Question 1

A government created monopoly arises when:

Accepted Answer

A)  government spending in a certain industry gives rise to monopoly power 
B)  the government gives a firm the exclusive right to sell some good or service 
C)  the government exercises its market control by encouraging competition among sellers 
D)  all of the above could qualify as government created monopolies 
A)  government spending in a certain industry gives rise to monopoly power 
B)  the government gives a firm the exclusive right to sell some good or service 
C)  the government exercises its market control by encouraging competition among sellers 
D)  all of the above could qualify as government created monopolies

Question 2

Patent and copyright laws are major sources of government created monopolies.

Accepted Answer

A) True 
 B)False

Question 3

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 average-total-cost 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 4

If the firm is the only owner of a key resource then this will be a significant barrier to entry.

Accepted Answer

A) True 
 B)False

Question 5

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. Which of the following areas represents the deadweight loss due to monopoly pricing?

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 6

Patents are employed to give drug companies temporary monopoly power in order to:

Accepted Answer

A)  encourage research and innovations in pharmaceutical products 
B)  protect corporate interests 
C)  regulate drug companies to charge a price that is equal to their marginal cost 
D)  do all of the above 
A)  encourage research and innovations in pharmaceutical products 
B)  protect corporate interests 
C)  regulate drug companies to charge a price that is equal to their marginal cost 
D)  do all of the above

Question 7

A monopolist's average revenue is always:

Accepted Answer

A)  greater than the price of its product 
B)  equal to the price of its product 
C)  less than the price of its product 
D)  equal to marginal revenue 
A)  greater than the price of its product 
B)  equal to the price of its product 
C)  less than the price of its product 
D)  equal to marginal revenue

Question 8

Describe how government is involved in creating a monopoly. Why might the government create one? Give an example.

Accepted Answer

The government can create a monopoly by

Question 9

Table 15-1
  
-Refer to Table 15-1. What is the average revenue received from selling 4 units of the monopolist's product?

Accepted Answer

A)  17 
B)  23 
C)  26 
D)  29 
A)  17 
B)  23 
C)  26 
D)  29

Question 10

The main differences between a competitive firm and a monopoly are: (i) competitive firms do not have to worry about the price effect lowering their total revenue
(ii) marginal revenue for a competitive firm equals price, while marginal revenue for a monopoly is less than the price it is able to charge
(iii) monopolies must lower their price in order to sell more of their product, while competitive firms do not

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 11

Like monopolies, competitive firms choose to produce a quantity in which marginal revenue equals marginal cost.

Accepted Answer

A) True 
 B)False

Question 12

A profit-maximising monopolist will choose a level of output at where:

Accepted Answer

A)  marginal revenue equals the price 
B)  average revenue is equal to average total cost 
C)  marginal revenue is equal to marginal cost 
D)  average total cost is at a minimum 
A)  marginal revenue equals the price 
B)  average revenue is equal to average total cost 
C)  marginal revenue is equal to marginal cost 
D)  average total cost is at a minimum

Question 13

Calculate the deadweight loss due to profit-maximising monopoly pricing under the following conditions.
The price charged for goods produced is $10. The intersection of the marginal-revenue and marginal-cost curves occurs where output is 100 units and marginal revenue is $5. The socially efficient level of production is 110 units. The demand curve is linear and downward-sloping and the marginal-cost curve is linear and upward-sloping.

Accepted Answer

The answer of Calculate the deadweight loss due to profit-maximising...

Question 14

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,C.R. Evans may continue to be a monopolist in the subway transportation industry only if:

Accepted Answer

A)  there are no new entrants to the market 
B)  demand for transportation services decreases 
C)  population growth leads to an overcrowding of the subway cars 
D)  all of the above occur 
A)  there are no new entrants to the market 
B)  demand for transportation services decreases 
C)  population growth leads to an overcrowding of the subway cars 
D)  all of the above occur

Question 15

The inefficiency of a deadweight loss stems from the fact that:

Accepted Answer

A)  consumers buy fewer units when the monopoly firm raises its price 
B)  high monopoly prices take money from consumers' pockets and put it in the pocket of the monopoly owners 
C)  consumers who still buy the product at the high price are worse off 
D)  all of the above are true 
A)  consumers buy fewer units when the monopoly firm raises its price 
B)  high monopoly prices take money from consumers' pockets and put it in the pocket of the monopoly owners 
C)  consumers who still buy the product at the high price are worse off 
D)  all of the above are true

Question 16

A monopolist's marginal-revenue curve is less than price for which of the following reasons? (i) to sell additional units of the good, the price charged on all units must decrease
(ii) with the sale of an additional unit, the monopolist receives less revenue for each of the previous units it planned to sell
(iii) because of the downward-sloping demand curve

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 17

When a firm operates under conditions of a monopoly, its price is constrained by demand.

Accepted Answer

A) True 
 B)False

Question 18

If a monopolist faces a downward-sloping market demand curve, its:

Accepted Answer

A)  average revenue is always less than marginal revenue 
B)  marginal revenue is greater than the price of the units it sells 
C)  marginal revenue is always less than the price of the units it sells 
D)  average revenue is less than the price of its product 
A)  average revenue is always less than marginal revenue 
B)  marginal revenue is greater than the price of the units it sells 
C)  marginal revenue is always less than the price of the units it sells 
D)  average revenue is less than the price of its product

Question 19

Consider the following diagram of a monopoly.
   Assuming that the monopoly is at its profit-maximising point, identify the values of its marginal revenue, marginal cost, average revenue and price.

Accepted Answer

The profit maximising point is at point

Question 20

An industry is a natural monopoly when which of the following is(are) true? (i) a single firm will supply a good or service at a socially optimal quantity
(ii) a single firm can supply a fixed number of goods or services at a smaller cost than could two or more firms
(iii) a single firm can produce additional units at a smaller marginal cost

Accepted Answer

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

Exam 15: Monopoly

A government created monopoly arises when:

Patent and copyright laws are major sources of government created monopolies.

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 average-total-cost curve for a monopoly firm is depicted by curve:

If the firm is the only owner of a key resource then this will be a significant barrier to entry.

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. Which of the following areas represents the deadweight loss due to monopoly pricing?

Patents are employed to give drug companies temporary monopoly power in order to:

A monopolist's average revenue is always:

Describe how government is involved in creating a monopoly. Why might the government create one? Give an example.

Table 15-1 -Refer to Table 15-1. What is the average revenue received from selling 4 units of the monopolist's product?

Like monopolies, competitive firms choose to produce a quantity in which marginal revenue equals marginal cost.

A profit-maximising monopolist will choose a level of output at where:

The inefficiency of a deadweight loss stems from the fact that:

When a firm operates under conditions of a monopoly, its price is constrained by demand.

If a monopolist faces a downward-sloping market demand curve, its:

Consider the following diagram of a monopoly. Assuming that the monopoly is at its profit-maximising point, identify the values of its marginal revenue, marginal cost, average revenue and price.

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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