Question 1

Monopoly firms have

Accepted Answer

A)  downward-sloping demand curves and they can sell as much output as they desire at the market price. 
B)  downward-sloping demand curves and they can sell only a limited quantity of output at each price. 
C)  horizontal demand curves and they can sell as much output as they desire at the market price. 
D)  horizontal demand curves and they can sell only a limited quantity of output at each price. 
A)  downward-sloping demand curves and they can sell as much output as they desire at the market price. 
B)  downward-sloping demand curves and they can sell only a limited quantity of output at each price. 
C)  horizontal demand curves and they can sell as much output as they desire at the market price. 
D)  horizontal demand curves and they can sell only a limited quantity of output at each price.

Question 2

Table 15-5
  
-Refer to Table 15-5.If the monopolist faces a constant marginal cost of $2,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 3

Table 15-2
Dreher's Designer Shirt Company,a monopolist,has the following cost and revenue information.
  
-Refer to Table 15-2.What are Dreher's Designer Shirt Company's fixed costs?

Accepted Answer

A)  $0 
B)  $100 
C)  $600 
D)  $745 
A)  $0 
B)  $100 
C)  $600 
D)  $745

Question 4

Because monopoly firms do not have to compete with other firms,the outcome in a market with a monopoly is often

Accepted Answer

A)  not in the best interest of society. 
B)  one that fails to maximize total economic well-being. 
C)  inefficient. 
D)  All of the above are correct. 
A)  not in the best interest of society. 
B)  one that fails to maximize total economic well-being. 
C)  inefficient. 
D)  All of the above are correct.

Question 5

Explain how a profit-maximizing monopolist chooses its level of output and the price of its goods.

Accepted Answer

A profit-maximizing monopolist produces

Question 6

Figure 15-11  
-Refer to Figure 15-11.If the monopoly firm perfectly price discriminates,then the deadweight loss amounts to

Accepted Answer

A)  $0. 
B)  $100. 
C)  $200. 
D)  $500. 
A)  $0. 
B)  $100. 
C)  $200. 
D)  $500.

Question 7

Figure 15-7  
-Refer to Figure 15-7.What is the area of deadweight loss?

Accepted Answer

A)  the rectangle (F-
D) xA 
B)  the triangle 1/2[(F-
D) x(B-
A) ] 
C)  the triangle 1/2[(F-G)x(B-
A) ] 
D)  the rectangle (F-
D) xA plus the triangle 1/2[(F-
D) x(B-
A) ] 
A)  the rectangle (F-
D) xA 
B)  the triangle 1/2[(F-
D) x(B-
A) ] 
C)  the triangle 1/2[(F-G)x(B-
A) ] 
D)  the rectangle (F-
D) xA plus the triangle 1/2[(F-
D) x(B-
A) ]

Question 8

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 additional profit can the firm earn by charging each customer their willingness to pay relative to charging a flat price of $600 per ticket?

Accepted Answer

A)  $15,000 
B)  $25,000 
C)  $40,000 
D)  $70,000 
A)  $15,000 
B)  $25,000 
C)  $40,000 
D)  $70,000

Question 9

A natural monopoly has economies of scale for most if not all of its range of output.

Accepted Answer

A) True 
 B)False

Question 10

If a pharmaceutical company discovers a new drug and successfully patents it,patent law gives the firm

Accepted Answer

A)  partial ownership of the right to sell the drug for a limited number of years. 
B)  partial ownership of the right to sell the drug for an unlimited number of years. 
C)  sole ownership of the right to sell the drug for a limited number of years. 
D)  sole ownership of the right to sell the drug for an unlimited number of years. 
A)  partial ownership of the right to sell the drug for a limited number of years. 
B)  partial ownership of the right to sell the drug for an unlimited number of years. 
C)  sole ownership of the right to sell the drug for a limited number of years. 
D)  sole ownership of the right to sell the drug for an unlimited number of years.

Question 11

Scenario 15-3
Suppose a monopolist has a demand curve that can be expressed as P=90-Q.The monopolist's marginal revenue curve can be expressed as MR=90-2Q.The monopolist has constant marginal costs and average total costs of $10.
-Refer to Scenario 15-3.The profit-maximizing monopolist will charge a price of

Accepted Answer

A)  $50. 
B)  $40. 
C)  $20. 
D)  $10. 
A)  $50. 
B)  $40. 
C)  $20. 
D)  $10.

Question 12

Which of the following statements is correct for a monopolist?

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

With no price discrimination,the monopolist sells every unit at the same price.Therefore

Accepted Answer

A)  marginal revenue is equal to price. 
B)  marginal revenue is equal to average revenue. 
C)  price is greater than marginal revenue. 
D)  Both a and b are correct. 
A)  marginal revenue is equal to price. 
B)  marginal revenue is equal to average revenue. 
C)  price is greater than marginal revenue. 
D)  Both a and b are correct.

Question 14

Figure 15-4  
-Refer to Figure 15-4.A profit-maximizing monopoly's total revenue is equal to

Accepted Answer

A)  P4 x Q2. 
B)  P3 x Q4. 
C)  (P4-P2) x Q2. 
D)  (P4-P3)x Q2. 
A)  P4 x Q2. 
B)  P3 x Q4. 
C)  (P4-P2) x Q2. 
D)  (P4-P3)x Q2.

Question 15

The De Beers Diamond company advertises heavily to promote the sale of all diamonds,not just its own.This is evidence that it has a monopoly position to some degree.

Accepted Answer

A) True 
 B)False

Question 16

The profit-maximization problem for a monopolist differs from that of a competitive firm in which of the following ways?

Accepted Answer

A)  A competitive firm maximizes profit at the point where marginal revenue equals marginal cost;a monopolist maximizes profit at the point where marginal revenue exceeds marginal cost. 
B)  A competitive firm maximizes profit at the point where average revenue equals marginal cost;a monopolist maximizes profit at the point where average revenue exceeds marginal cost. 
C)  For a competitive firm,marginal revenue at the profit-maximizing level of output is equal to marginal revenue at all other levels of output;for a monopolist,marginal revenue at the profit-maximizing level of output is smaller than it is for larger levels of output. 
D)  For a profit-maximizing competitive firm,thinking at the margin is much more important than it is for a profit-maximizing monopolist. 
A)  A competitive firm maximizes profit at the point where marginal revenue equals marginal cost;a monopolist maximizes profit at the point where marginal revenue exceeds marginal cost. 
B)  A competitive firm maximizes profit at the point where average revenue equals marginal cost;a monopolist maximizes profit at the point where average revenue exceeds marginal cost. 
C)  For a competitive firm,marginal revenue at the profit-maximizing level of output is equal to marginal revenue at all other levels of output;for a monopolist,marginal revenue at the profit-maximizing level of output is smaller than it is for larger levels of output. 
D)  For a profit-maximizing competitive firm,thinking at the margin is much more important than it is for a profit-maximizing monopolist.

Question 17

After the patent runs out on a brand name drug,generic drugs enter the market.What happens next in the market?

Accepted Answer

A)  Price increases,and total surplus decreases. 
B)  Price decreases,and total surplus decreases. 
C)  Price decreases,and total surplus increases. 
D)  Price increases,and total surplus increases. 
A)  Price increases,and total surplus decreases. 
B)  Price decreases,and total surplus decreases. 
C)  Price decreases,and total surplus increases. 
D)  Price increases,and total surplus increases.

Question 18

Young Johnny inherited the only local cable TV company in town after his father passed away.The company is completely unregulated by the government and is therefore free to operate as it wishes.Assume that Johnny understands the true power of his new monopoly.Which of the following statements is (are)correct?

Accepted Answer

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

Question 19

Figure 15-3  
-Refer to Figure 15-3.What price will the monopolist charge?

Accepted Answer

A)  A 
B)  B 
C)  C 
D)  F 
A)  A 
B)  B 
C)  C 
D)  F

Question 20

The process of buying a good in one market at a low price and selling the good in another market for a higher price in order to profit from the price difference is known as

Accepted Answer

A)  sabotage. 
B)  conspiracy. 
C)  arbitrage. 
D)  collusion. 
A)  sabotage. 
B)  conspiracy. 
C)  arbitrage. 
D)  collusion.

Exam 15: Monopoly

Monopoly firms have

Table 15-5 -Refer to Table 15-5.If the monopolist faces a constant marginal cost of $2,how much output should the firm produce?

Table 15-2 Dreher's Designer Shirt Company,a monopolist,has the following cost and revenue information. -Refer to Table 15-2.What are Dreher's Designer Shirt Company's fixed costs?

Because monopoly firms do not have to compete with other firms,the outcome in a market with a monopoly is often

Explain how a profit-maximizing monopolist chooses its level of output and the price of its goods.

Figure 15-11 -Refer to Figure 15-11.If the monopoly firm perfectly price discriminates,then the deadweight loss amounts to

Figure 15-7 -Refer to Figure 15-7.What is the area of deadweight loss?

A natural monopoly has economies of scale for most if not all of its range of output.

If a pharmaceutical company discovers a new drug and successfully patents it,patent law gives the firm

Which of the following statements is correct for a monopolist?

With no price discrimination,the monopolist sells every unit at the same price.Therefore

Figure 15-4 -Refer to Figure 15-4.A profit-maximizing monopoly's total revenue is equal to

The De Beers Diamond company advertises heavily to promote the sale of all diamonds,not just its own.This is evidence that it has a monopoly position to some degree.

The profit-maximization problem for a monopolist differs from that of a competitive firm in which of the following ways?

After the patent runs out on a brand name drug,generic drugs enter the market.What happens next in the market?

Figure 15-3 -Refer to Figure 15-3.What price will the monopolist charge?

The process of buying a good in one market at a low price and selling the good in another market for a higher price in order to profit from the price difference is known as

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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