Question 1

Price discrimination is the business practice of

Accepted Answer

A)  bundling related products to increase total sales. 
B)  selling the same good at different prices to different customers. 
C)  pricing above marginal cost. 
D)  hiring marketing experts to increase consumers' brand loyalty. 
A)  bundling related products to increase total sales. 
B)  selling the same good at different prices to different customers. 
C)  pricing above marginal cost. 
D)  hiring marketing experts to increase consumers' brand loyalty.

Question 2

Economists assume that monopolists behave as

Accepted Answer

A)  cost minimizers. 
B)  profit maximizers. 
C)  price maximizers. 
D)  maximizers of social welfare. 
A)  cost minimizers. 
B)  profit maximizers. 
C)  price maximizers. 
D)  maximizers of social welfare.

Question 3

A monopolist faces the following demand curve:
 
The monopolist has fixed costs of $1,000 and has a constant marginal cost of $2 per unit.If the monopolist were able to perfectly price discriminate,how many units would it sell?

Accepted Answer

A)  400 
B)  500 
C)  900 
D)  4,200 
A)  400 
B)  500 
C)  900 
D)  4,200

Question 4

A monopolist faces the following demand curve:
 
The monopolist has total fixed costs of $60 and has a constant marginal cost of $15.What is the profit-maximizing level of production?

Accepted Answer

A)  2 units 
B)  3 units 
C)  4 units 
D)  5 units 
A)  2 units 
B)  3 units 
C)  4 units 
D)  5 units

Question 5

A monopoly is an inefficient way to produce a product because

Accepted Answer

A)  it can earn both short-run and long-run profits. 
B)  it faces a downward-sloping demand curve. 
C)  the cost to the monopolist of producing one more unit exceeds the value of that unit to potential buyers. 
D)  it produces a smaller level of output than would be produced in a competitive market. 
A)  it can earn both short-run and long-run profits. 
B)  it faces a downward-sloping demand curve. 
C)  the cost to the monopolist of producing one more unit exceeds the value of that unit to potential buyers. 
D)  it produces a smaller level of output than would be produced in a competitive market.

Question 6

When deciding what price to charge consumers,the monopolist may choose to charge them different prices based on the customers'

Accepted Answer

A)  geographical location. 
B)  age. 
C)  income. 
D)  All of the above are correct. 
A)  geographical location. 
B)  age. 
C)  income. 
D)  All of the above are correct.

Question 7

Scenario 15-5
Mega Media Cable TV is able to purchase an exclusive right to sell a premium sports channel in its market area.Let's assume that Mega Media pays $100,000 a year for the exclusive marketing rights to the sports channel.Since Mega Media has already installed cable to all of the homes in its market area,the marginal cost of delivering the sports channel to subscribers is zero.The manager of Mega Media needs to know what price to charge for the sports channel service to maximize her profit.Before setting price,she hires an economist to estimate demand for the sports channel.The economist discovers that there are two types of subscribers who value premium sporting channels.First are the 3,000 die-hard sports fans who will pay as much as $150 a year for the new channel.Second,the premium sports channel will appeal to about 20,000 occasional sports viewers who will pay as much as $25 a year for a subscription to it.
-Refer to Scenario 15-5.What is the deadweight loss associated with the nondiscriminating pricing policy compared to the price discriminating policy?

Accepted Answer

A)  $500,000 
B)  $450,000 
C)  $400,000 
D)  It cannot be determined from the information provided. 
A)  $500,000 
B)  $450,000 
C)  $400,000 
D)  It cannot be determined from the information provided.

Question 8

Give some examples of the benefits and costs of antitrust laws.

Accepted Answer

Benefits include promoting com

Question 9

A monopolist's average revenue is always

Accepted Answer

A)  equal to marginal revenue. 
B)  greater than the price of its product. 
C)  equal to the price of its product. 
D)  less than the price of its product. 
A)  equal to marginal revenue. 
B)  greater than the price of its product. 
C)  equal to the price of its product. 
D)  less than the price of its product.

Question 10

During the life of a drug patent,the monopoly pharmaceutical firm maximizes profit by producing the quantity at which marginal revenue equals marginal cost.

Accepted Answer

A) True 
 B)False

Question 11

For a monopoly,the socially efficient level of output occurs where

Accepted Answer

A)  marginal revenue equals marginal cost. 
B)  average revenue equals marginal cost. 
C)  marginal revenue equals average total cost. 
D)  average revenue equals average total cost. 
A)  marginal revenue equals marginal cost. 
B)  average revenue equals marginal cost. 
C)  marginal revenue equals average total cost. 
D)  average revenue equals average total cost.

Question 12

Figure 15-11  
-Refer to Figure 15-11.If the monopoly firm is not allowed to price discriminate,then the deadweight loss amounts to

Accepted Answer

A)  $50. 
B)  $100. 
C)  $500. 
D)  $1,000. 
A)  $50. 
B)  $100. 
C)  $500. 
D)  $1,000.

Question 13

Which of the following statements is correct?

Accepted Answer

A)  Firms with some degree of monopoly power are common,but firms with substantial monopoly power are rare. 
B)  Firms with some degree of monopoly power are rare,as are firms with substantial monopoly power. 
C)  Firms with some degree of monopoly power are common,as are firms with substantial monopoly power. 
D)  Firms with some degree of monopoly power are rare,but firms with substantial monopoly power are common. 
A)  Firms with some degree of monopoly power are common,but firms with substantial monopoly power are rare. 
B)  Firms with some degree of monopoly power are rare,as are firms with substantial monopoly power. 
C)  Firms with some degree of monopoly power are common,as are firms with substantial monopoly power. 
D)  Firms with some degree of monopoly power are rare,but firms with substantial monopoly power are common.

Question 14

Which of the following statements is (are)true of a monopoly?

Accepted Answer

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

Question 15

The difference in total surplus between the socially efficient level of production and the monopolist's level of production is

Accepted Answer

A)  offset by regulatory revenues. 
B)  called a deadweight loss. 
C)  equal to the monopolist's profit. 
D)  Both b and c are correct. 
A)  offset by regulatory revenues. 
B)  called a deadweight loss. 
C)  equal to the monopolist's profit. 
D)  Both b and c are correct.

Question 16

Which of the following strategies is not an effective strategy to reduce monopoly inefficiency?

Accepted Answer

A)  antitrust laws 
B)  price discrimination 
C)  doing nothing 
D)  breaking up a natural monopoly into more than one firm 
A)  antitrust laws 
B)  price discrimination 
C)  doing nothing 
D)  breaking up a natural monopoly into more than one firm

Question 17

Figure 15-11  
-Refer to Figure 15-11.If there are no fixed costs of production,monopoly profit without price discrimination equals

Accepted Answer

A)  $500. 
B)  $1,000. 
C)  $2,000. 
D)  $4,000. 
A)  $500. 
B)  $1,000. 
C)  $2,000. 
D)  $4,000.

Question 18

A rational pricing strategy for a profit-maximizing monopolist is

Accepted Answer

A)  price discrimination. 
B)  price segregation. 
C)  synergy pricing. 
D)  average cost pricing. 
A)  price discrimination. 
B)  price segregation. 
C)  synergy pricing. 
D)  average cost pricing.

Question 19

A reduction in a monopolist's fixed costs would

Accepted Answer

A)  decrease the profit-maximizing price and increase the profit-maximizing quantity produced. 
B)  increase the profit-maximizing price and decrease the profit-maximizing quantity produced. 
C)  not effect the profit-maximizing price or quantity. 
D)  possibly increase,decrease or not effect profit-maximizing price and quantity,depending on the elasticity of demand. 
A)  decrease the profit-maximizing price and increase the profit-maximizing quantity produced. 
B)  increase the profit-maximizing price and decrease the profit-maximizing quantity produced. 
C)  not effect the profit-maximizing price or quantity. 
D)  possibly increase,decrease or not effect profit-maximizing price and quantity,depending on the elasticity of demand.

Question 20

For a profit-maximizing monopolist,

Accepted Answer

A) P > MR = MC. B) P = MR = MC. C) P > MR > MC. D) MR < MC < P. A) P > MR = MC. B) P = MR = MC. C) P > MR > MC. D) MR < MC < P.

Exam 15: Monopoly

Price discrimination is the business practice of

Economists assume that monopolists behave as

A monopolist faces the following demand curve: The monopolist has fixed costs of $1,000 and has a constant marginal cost of $2 per unit.If the monopolist were able to perfectly price discriminate,how many units would it sell?

A monopolist faces the following demand curve: The monopolist has total fixed costs of $60 and has a constant marginal cost of $15.What is the profit-maximizing level of production?

A monopoly is an inefficient way to produce a product because

When deciding what price to charge consumers,the monopolist may choose to charge them different prices based on the customers'

Give some examples of the benefits and costs of antitrust laws.

A monopolist's average revenue is always

During the life of a drug patent,the monopoly pharmaceutical firm maximizes profit by producing the quantity at which marginal revenue equals marginal cost.

For a monopoly,the socially efficient level of output occurs where

Figure 15-11 -Refer to Figure 15-11.If the monopoly firm is not allowed to price discriminate,then the deadweight loss amounts to

Which of the following statements is correct?

Which of the following statements is (are)true of a monopoly?

The difference in total surplus between the socially efficient level of production and the monopolist's level of production is

Which of the following strategies is not an effective strategy to reduce monopoly inefficiency?

Figure 15-11 -Refer to Figure 15-11.If there are no fixed costs of production,monopoly profit without price discrimination equals

A rational pricing strategy for a profit-maximizing monopolist is

A reduction in a monopolist's fixed costs would

For a profit-maximizing monopolist,

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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