Question 1

A firm that is a natural monopoly

Accepted Answer

A)  is not likely to be concerned about new entrants eroding its monopoly power. 
B)  is taking advantage of economies of scale. 
C)  would experience a higher average total cost if more firms entered the market. 
D)  All of the above are correct. 
A)  is not likely to be concerned about new entrants eroding its monopoly power. 
B)  is taking advantage of economies of scale. 
C)  would experience a higher average total cost if more firms entered the market. 
D)  All of the above are correct.

Question 2

A government-created monopoly arises when

Accepted Answer

A)  government spending in a certain industry gives rise to monopoly power. 
B)  the government exercises its market control by encouraging competition among sellers. 
C)  the government gives a firm the exclusive right to sell some good or service. 
D)  Both a and c are correct. 
A)  government spending in a certain industry gives rise to monopoly power. 
B)  the government exercises its market control by encouraging competition among sellers. 
C)  the government gives a firm the exclusive right to sell some good or service. 
D)  Both a and c are correct.

Question 3

Angelo is a wholesale meatball distributor.He sells his meatballs to all the finest Italian restaurants in town.Nobody can make meatballs like Angelo.As a result,his is the only business in town that sells meatballs to restaurants.Assuming that Angelo is maximizing his profit,which of the following statements is true?

Accepted Answer

A)  Meatball prices will be less than marginal cost. 
B)  Meatball prices will equal marginal cost. 
C)  Meatball prices will exceed marginal cost. 
D)  Costs are irrelevant to Angelo because he is a monopolist. 
A)  Meatball prices will be less than marginal cost. 
B)  Meatball prices will equal marginal cost. 
C)  Meatball prices will exceed marginal cost. 
D)  Costs are irrelevant to Angelo because he is a monopolist.

Question 4

For a monopoly market,total surplus can be defined as the value of the good to

Accepted Answer

A)  producers minus the cost incurred by consumers. 
B)  producers plus the cost incurred by consumers. 
C)  consumers minus the costs of producing the good. 
D)  consumers plus the cost of producing the good. 
A)  producers minus the cost incurred by consumers. 
B)  producers plus the cost incurred by consumers. 
C)  consumers minus the costs of producing the good. 
D)  consumers plus the cost of producing the good.

Question 5

A monopolist earns higher profits by charging one price than by practicing price discrimination.

Accepted Answer

A) True 
 B)False

Question 6

Table 15-4
Consider the following demand and cost information for a monopoly.
  
-Refer to Table 15-4.The maximum profit this monopolist can earn is

Accepted Answer

A)  $5. 
B)  $15. 
C)  $16. 
D)  $28. 
A)  $5. 
B)  $15. 
C)  $16. 
D)  $28.

Question 7

For a monopolist,when the output effect is greater than the price effect,marginal revenue is

Accepted Answer

A)  positive. 
B)  negative. 
C)  zero. 
D)  maximized. 
A)  positive. 
B)  negative. 
C)  zero. 
D)  maximized.

Question 8

In reality,perfect price discrimination is

Accepted Answer

A)  used by about 75 percent of all monopolies. 
B)  used by about 50 percent of all monopolies. 
C)  seldom used by monopolies because it leads to lower profits. 
D)  rarely possible. 
A)  used by about 75 percent of all monopolies. 
B)  used by about 50 percent of all monopolies. 
C)  seldom used by monopolies because it leads to lower profits. 
D)  rarely possible.

Question 9

Most markets are not monopolies in the real world because

Accepted Answer

A)  firms usually face downward-sloping demand curves. 
B)  supply curves slope upward. 
C)  price is usually set equal to marginal cost by firms. 
D)  there are reasonable substitutes for most goods. 
A)  firms usually face downward-sloping demand curves. 
B)  supply curves slope upward. 
C)  price is usually set equal to marginal cost by firms. 
D)  there are reasonable substitutes for most goods.

Question 10

Patent and copyright laws encourage

Accepted Answer

A)  creative activity. 
B)  lower prices due to decreasing average total costs. 
C)  competition among firms. 
D)  Both a and b are correct. 
A)  creative activity. 
B)  lower prices due to decreasing average total costs. 
C)  competition among firms. 
D)  Both a and b are correct.

Question 11

A monopolist faces the following demand curve:
 
The monopolist has total fixed costs of $40 and a constant marginal cost of $5.What is the profit-maximizing level of output?

Accepted Answer

A)  7 units 
B)  16 units 
C)  23 units 
D)  31 units 
A)  7 units 
B)  16 units 
C)  23 units 
D)  31 units

Question 12

If the ABC company owns the exclusive rights to mine land in Afghanistan for Lapis Lazuli,a rare stone used in jewelry which is found only in Afghanistan,the company benefits from a barrier to entry.

Accepted Answer

A) True 
 B)False

Question 13

A benefit of a monopoly is

Accepted Answer

A)  lower prices. 
B)  a wide variety of similar products. 
C)  decreasing long-run average total costs. 
D)  greater creativity by authors who can copyright their novels. 
A)  lower prices. 
B)  a wide variety of similar products. 
C)  decreasing long-run average total costs. 
D)  greater creativity by authors who can copyright their novels.

Question 14

Which of the following would be most likely to have monopoly power?

Accepted Answer

A)  a long-distance telephone service provider 
B)  a local cable TV provider 
C)  a large department store 
D)  a gas station 
A)  a long-distance telephone service provider 
B)  a local cable TV provider 
C)  a large department store 
D)  a gas station

Question 15

Which of the following statements is not correct?

Accepted Answer

A)  The government may use antitrust laws to break up an existing company to improve competition. 
B)  The government may break up a natural monopoly to lower the price charged to customers. 
C)  Private ownership is typically preferred to public ownership. 
D)  Sometimes the best strategy is for the government to do nothing about monopoly inefficiency because the "fix" may be worse than the problem. 
A)  The government may use antitrust laws to break up an existing company to improve competition. 
B)  The government may break up a natural monopoly to lower the price charged to customers. 
C)  Private ownership is typically preferred to public ownership. 
D)  Sometimes the best strategy is for the government to do nothing about monopoly inefficiency because the "fix" may be worse than the problem.

Question 16

Antitrust laws may

Accepted Answer

A)  enhance the ability of firms to capture profits from a concentration of market power. 
B)  enhance the ability of firms to reduce economic losses. 
C)  restrict the ability of firms to operate at the socially efficient level of production. 
D)  restrict the ability of firms to merge. 
A)  enhance the ability of firms to capture profits from a concentration of market power. 
B)  enhance the ability of firms to reduce economic losses. 
C)  restrict the ability of firms to operate at the socially efficient level of production. 
D)  restrict the ability of firms to merge.

Question 17

Which of the following is not an example of price discrimination by a firm?

Accepted Answer

A)  children's meals at a restaurant 
B)  a natural gas company charging customers a higher rate in the winter than in the summer 
C)  a senior citizens' discount 
D)  coupons in the Sunday newspaper 
A)  children's meals at a restaurant 
B)  a natural gas company charging customers a higher rate in the winter than in the summer 
C)  a senior citizens' discount 
D)  coupons in the Sunday newspaper

Question 18

Suppose when a monopolist produces 75 units its average revenue is $10 per unit,its marginal revenue is $5 per unit,its marginal cost is $6 per unit,and its average total cost is $5 per unit.What can we conclude about this monopolist?

Accepted Answer

A)  The monopolist is currently maximizing profits,and its total profits are $375. 
B)  The monopolist is currently maximizing profits,and its total profits are $300. 
C)  The monopolist is not currently maximizing profits;it should produce more units and charge a lower price to maximize profits. 
D)  The monopolist is not currently maximizing profits;it should produce fewer units and charge a higher price to maximize profits. 
A)  The monopolist is currently maximizing profits,and its total profits are $375. 
B)  The monopolist is currently maximizing profits,and its total profits are $300. 
C)  The monopolist is not currently maximizing profits;it should produce more units and charge a lower price to maximize profits. 
D)  The monopolist is not currently maximizing profits;it should produce fewer units and charge a higher price to maximize profits.

Question 19

Monopolies use their market power to

Accepted Answer

A)  charge prices that equal minimum average total cost. 
B)  increase the quantity sold as they increase price. 
C)  charge a price that is higher than marginal cost. 
D)  dump excess supplies of their product on the market. 
A)  charge prices that equal minimum average total cost. 
B)  increase the quantity sold as they increase price. 
C)  charge a price that is higher than marginal cost. 
D)  dump excess supplies of their product on the market.

Question 20

Figure 15-12  
-Refer to Figure 15-12.If the monopoly firm perfectly price discriminates,then consumer surplus amounts to

Accepted Answer

A)  $0. 
B)  $1,562.50. 
C)  $3,125. 
D)  $6,250. 
A)  $0. 
B)  $1,562.50. 
C)  $3,125. 
D)  $6,250.

Exam 15: Monopoly

A firm that is a natural monopoly

A government-created monopoly arises when

For a monopoly market,total surplus can be defined as the value of the good to

A monopolist earns higher profits by charging one price than by practicing price discrimination.

Table 15-4 Consider the following demand and cost information for a monopoly. -Refer to Table 15-4.The maximum profit this monopolist can earn is

For a monopolist,when the output effect is greater than the price effect,marginal revenue is

In reality,perfect price discrimination is

Most markets are not monopolies in the real world because

Patent and copyright laws encourage

A monopolist faces the following demand curve: The monopolist has total fixed costs of $40 and a constant marginal cost of $5.What is the profit-maximizing level of output?

If the ABC company owns the exclusive rights to mine land in Afghanistan for Lapis Lazuli,a rare stone used in jewelry which is found only in Afghanistan,the company benefits from a barrier to entry.

A benefit of a monopoly is

Which of the following would be most likely to have monopoly power?

Which of the following statements is not correct?

Antitrust laws may

Which of the following is not an example of price discrimination by a firm?

Suppose when a monopolist produces 75 units its average revenue is $10 per unit,its marginal revenue is $5 per unit,its marginal cost is $6 per unit,and its average total cost is $5 per unit.What can we conclude about this monopolist?

Monopolies use their market power to

Figure 15-12 -Refer to Figure 15-12.If the monopoly firm perfectly price discriminates,then consumer surplus amounts to

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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