Question 1

Which of the following statements comparing monopoly with competition is correct?

Accepted Answer

A)  A monopolist produces a higher level of output and charges a lower price than a competitive firm would. 
B)  With perfect price discrimination,the total surplus under monopoly can be the same as under competition. 
C)  With or without price discrimination,the consumer surplus under monopoly is at least as large as it would be under competition. 
D)  The deadweight loss associated with monopoly is caused by the positive economic profits of the monopolist;competitive firms do not earn a positive economic profit so there is no deadweight loss under competition. 
A)  A monopolist produces a higher level of output and charges a lower price than a competitive firm would. 
B)  With perfect price discrimination,the total surplus under monopoly can be the same as under competition. 
C)  With or without price discrimination,the consumer surplus under monopoly is at least as large as it would be under competition. 
D)  The deadweight loss associated with monopoly is caused by the positive economic profits of the monopolist;competitive firms do not earn a positive economic profit so there is no deadweight loss under competition.

Question 2

Authors are allowed to be monopolists in the sale of their books in order to

Accepted Answer

A)  encourage authors to write more and better books. 
B)  correct for the negative externalities that the Internet and television impose. 
C)  satisfy literary advocacy groups that exercise their lobbying power. 
D)  promote a society in which people think for themselves and learn from whichever books they please. 
A)  encourage authors to write more and better books. 
B)  correct for the negative externalities that the Internet and television impose. 
C)  satisfy literary advocacy groups that exercise their lobbying power. 
D)  promote a society in which people think for themselves and learn from whichever books they please.

Question 3

A profit-maximizing monopolist charges a price of $14.The intersection of the marginal revenue curve and the marginal cost curve occurs where output is 15 units and marginal cost is $7.What is the monopolist's profit?

Accepted Answer

A)  $90 
B)  $105 
C)  $180 
D)  Not enough information is given to determine the answer. 
A)  $90 
B)  $105 
C)  $180 
D)  Not enough information is given to determine the answer.

Question 4

When a monopolist increases the amount of output that it produces and sells,average revenue

Accepted Answer

A)  increases,and marginal revenue increases. 
B)  increases,and marginal revenue decreases. 
C)  decreases,and marginal revenue increases. 
D)  decreases,and marginal revenue decreases. 
A)  increases,and marginal revenue increases. 
B)  increases,and marginal revenue decreases. 
C)  decreases,and marginal revenue increases. 
D)  decreases,and marginal revenue decreases.

Question 5

Table 15-5
  
-Refer to Table 15-5.If the monopolist faces a constant marginal cost of $3,how much output should the firm produce?

Accepted Answer

A)  3 units 
B)  4 units 
C)  5 units 
D)  6 units 
A)  3 units 
B)  4 units 
C)  5 units 
D)  6 units

Question 6

Splitting up a monopoly is often justified on the grounds that

Accepted Answer

A)  consumers prefer dealing with small firms. 
B)  small firms have lower costs. 
C)  competition is inherently efficient. 
D)  nationalization is a less-preferred option. 
A)  consumers prefer dealing with small firms. 
B)  small firms have lower costs. 
C)  competition is inherently efficient. 
D)  nationalization is a less-preferred option.

Question 7

One solution to the problems of marginal-cost pricing of a regulated natural monopolist is average cost pricing.In this model,the monopolist is allowed to price its production at average total cost.How does average-cost pricing differ from marginal-cost pricing? Does this solution maximize social well-being?

Accepted Answer

Under average-cost pricing,the monopolis

Question 8

During the holiday season,high-end retailers frequently place a high price on merchandise on weekends and discount the price during the week.They do this because they believe that two groups of customers exist: shoppers with little free time and bargain hunters.Bargain hunters have time to shop around and frequently shop during the week.What do economists call this price strategy used by high-end retailers?

Accepted Answer

A)  oligopoly 
B)  price discrimination 
C)  compensating differential 
D)  in-kind transfers 
A)  oligopoly 
B)  price discrimination 
C)  compensating differential 
D)  in-kind transfers

Question 9

What are the four ways that government policymakers can respond to the problem of monopoly?

Accepted Answer

First,the government can try to make mon

Question 10

Because a monopolist is the sole producer in its market,it can necessarily alter the price of its good

Accepted Answer

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

Question 11

The following table shows quantity,price,and marginal cost information for a monopoly.What price should the firm charge to maximize its profit?

Accepted Answer

A)  $4 
B)  $5 
C)  $6 
D)  $7 
A)  $4 
B)  $5 
C)  $6 
D)  $7

Question 12

Figure 15-10  
-Refer to Figure 15-10.Which area represents the deadweight loss from monopoly?

Accepted Answer

A)  J 
B)  H 
C)  A+B+C+D+F+I+J+H 
D)  J+H 
A)  J 
B)  H 
C)  A+B+C+D+F+I+J+H 
D)  J+H

Question 13

In order for antitrust laws to raise social welfare,the government must

Accepted Answer

A)  disallow synergy benefits from accruing to monopolists. 
B)  disallow any mergers from taking place. 
C)  be able to determine which mergers are desirable and which are not. 
D)  always attempt to keep markets in their most competitive form. 
A)  disallow synergy benefits from accruing to monopolists. 
B)  disallow any mergers from taking place. 
C)  be able to determine which mergers are desirable and which are not. 
D)  always attempt to keep markets in their most competitive form.

Question 14

The monopolist's profit-maximizing quantity of output is determined by the intersection of which of the following two curves?

Accepted Answer

A)  marginal cost and demand 
B)  marginal cost and marginal revenue 
C)  average total cost and marginal revenue 
D)  average variable cost and average revenue 
A)  marginal cost and demand 
B)  marginal cost and marginal revenue 
C)  average total cost and marginal revenue 
D)  average variable cost and average revenue

Question 15

Table 15-5
  
-Refer to Table 15-5.If the monopolist faces a constant marginal cost of $1,how much output should the firm produce?

Accepted Answer

A)  3 units 
B)  4 units 
C)  5 units 
D)  6 units 
A)  3 units 
B)  4 units 
C)  5 units 
D)  6 units

Question 16

If the distribution of water is a natural monopoly,then

Accepted Answer

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

Question 17

Suppose a profit-maximizing monopolist faces a constant marginal cost of $10,produces an output level of 100 units,and charges a price of $50.The socially efficient level of output is 200 units.Assume that the demand curve and marginal revenue curve are the typical downward-sloping straight lines.The monopoly deadweight loss equals $4,000.

Accepted Answer

A) True 
 B)False

Question 18

Figure 15-9  
-Refer to Figure 15-9.What area measures the deadweight loss?

Accepted Answer

A)  (B-F)*K 
B)  0.5[(P-O)*(L-O)] 
C)  0.5[(A-H)*(L-J)] 
D)  0.5[(B-F)*(L-K)] 
A)  (B-F)*K 
B)  0.5[(P-O)*(L-O)] 
C)  0.5[(A-H)*(L-J)] 
D)  0.5[(B-F)*(L-K)]

Question 19

University financial aid can be viewed as a type of price discrimination.

Accepted Answer

A) True 
 B)False

Question 20

Price discrimination is a rational strategy for a profit-maximizing monopolist when

Accepted Answer

A)  the monopolist finds itself able to produce only limited quantities of output. 
B)  consumers are unable to be segmented into identifiable markets. 
C)  the monopolist wishes to increase the deadweight loss that results from profit-maximizing behavior. 
D)  there is no opportunity for arbitrage across market segments. 
A)  the monopolist finds itself able to produce only limited quantities of output. 
B)  consumers are unable to be segmented into identifiable markets. 
C)  the monopolist wishes to increase the deadweight loss that results from profit-maximizing behavior. 
D)  there is no opportunity for arbitrage across market segments.

Exam 15: Monopoly

Which of the following statements comparing monopoly with competition is correct?

Authors are allowed to be monopolists in the sale of their books in order to

A profit-maximizing monopolist charges a price of $14.The intersection of the marginal revenue curve and the marginal cost curve occurs where output is 15 units and marginal cost is $7.What is the monopolist's profit?

When a monopolist increases the amount of output that it produces and sells,average revenue

Table 15-5 -Refer to Table 15-5.If the monopolist faces a constant marginal cost of $3,how much output should the firm produce?

Splitting up a monopoly is often justified on the grounds that

What are the four ways that government policymakers can respond to the problem of monopoly?

Because a monopolist is the sole producer in its market,it can necessarily alter the price of its good

The following table shows quantity,price,and marginal cost information for a monopoly.What price should the firm charge to maximize its profit?

Figure 15-10 -Refer to Figure 15-10.Which area represents the deadweight loss from monopoly?

In order for antitrust laws to raise social welfare,the government must

The monopolist's profit-maximizing quantity of output is determined by the intersection of which of the following two curves?

Table 15-5 -Refer to Table 15-5.If the monopolist faces a constant marginal cost of $1,how much output should the firm produce?

If the distribution of water is a natural monopoly,then

Figure 15-9 -Refer to Figure 15-9.What area measures the deadweight loss?

University financial aid can be viewed as a type of price discrimination.

Price discrimination is a rational strategy for a profit-maximizing monopolist when

Ten Principles of 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

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality 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 Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

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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