Question 1

When the government creates a monopoly,the social loss may include

Accepted Answer

A)  declining marginal costs. 
B)  the cost of lawyers and lobbyists hired to convince lawmakers to continue the monopoly. 
C)  excessive monopoly profits. 
D)  diminishing marginal revenue. 
A)  declining marginal costs. 
B)  the cost of lawyers and lobbyists hired to convince lawmakers to continue the monopoly. 
C)  excessive monopoly profits. 
D)  diminishing marginal revenue.

Question 2

What do economists call the business practice of selling the same good at difference prices to different customers?

Accepted Answer

A)  price discrimination 
B)  collusion 
C)  compensating differential 
D)  Both a and b are correct 
A)  price discrimination 
B)  collusion 
C)  compensating differential 
D)  Both a and b are correct

Question 3

Table 15-6
Dreher's Designer Shirt Company,a monopolist,has the following cost and revenue information.Assume that Dreher's is able to engage in perfect price discrimination.
  
-Refer to Table 15-6.If the monopolist can engage in perfect price discrimination,what is total profit at the profit-maximizing quantity?

Accepted Answer

A)  $325 
B)  $435 
C)  $565 
D)  $1000 
A)  $325 
B)  $435 
C)  $565 
D)  $1000

Question 4

When a monopolist is able to sell its product at different prices,it is engaging in

Accepted Answer

A)  distribution pricing. 
B)  quality-adjusted pricing. 
C)  price differentiation. 
D)  price discrimination. 
A)  distribution pricing. 
B)  quality-adjusted pricing. 
C)  price differentiation. 
D)  price discrimination.

Question 5

Figure 15-6  
-Refer to Figure 15-6.A benevolent social planner would have the monopoly operate at an output level

Accepted Answer

A)  less than Q0. 
B)  greater than Q0. 
C)  equal to Q0. 
D)  equal to zero. 
A)  less than Q0. 
B)  greater than Q0. 
C)  equal to Q0. 
D)  equal to zero.

Question 6

To maximize total surplus with a monopoly firm,a benevolent social planner would

Accepted Answer

A)  choose the level of output where MR = MC. 
B)  choose the level of output where MR intersects the demand curve. 
C)  choose the level of output where MC intersects the demand curve. 
D)  allow the free market system to determine the level of output. 
A)  choose the level of output where MR = MC. 
B)  choose the level of output where MR intersects the demand curve. 
C)  choose the level of output where MC intersects the demand curve. 
D)  allow the free market system to determine the level of output.

Question 7

One problem with government operation of monopolies is that

Accepted Answer

A)  a benevolent government is likely to be interested in generating profits for political gain. 
B)  monopolies typically have rising average costs. 
C)  the government typically has little incentive to reduce costs. 
D)  a government-regulated outcome will increase the profitability of the monopoly. 
A)  a benevolent government is likely to be interested in generating profits for political gain. 
B)  monopolies typically have rising average costs. 
C)  the government typically has little incentive to reduce costs. 
D)  a government-regulated outcome will increase the profitability of the monopoly.

Question 8

Perfect price discrimination

Accepted Answer

A)  increases profits to the firm. 
B)  increases total surplus. 
C)  decreases consumer surplus. 
D)  All of the above are correct. 
A)  increases profits to the firm. 
B)  increases total surplus. 
C)  decreases consumer surplus. 
D)  All of the above are correct.

Question 9

When an industry is a natural monopoly,

Accepted Answer

A)  it is characterized by constant returns to scale. 
B)  it is characterized by diseconomies of scale. 
C)  a larger number of firms may lead to a lower average cost. 
D)  a larger number of firms will lead to a higher average cost. 
A)  it is characterized by constant returns to scale. 
B)  it is characterized by diseconomies of scale. 
C)  a larger number of firms may lead to a lower average cost. 
D)  a larger number of firms will lead to a higher average cost.

Question 10

The supply curve for the monopolist

Accepted Answer

A)  is horizontal. 
B)  is vertical. 
C)  is upward sloping. 
D)  does not exist. 
A)  is horizontal. 
B)  is vertical. 
C)  is upward sloping. 
D)  does not exist.

Question 11

Price discrimination

Accepted Answer

A)  forces monopolies to charge a lower price as a result of government regulation. 
B)  is an attempt by a monopoly to prevent some customers from purchasing its product by charging a high price. 
C)  is an attempt by a monopoly to increases its profit by selling the same good to different customers at different prices. 
D)  increases the consumer surplus associated with a monopolistic market. 
A)  forces monopolies to charge a lower price as a result of government regulation. 
B)  is an attempt by a monopoly to prevent some customers from purchasing its product by charging a high price. 
C)  is an attempt by a monopoly to increases its profit by selling the same good to different customers at different prices. 
D)  increases the consumer surplus associated with a monopolistic market.

Question 12

Which of the following statements is correct for both a monopolist and a perfectly competitive firm?

Accepted Answer

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

Question 13

Declining average total cost with increased production is one of the defining characteristics of a natural monopoly.

Accepted Answer

A) True 
 B)False

Question 14

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 15

Table 15-5
  
-Refer to Table 15-5.If the monopolist faces a constant marginal cost of $4,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

The following table provides information on the price,quantity,and average cost for a monopoly.At what price will the firm maximize its profit?

Accepted Answer

A)  $1 
B)  $2 
C)  $3 
D)  $4 
A)  $1 
B)  $2 
C)  $3 
D)  $4

Question 17

Scenario 15-6
An airline knows that there are two types of travelers: business travelers and vacationers.For a particular flight,there are 100 business travelers who will pay $600 for a ticket while there are 50 vacationers who will pay $300 for a ticket.There are 150 seats available on the plane.Suppose the cost to the airline of providing the flight is $20,000,which includes the cost of the pilots,flight attendants,fuel,etc.
-Refer to Scenario 15-6.How much profit will the airline earn if it engages in price discrimination?

Accepted Answer

A)  -$5,000 
B)  $40,000 
C)  $55,000 
D)  $75,000 
A)  -$5,000 
B)  $40,000 
C)  $55,000 
D)  $75,000

Question 18

Figure 15-5  
-Refer to Figure 15-5.At the profit-maximizing level of output,

Accepted Answer

A)  marginal revenue is equal to P3. 
B)  marginal cost is equal to P3. 
C)  average revenue is equal to P4. 
D)  average total cost is equal to P0. 
A)  marginal revenue is equal to P3. 
B)  marginal cost is equal to P3. 
C)  average revenue is equal to P4. 
D)  average total cost is equal to P0.

Question 19

Which of the following is the preferred strategy for the government to follow to remedy the inefficient allocation of resources associated with monopolies?

Accepted Answer

A)  preventing mergers through antitrust laws 
B)  regulating the prices that monopolies can charge 
C)  do nothing 
D)  None of the above strategies is preferred.Each is a viable strategy. 
A)  preventing mergers through antitrust laws 
B)  regulating the prices that monopolies can charge 
C)  do nothing 
D)  None of the above strategies is preferred.Each is a viable strategy.

Question 20

A monopolist maximizes profit by producing an output level where marginal cost equals price.

Accepted Answer

A) True 
 B)False

Exam 15: Monopoly

When the government creates a monopoly,the social loss may include

What do economists call the business practice of selling the same good at difference prices to different customers?

When a monopolist is able to sell its product at different prices,it is engaging in

Figure 15-6 -Refer to Figure 15-6.A benevolent social planner would have the monopoly operate at an output level

To maximize total surplus with a monopoly firm,a benevolent social planner would

One problem with government operation of monopolies is that

Perfect price discrimination

When an industry is a natural monopoly,

The supply curve for the monopolist

Price discrimination

Which of the following statements is correct for both a monopolist and a perfectly competitive firm?

Declining average total cost with increased production is one of the defining characteristics of a natural monopoly.

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

Table 15-5 -Refer to Table 15-5.If the monopolist faces a constant marginal cost of $4,how much output should the firm produce?

The following table provides information on the price,quantity,and average cost for a monopoly.At what price will the firm maximize its profit?

Figure 15-5 -Refer to Figure 15-5.At the profit-maximizing level of output,

Which of the following is the preferred strategy for the government to follow to remedy the inefficient allocation of resources associated with monopolies?

A monopolist maximizes profit by producing an output level where marginal cost equals price.

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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