Question 1

If the government deems a newly invented drug to be truly original,the pharmaceutical company is given the exclusive right to manufacture and sell the drug for 50 years.

Accepted Answer

A) True 
 B)False

Question 2

Suppose a profit-maximizing monopolist faces a constant marginal cost of $20,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 $1,500.

Accepted Answer

A) True 
 B)False

Question 3

For a long while,electricity producers were thought to be a classic example of a natural monopoly.People held this view because

Accepted Answer

A)  the average cost of producing units of electricity by one producer in a specific region was lower than if the same quantity were produced by two or more producers in the same region. 
B)  the average cost of producing units of electricity by one producer in a specific region was higher than if the same quantity were produced by two or more produced in the same region. 
C)  the marginal cost of producing units of electricity by one producer in a specific region was higher than if the same quantity were produced by two or more producers in the same region. 
D)  electricity is a special non-excludable good that could never be sold in a competitive market. 
A)  the average cost of producing units of electricity by one producer in a specific region was lower than if the same quantity were produced by two or more producers in the same region. 
B)  the average cost of producing units of electricity by one producer in a specific region was higher than if the same quantity were produced by two or more produced in the same region. 
C)  the marginal cost of producing units of electricity by one producer in a specific region was higher than if the same quantity were produced by two or more producers in the same region. 
D)  electricity is a special non-excludable good that could never be sold in a competitive market.

Question 4

Sizable economic profits can persist over time under monopoly if the monopolist

Accepted Answer

A)  produces that output where average total cost is at a maximum. 
B)  is protected by barriers to entry. 
C)  operates as a price taker rather than a price maker. 
D)  realizes revenues that exceed variable costs. 
A)  produces that output where average total cost is at a maximum. 
B)  is protected by barriers to entry. 
C)  operates as a price taker rather than a price maker. 
D)  realizes revenues that exceed variable costs.

Question 5

Which of the following statements is true about patents and copyrights?

Accepted Answer

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

Question 6

Which of the following statements is not correct?

Accepted Answer

A)  The government may use antitrust laws to prevent a merger if the government believes the merger will reduce competition and increase prices. 
B)  By regulating a natural monopoly where price equals average total cost,the monopoly earns zero profits. 
C)  An advantage of private ownership over public ownership is that private business owners tend to fire inefficient managers. 
D)  The government should always intervene to improve monopoly inefficiency. 
A)  The government may use antitrust laws to prevent a merger if the government believes the merger will reduce competition and increase prices. 
B)  By regulating a natural monopoly where price equals average total cost,the monopoly earns zero profits. 
C)  An advantage of private ownership over public ownership is that private business owners tend to fire inefficient managers. 
D)  The government should always intervene to improve monopoly inefficiency.

Question 7

When a firm operates under conditions of monopoly,its price is

Accepted Answer

A)  not constrained. 
B)  constrained by marginal cost. 
C)  constrained by demand. 
D)  constrained only by its social agenda. 
A)  not constrained. 
B)  constrained by marginal cost. 
C)  constrained by demand. 
D)  constrained only by its social agenda.

Question 8

Figure 15-5  
-Refer to Figure 15-5.A profit-maximizing monopoly will produce an output level of

Accepted Answer

A)  Q1. 
B)  Q2. 
C)  Q3. 
D)  Q4. 
A)  Q1. 
B)  Q2. 
C)  Q3. 
D)  Q4.

Question 9

Figure 15-4  
-Refer to Figure 15-4.The demand curve for a monopoly firm is depicted by curve

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  D. 
A)  A. 
B)  B. 
C)  C. 
D)  D.

Question 10

A monopolist can sell 200 units of output for $36 per unit.Alternatively,it can sell 201 units of output for $35.80 per unit.The marginal revenue of the 201st unit of output is

Accepted Answer

A)  $-4.20. 
B)  $-0.20. 
C)  $4.20. 
D)  $35.80. 
A)  $-4.20. 
B)  $-0.20. 
C)  $4.20. 
D)  $35.80.

Question 11

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 diseconomies of scale. 
C)  would experience a lower 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 diseconomies of scale. 
C)  would experience a lower average total cost if more firms entered the market. 
D)  All of the above are correct.

Question 12

When a single firm can supply a product to an entire market at a lower cost than could two or more firms,the industry is called a

Accepted Answer

A)  resource industry. 
B)  exclusive industry. 
C)  government monopoly. 
D)  natural monopoly. 
A)  resource industry. 
B)  exclusive industry. 
C)  government monopoly. 
D)  natural monopoly.

Question 13

If government regulation sets the maximum price for a natural monopoly equal to its marginal cost,then the natural monopolist will

Accepted Answer

A)  earn economic losses. 
B)  earn economic profits. 
C)  earn zero economic profits. 
D)  produce a lower quantity of output than is socially optimal. 
A)  earn economic losses. 
B)  earn economic profits. 
C)  earn zero economic profits. 
D)  produce a lower quantity of output than is socially optimal.

Question 14

The legislation passed by Congress in 1890 to reduce the market power of large and powerful "trusts" is called the

Accepted Answer

A)  Morgan Act. 
B)  Sherman Act. 
C)  Clayton Act. 
D)  14th Amendment. 
A)  Morgan Act. 
B)  Sherman Act. 
C)  Clayton Act. 
D)  14th Amendment.

Question 15

Like competitive firms,monopolies choose to produce a quantity in which marginal revenue equals marginal cost.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is not a characteristic of a monopoly?

Accepted Answer

A)  barriers to entry 
B)  one seller 
C)  one buyer 
D)  a product without close substitutes 
A)  barriers to entry 
B)  one seller 
C)  one buyer 
D)  a product without close substitutes

Question 17

By offering lower prices to customers who buy a large quantity,a monopoly is price discriminating.

Accepted Answer

A) True 
 B)False

Question 18

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 the average revenue when 7 shirts are sold?

Accepted Answer

A)  $90 
B)  $100 
C)  $110 
D)  $130 
A)  $90 
B)  $100 
C)  $110 
D)  $130

Question 19

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 marginal cost of the 8th shirt?

Accepted Answer

A)  $50 
B)  $60 
C)  $90 
D)  $110 
A)  $50 
B)  $60 
C)  $90 
D)  $110

Question 20

Scenario 15-1
Consider a transportation corporation named C.R.Evans that has just completed the development of a new subway system in a medium-sized town in the Northwest.Currently,there are plenty of seats on the subway,and it is never crowded.Its capacity far exceeds the needs of the city.After just a few years of operation,the shareholders of C.R.Evans experienced incredible rates of return on their investment,due to the profitability of the corporation.
-Refer to Scenario 15-1.Which of the following statements are most likely to be true?

Accepted Answer

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

Exam 15: Monopoly

If the government deems a newly invented drug to be truly original,the pharmaceutical company is given the exclusive right to manufacture and sell the drug for 50 years.

For a long while,electricity producers were thought to be a classic example of a natural monopoly.People held this view because

Sizable economic profits can persist over time under monopoly if the monopolist

Which of the following statements is true about patents and copyrights?

Which of the following statements is not correct?

When a firm operates under conditions of monopoly,its price is

Figure 15-5 -Refer to Figure 15-5.A profit-maximizing monopoly will produce an output level of

Figure 15-4 -Refer to Figure 15-4.The demand curve for a monopoly firm is depicted by curve

A monopolist can sell 200 units of output for $36 per unit.Alternatively,it can sell 201 units of output for $35.80 per unit.The marginal revenue of the 201st unit of output is

A firm that is a natural monopoly

When a single firm can supply a product to an entire market at a lower cost than could two or more firms,the industry is called a

If government regulation sets the maximum price for a natural monopoly equal to its marginal cost,then the natural monopolist will

The legislation passed by Congress in 1890 to reduce the market power of large and powerful "trusts" is called the

Like competitive firms,monopolies choose to produce a quantity in which marginal revenue equals marginal cost.

Which of the following is not a characteristic of a monopoly?

By offering lower prices to customers who buy a large quantity,a monopoly is price discriminating.

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 marginal cost of the 8th shirt?

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

A monopolist can sell 200 units of output for $36 per unit.Alternatively,it can sell 201 units of output for $35.80 per unit.The marginal revenue of the 201^st unit of output is