Question 1

For a monopoly firm,which of the following equalities is always true?

Accepted Answer

A)  price = marginal revenue 
B)  price = average revenue 
C)  price = total revenue 
D)  marginal revenue = marginal cost 
A)  price = marginal revenue 
B)  price = average revenue 
C)  price = total revenue 
D)  marginal revenue = marginal cost

Question 2

The assessment by George Stigler concerning the tradeoffs between "market failure" and "political failure" in the American economy provides support for which of the following solutions to the problems of monopolies?

Accepted Answer

A)  public ownership of monopolies 
B)  government regulation of monopolies 
C)  government incentives to promote competition in monopolized industries 
D)  doing nothing at all 
A)  public ownership of monopolies 
B)  government regulation of monopolies 
C)  government incentives to promote competition in monopolized industries 
D)  doing nothing at all

Question 3

Which of the following statements is correct?

Accepted Answer

A)  Two examples of early antitrust laws are the Clinton and Stigler Antitrust Acts. 
B)  Antitrust laws automatically prevent mergers between companies that produce similar products. 
C)  Antitrust laws reduce the government's power to regulate private companies. 
D)  Antitrust laws can reduce social welfare if they prevent mergers that would lower costs through more efficient joint production. 
A)  Two examples of early antitrust laws are the Clinton and Stigler Antitrust Acts. 
B)  Antitrust laws automatically prevent mergers between companies that produce similar products. 
C)  Antitrust laws reduce the government's power to regulate private companies. 
D)  Antitrust laws can reduce social welfare if they prevent mergers that would lower costs through more efficient joint production.

Question 4

Scenario 15-4
Black Box Cable TV is able to purchase an exclusive right to sell a premium movie channel (PMC)in its market area.Let's assume that Black Box Cable pays $150,000 a year for the exclusive marketing rights to PMC.Since Black Box has already installed cable to all of the homes in its market area,the marginal cost of delivering PMC to subscribers is zero.The manager of Black Box needs to know what price to charge for the PMC service to maximize her profit.Before setting price,she hires an economist to estimate demand for the PMC service.The economist discovers that there are two types of subscribers who value premium movie channels.First are the 4,000 die-hard TV viewers who will pay as much as $150 a year for the new PMC premium channel.Second,the PMC channel will appeal to about 20,000 occasional TV viewers who will pay as much as $20 a year for a subscription to PMC.
-Refer to Scenario 15-4.If Black Box Cable TV is able to price discriminate,what would be the maximum amount of profit it could generate?

Accepted Answer

A)  $500,000 
B)  $600,000 
C)  $850,000 
D)  $925,000 
A)  $500,000 
B)  $600,000 
C)  $850,000 
D)  $925,000

Question 5

Scenario 15-2
A monopoly firm maximizes its profit by producing Q = 500 units of output.At that level of output,its marginal revenue is $30,its average revenue is $60,and its average total cost is $34.
-Refer to Scenario 15-2.At Q = 500,the firm's marginal cost is

Accepted Answer

A)  less than $30. 
B)  $30. 
C)  $34. 
D)  greater than $34. 
A)  less than $30. 
B)  $30. 
C)  $34. 
D)  greater than $34.

Question 6

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 $2,000.

Accepted Answer

A) True 
 B)False

Question 7

Which of the following statements is correct?

Accepted Answer

A)  If the monopolist's marginal revenue is greater than its marginal cost,the monopolist can increase profit by selling more units at a lower price per unit. 
B)  If the monopolist's marginal revenue is greater than its marginal cost,the monopolist can increase profit by selling fewer units at a higher price per unit. 
C)  When a monopolist produces where price equals the minimum of average total cost,it earns a positive economic profit. 
D)  If the monopolist is earning a positive economic profit,it must be producing where MR = MC. 
A)  If the monopolist's marginal revenue is greater than its marginal cost,the monopolist can increase profit by selling more units at a lower price per unit. 
B)  If the monopolist's marginal revenue is greater than its marginal cost,the monopolist can increase profit by selling fewer units at a higher price per unit. 
C)  When a monopolist produces where price equals the minimum of average total cost,it earns a positive economic profit. 
D)  If the monopolist is earning a positive economic profit,it must be producing where MR = MC.

Question 8

A fundamental source of monopoly market power arises from

Accepted Answer

A)  perfectly elastic demand. 
B)  perfectly inelastic demand. 
C)  barriers to entry. 
D)  availability of "free" natural resources,such as water or air. 
A)  perfectly elastic demand. 
B)  perfectly inelastic demand. 
C)  barriers to entry. 
D)  availability of "free" natural resources,such as water or air.

Question 9

A monopoly market

Accepted Answer

A)  always maximizes total economic well-being. 
B)  always minimizes consumer surplus. 
C)  generally fails to maximize total economic well-being. 
D)  generally fails to maximize producer surplus. 
A)  always maximizes total economic well-being. 
B)  always minimizes consumer surplus. 
C)  generally fails to maximize total economic well-being. 
D)  generally fails to maximize producer surplus.

Question 10

Figure 15-8  
-Refer to Figure 15-8.To maximize total surplus,a benevolent social planner would choose which of the following outcomes?

Accepted Answer

A)  100 units of output and a price of $10 per unit 
B)  150 units of output and a price of $10 per unit 
C)  150 units of output and a price of $15 per unit 
D)  200 units of output and a price of $10 per unit 
A)  100 units of output and a price of $10 per unit 
B)  150 units of output and a price of $10 per unit 
C)  150 units of output and a price of $15 per unit 
D)  200 units of output and a price of $10 per unit

Question 11

Most firms have

Accepted Answer

A)  no monopoly pricing power. 
B)  some monopoly pricing power. 
C)  absolute monopoly pricing power. 
D)  the ability to earn monopoly profits. 
A)  no monopoly pricing power. 
B)  some monopoly pricing power. 
C)  absolute monopoly pricing power. 
D)  the ability to earn monopoly profits.

Question 12

Suppose a firm has a monopoly on the sale of widgets and faces a downward-sloping demand curve.When selling the 100th widget,the firm will always receive

Accepted Answer

A)  less marginal revenue on the 100th widget than it received on the 99th widget. 
B)  more average revenue on the 100th widget than it received on the 99th widget. 
C)  more total revenue on the 100 widgets than it received on the first 99 widgets. 
D)  a lower average cost per unit at 100 units output than at 99 units of output. 
A)  less marginal revenue on the 100th widget than it received on the 99th widget. 
B)  more average revenue on the 100th widget than it received on the 99th widget. 
C)  more total revenue on the 100 widgets than it received on the first 99 widgets. 
D)  a lower average cost per unit at 100 units output than at 99 units of output.

Question 13

A natural monopoly arises when

Accepted Answer

A)  there are constant returns to scale over the relevant range of output. 
B)  there are economies of scale over the relevant range of output. 
C)  one firm owns a key natural resource. 
D)  the government gives a single firm the exclusive right to produce a particular good or service. 
A)  there are constant returns to scale over the relevant range of output. 
B)  there are economies of scale over the relevant range of output. 
C)  one firm owns a key natural resource. 
D)  the government gives a single firm the exclusive right to produce a particular good or service.

Question 14

A monopoly's marginal cost will

Accepted Answer

A)  be less than its average fixed cost. 
B)  be less than the price per unit of its product. 
C)  exceed its marginal revenue. 
D)  equal its average total cost. 
A)  be less than its average fixed cost. 
B)  be less than the price per unit of its product. 
C)  exceed its marginal revenue. 
D)  equal its average total cost.

Question 15

Antitrust laws allow the government to

Accepted Answer

A)  collect revenues through the antitrust tax. 
B)  break up companies. 
C)  purchase privately-held companies through eminent domain. 
D)  All of the above are correct. 
A)  collect revenues through the antitrust tax. 
B)  break up companies. 
C)  purchase privately-held companies through eminent domain. 
D)  All of the above are correct.

Question 16

What is the shape of the monopolist's marginal revenue curve?

Accepted Answer

A)  a downward-sloping line that is identical to the demand curve 
B)  a downward-sloping line that lies below the demand curve 
C)  a horizontal line that is identical to the demand curve 
D)  a horizontal line that lies below the demand curve 
A)  a downward-sloping line that is identical to the demand curve 
B)  a downward-sloping line that lies below the demand curve 
C)  a horizontal line that is identical to the demand curve 
D)  a horizontal line that lies below the demand curve

Question 17

Table 15-2
Dreher's Designer Shirt Company,a monopolist,has the following cost and revenue information.
  
-Refer to Table 15-2.What is the total revenue from selling 8 shirts?

Accepted Answer

A)  $90 
B)  $695 
C)  $720 
D)  $800 
A)  $90 
B)  $695 
C)  $720 
D)  $800

Question 18

Which of the following statements is correct?

Accepted Answer

A)  Public ownership is preferred to regulation in order to minimize the deadweight losses associated with natural monopolies. 
B)  Antitrust laws are always the best way to limit monopoly power. 
C)  It is possible that the best approach to monopolies is for the government to do nothing. 
D)  Marginal-cost pricing requires a natural monopoly to earn zero economic profits. 
A)  Public ownership is preferred to regulation in order to minimize the deadweight losses associated with natural monopolies. 
B)  Antitrust laws are always the best way to limit monopoly power. 
C)  It is possible that the best approach to monopolies is for the government to do nothing. 
D)  Marginal-cost pricing requires a natural monopoly to earn zero economic profits.

Question 19

Marginal revenue for a monopolist is computed as

Accepted Answer

A)  average revenue divided by quantity sold. 
B)  average revenue times quantity divided by price. 
C)  total revenue divided by quantity sold. 
D)  change in total revenue per one unit increase in quantity sold. 
A)  average revenue divided by quantity sold. 
B)  average revenue times quantity divided by price. 
C)  total revenue divided by quantity sold. 
D)  change in total revenue per one unit increase in quantity sold.

Question 20

A common solution to monopoly in European countries is public ownership.

Accepted Answer

A) True 
 B)False

Exam 15: Monopoly

For a monopoly firm,which of the following equalities is always true?

The assessment by George Stigler concerning the tradeoffs between "market failure" and "political failure" in the American economy provides support for which of the following solutions to the problems of monopolies?

Which of the following statements is correct?

Scenario 15-2 A monopoly firm maximizes its profit by producing Q = 500 units of output.At that level of output,its marginal revenue is $30,its average revenue is $60,and its average total cost is $34. -Refer to Scenario 15-2.At Q = 500,the firm's marginal cost is

Which of the following statements is correct?

A fundamental source of monopoly market power arises from

A monopoly market

Figure 15-8 -Refer to Figure 15-8.To maximize total surplus,a benevolent social planner would choose which of the following outcomes?

Most firms have

Suppose a firm has a monopoly on the sale of widgets and faces a downward-sloping demand curve.When selling the 100th widget,the firm will always receive

A natural monopoly arises when

A monopoly's marginal cost will

Antitrust laws allow the government to

What is the shape of the monopolist's marginal revenue curve?

Table 15-2 Dreher's Designer Shirt Company,a monopolist,has the following cost and revenue information. -Refer to Table 15-2.What is the total revenue from selling 8 shirts?

Which of the following statements is correct?

Marginal revenue for a monopolist is computed as

A common solution to monopoly in European countries is public ownership.

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

Filters

Suppose a firm has a monopoly on the sale of widgets and faces a downward-sloping demand curve.When selling the 100^th widget,the firm will always receive