Question 1

If a monopolist sells 500 units at $20 per unit and realises an average total cost of $8 per unit, what is the monopolist's profit?

Accepted Answer

A)  $600 
B)  $6000 
C)  $10000 
D)  none of the above 
A)  $600 
B)  $6000 
C)  $10000 
D)  none of the above

Question 2

Graph 15-5
   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 15-5. Total surplus lost due to monopoly pricing is reflected in:

Accepted Answer

A)  rectangle ACDB 
B)  rectangle CFGD 
C)  triangle BDE 
D)  triangle BGE 
A)  rectangle ACDB 
B)  rectangle CFGD 
C)  triangle BDE 
D)  triangle BGE

Question 3

What is the defining characteristic of a natural monopoly? Give an example of a natural monopoly.

Accepted Answer

The defining characteristic of a natural

Question 4

Monopoly firms can employ their market power to charge a price that is:

Accepted Answer

A)  above marginal cost 
B)  equal to marginal cost 
C)  above average revenue 
D)  too high for most consumers to afford 
A)  above marginal cost 
B)  equal to marginal cost 
C)  above average revenue 
D)  too high for most consumers to afford

Question 5

If the government deems a newly invented drug to be truly original, the pharmaceutical company is given the exclusive right to manufacture and sell the drug for five years.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following qualify as barriers to entering a monopoly market? (i) a key resource's ownership is not defined
(ii) the government has given the existing monopoly the exclusive right to produce the good
(iii) the costs of production make a single producer more efficient than a large number of producers

Accepted Answer

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

Question 7

When a natural monopoly exists, it is always more cost-effective for two or more private firms to produce the product.

Accepted Answer

A) True 
 B)False

Question 8

Price discrimination requires the firm to:

Accepted Answer

A)  differentiate between different units of its product 
B)  engage in arbitrage 
C)  separate customers according to their willingness to pay 
D)  do all of the above 
A)  differentiate between different units of its product 
B)  engage in arbitrage 
C)  separate customers according to their willingness to pay 
D)  do all of the above

Question 9

Table 15-1
  
-Refer to Table 15-1. If the monopolist wants to maximise its revenue, how many units of its product should it sell?

Accepted Answer

A)  five 
B)  six 
C)  nine 
D)  10 
A)  five 
B)  six 
C)  nine 
D)  10

Question 10

Which of the following scenarios best represents a monopoly situation?

Accepted Answer

A)  Bill and Tom work separately from one another but both sell a very rare form of the same diamond; they are the only sellers of this type of diamond in town 
B)  Bill owns the only grocery store in a small community that lies 200 miles from the nearest city 
C)  Tom owns a fishing tackle shop in Miami, Florida, in which he sells all the top-of-the-line fishing equipment 
D)  none of the above adequately represent a monopoly 
A)  Bill and Tom work separately from one another but both sell a very rare form of the same diamond; they are the only sellers of this type of diamond in town 
B)  Bill owns the only grocery store in a small community that lies 200 miles from the nearest city 
C)  Tom owns a fishing tackle shop in Miami, Florida, in which he sells all the top-of-the-line fishing equipment 
D)  none of the above adequately represent a monopoly

Question 11

Where does the marginal-revenue curve for a monopoly firm start? (i) at the same point on the vertical axis as the average-revenue curve
(ii) above the demand curve
(iii) below the demand curve

Accepted Answer

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

Question 12

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 demand 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 13

Many bus companies allow discount tickets to be sold to students because:

Accepted Answer

A)  education laws mandate such discounts 
B)  it signals that the companies care about education 
C)  they are profit maximisers 
D)  students have argued forcefully for the right to cheaper tickets 
A)  education laws mandate such discounts 
B)  it signals that the companies care about education 
C)  they are profit maximisers 
D)  students have argued forcefully for the right to cheaper tickets

Question 14

Consumers' willingness to pay for a good minus the amount they actually pay for it equals consumer:

Accepted Answer

A)  profit 
B)  benefit 
C)  surplus 
D)  cost 
A)  profit 
B)  benefit 
C)  surplus 
D)  cost

Question 15

Which of the following can eliminate the inefficiency inherent in monopoly pricing?

Accepted Answer

A)  arbitrage 
B)  price discrimination 
C)  cost-plus pricing 
D)  regulation 
A)  arbitrage 
B)  price discrimination 
C)  cost-plus pricing 
D)  regulation

Question 16

Another form of price discrimination is when a monopoly offers lower prices to customers who buy small quantities.

Accepted Answer

A) True 
 B)False

Question 17

One example of price discrimination occurs in the publishing industry when a publisher initially releases an expensive hardcover edition of a popular novel, and later releases a cheaper paperback edition. Use this example to demonstrate the benefits and potential pitfalls of a price discrimination pricing strategy.

Accepted Answer

The answer should address the three basi

Question 18

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.
-Refer to the information provided. Jack, the sole owner of all the wells in town, decides to move to a more suitable climate, so he sells the wells to a couple of dozen different town residents. Which of the following is likely to occur?

Accepted Answer

A)  the price of water is likely to fall 
B)  the individual water sellers will not have as much pricing power as Jack had 
C)  the town residents will likely be better off 
D)  all of the above will occur 
A)  the price of water is likely to fall 
B)  the individual water sellers will not have as much pricing power as Jack had 
C)  the town residents will likely be better off 
D)  all of the above will occur

Question 19

Natural monopolies differ from other forms of monopoly because they:

Accepted Answer

A)  are generally not worried about competition eroding their monopoly position in the market 
B)  are not subject to barriers to entry 
C)  are not regulated by government 
D)  generally don't make a profit 
A)  are generally not worried about competition eroding their monopoly position in the market 
B)  are not subject to barriers to entry 
C)  are not regulated by government 
D)  generally don't make a profit

Question 20

In order to sell more of its product, a monopolist must:

Accepted Answer

A)  lower its price 
B)  sell in international markets 
C)  use its market power to force up the price of complementary products 
D)  sell to the government 
A)  lower its price 
B)  sell in international markets 
C)  use its market power to force up the price of complementary products 
D)  sell to the government

Exam 15: Monopoly

If a monopolist sells 500 units at $20 per unit and realises an average total cost of $8 per unit, what is the monopolist's profit?

Graph 15-5 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 15-5. Total surplus lost due to monopoly pricing is reflected in:

What is the defining characteristic of a natural monopoly? Give an example of a natural monopoly.

Monopoly firms can employ their market power to charge a price that is:

If the government deems a newly invented drug to be truly original, the pharmaceutical company is given the exclusive right to manufacture and sell the drug for five years.

When a natural monopoly exists, it is always more cost-effective for two or more private firms to produce the product.

Price discrimination requires the firm to:

Table 15-1 -Refer to Table 15-1. If the monopolist wants to maximise its revenue, how many units of its product should it sell?

Which of the following scenarios best represents a monopoly situation?

Where does the marginal-revenue curve for a monopoly firm start? (i) at the same point on the vertical axis as the average-revenue curve (ii) above the demand curve (iii) below the demand curve

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 demand curve for a monopoly firm is depicted by curve:

Many bus companies allow discount tickets to be sold to students because:

Consumers' willingness to pay for a good minus the amount they actually pay for it equals consumer:

Which of the following can eliminate the inefficiency inherent in monopoly pricing?

Another form of price discrimination is when a monopoly offers lower prices to customers who buy small quantities.

Natural monopolies differ from other forms of monopoly because they:

In order to sell more of its product, a monopolist must:

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