.

Accepted Answer

A) True 
 B)False

Question 15

A firm's supply curve in a competitive market dictates the amount it will supply whereas in a monopoly market, the:

Accepted Answer

A)  same is true 
B)  decision about how much to supply cannot be separated from the demand curve it faces 
C)  supply curve conceptually makes sense, but in practice is never used 
D)  supply curve will have limited predictive capacity 
A)  same is true 
B)  decision about how much to supply cannot be separated from the demand curve it faces 
C)  supply curve conceptually makes sense, but in practice is never used 
D)  supply curve will have limited predictive capacity

Question 16

The De Beers Diamond company advertises heavily to promote the sale of all diamonds, not just its own. This is evidence that they have a monopoly position to some degree.

Accepted Answer

A) True 
 B)False

Question 17

A monopolist is a price:

Accepted Answer

A)  setter, and therefore has no indifference curve 
B)  setter, and therefore has no variable-cost curve 
C)  setter, and therefore has no supply curve 
D)  setter, and therefore has no demand curve 
A)  setter, and therefore has no indifference curve 
B)  setter, and therefore has no variable-cost curve 
C)  setter, and therefore has no supply curve 
D)  setter, and therefore has no demand curve

Question 18

The socially efficient level of production occurs where the marginal-cost curve intersects which of the following curves?

Accepted Answer

A)  demand 
B)  marginal revenue 
C)  supply 
D)  average cost 
A)  demand 
B)  marginal revenue 
C)  supply 
D)  average cost

Question 19

Compared to the monopoly outcome with a single price, imperfect price discrimination can do which of the following? (i) raise welfare
(ii) lower welfare
(iii) leave welfare unchanged

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 20

Price discrimination is not possible if a firm:

Accepted Answer

A)  is regulated by the government 
B)  operates in a competitive market 
C)  has perfect information about consumer demand 
D)  faces a downward-sloping demand curve 
A)  is regulated by the government 
B)  operates in a competitive market 
C)  has perfect information about consumer demand 
D)  faces a downward-sloping demand curve

Exam 15: Monopoly

The profit-maximising level of output of a monopoly is determined where the marginal-cost curve crosses the:

Graph 15-4 This graph depicts the demand and marginal-cost curves of a profit-maximising monopolist. Use the graph to answer the following question(s). -Refer to Graph 15-4. A benevolent social planner would cause the monopoly firm to operate at an output level:

Suppose a drug patent runs out, the market consequences of this are? (i) the price will increase (ii) the price will converge on the marginal cost (iii) the quantity sold will increase

If the monopolist can collect the total surplus from the market as higher profits, it must be engaged in perfect price discrimination.

Graph 15-1 -Refer to Graph 15-1. The shape of the average-total-cost curve reveals information about the nature of the 'barrier to entry' that might exist in a monopoly market. Which of the following monopoly types best coincides with the figure?

Consider the following graph of a monopoly. Identify the firm's total revenue, total cost and total profit at the profit-maximising point. What is the value of the unit-profit?

Consider the following graph of a monopoly. Use the graph to identify the marginal-revenue curve, the average-revenue curve, the average-total-cost curve and the marginal-cost curve. Then identify the price a profit-maximising monopolist would charge and the output it would produce.

If a monopoly sells its good at a level that is below the socially optimal level, the price:

Monopoly pricing prevents some mutually beneficial trades from taking place. These unrealised mutually beneficial trades are:

A natural monopoly occurs when:

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. The marginal-revenue curve for a monopoly firm is depicted by curve:

An important assumption about a monopoly is that it behaves as a:

Given a monopolist is the sole producer in a market, it is able to change the price of its product: (i) without affecting the quantity sold (ii) by adjusting the quantity it supplies to the market (iii) but its profit could increase or decrease as a result

The unrealised mutually-beneficial trades resulting from monopoly pricing are not a cost to society.

A firm's supply curve in a competitive market dictates the amount it will supply whereas in a monopoly market, the:

The De Beers Diamond company advertises heavily to promote the sale of all diamonds, not just its own. This is evidence that they have a monopoly position to some degree.

A monopolist is a price:

The socially efficient level of production occurs where the marginal-cost curve intersects which of the following curves?

Compared to the monopoly outcome with a single price, imperfect price discrimination can do which of the following? (i) raise welfare (ii) lower welfare (iii) leave welfare unchanged

Price discrimination is not possible if a firm:

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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