Question 1

To maximise profit a monopolist will produce where

Accepted Answer

A) marginal revenue is equal to marginal cost. 
B) demand for its product is unit-elastic. 
C) revenue per unit is maximised. 
D) average total cost is equal to average revenue. 
A) marginal revenue is equal to marginal cost. 
B) demand for its product is unit-elastic. 
C) revenue per unit is maximised. 
D) average total cost is equal to average revenue. A

Question 2

Network externalities refer to the situation where the usefulness of a product increases with the number of consumers who use it.

Accepted Answer

A) True 
 B)False  True

Question 3

Figure 9.2   Figure 9.2 above shows the demand and cost curves facing a monopolist.
-Refer to Figure 9.2.If the firm's average total cost curve is ATC1, the firm will

Accepted Answer

A) suffer a loss. 
B) break even. 
C) make a profit. 
D) face competition. 
A) suffer a loss. 
B) break even. 
C) make a profit. 
D) face competition. C

Question 4

A firm that is the only seller of a good or service that does not have a close substitute is called

Accepted Answer

A) a monopoly. 
B) an oligopolist. 
C) a market maker. 
D) a price maker. 
A) a monopoly. 
B) an oligopolist. 
C) a market maker. 
D) a price maker.

Question 5

Table 9.2   The government of a small developing country has granted exclusive rights to Linden Enterprises for the production of plastic syringes.Table 9.2 shows the cost and demand data for this government protected monopolist.
-Refer to Table 9.2.The amount of profit that the firm earns is

Accepted Answer

A) $34.50 
B) $42 
C) $47 
D) $49 
A) $34.50 
B) $42 
C) $47 
D) $49

Question 6

Arnold's Airport Transport provides passenger transportation to and from the local airport.Arnold charges a flat rate of $30 per person for round-trip service, and he gives a $5 discount to senior citizens.Assume Arnold's marginal cost is $3.00 per person.Draw two graphs, one showing demand and marginal cost for his $30 customers, of which he has 300 per month, and the other graph showing demand and marginal cost for his senior citizen customers, of which he has 100 per month.If Arnold charged all of his customers $30, he would have 325 customers per month.
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

The answer of Arnold's Airport Transport provides passenger transportation to...

Question 7

Why is calling long distance often more expensive on weekdays between 8 am and 5 pm than in the evening hours?

Accepted Answer

A) Telephone companies hope to discourage customers from calling long distance during the day to keep their labour costs down. 
B) The cost of making long-distance connections is higher during the day than in the evenings. 
C) Businesses who must call suppliers or customers during business hours have few alternatives and therefore have an inelastic demand during the workday compared to after-work hours. 
D) Increasingly, businesses who must call suppliers or customers during business hours resort to the Internet, thereby reducing demand for long-distance calls.To make up for this fall in demand, telephone companies charge higher rates. 
A) Telephone companies hope to discourage customers from calling long distance during the day to keep their labour costs down. 
B) The cost of making long-distance connections is higher during the day than in the evenings. 
C) Businesses who must call suppliers or customers during business hours have few alternatives and therefore have an inelastic demand during the workday compared to after-work hours. 
D) Increasingly, businesses who must call suppliers or customers during business hours resort to the Internet, thereby reducing demand for long-distance calls.To make up for this fall in demand, telephone companies charge higher rates.

Question 8

Figure 9.7  
-Refer to Figure 9.7.Use the figure above to answer the following questions.
a.What is the profit-maximising quantity and what price will the monopolist charge?
b.What is the total revenue at the profit-maximising output level?
c.What is the total cost at the profit-maximising output level?
d.What is the profit?
e.What is the profit per unit (average profit)at the profit-maximising output level?
f.If this industry was organised as a perfectly competitive industry, what would be the profit-maximising price and quantity?
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

a.Quantity = 50; price = 32
b.Total reve

Question 9

One reason patent protection is vitally important to pharmaceutical firms is

Accepted Answer

A) successful new drugs are not profitable.If firms are not granted patents, many would go out of business and health care would be severely diminished. 
B) the approval process for new drugs through the Food and Drug Administration can take more than 10 years and is very costly.Patents enable firms to recover costs incurred during this process. 
C) that taxes on profits from drugs are very high; profits from patent protection enable firms to pay these taxes. 
D) the high salaries pharmaceutical firms pay to scientists and doctors make their labour costs higher than for any other business.Profits from patents are needed to pay these labour costs. 
A) successful new drugs are not profitable.If firms are not granted patents, many would go out of business and health care would be severely diminished. 
B) the approval process for new drugs through the Food and Drug Administration can take more than 10 years and is very costly.Patents enable firms to recover costs incurred during this process. 
C) that taxes on profits from drugs are very high; profits from patent protection enable firms to pay these taxes. 
D) the high salaries pharmaceutical firms pay to scientists and doctors make their labour costs higher than for any other business.Profits from patents are needed to pay these labour costs.

Question 10

A public franchise gives the exclusive right to produce a product for 20 years from the date the product is invented.

Accepted Answer

A) True 
 B)False

Question 11

Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly.Which of the following statements comparing the conditions in the industry under both market structures is true?

Accepted Answer

A) A monopoly will produce more and charge a higher price than would a perfectly competitive industry producing the same good. 
B) A monopoly will produce more and advertise more than would a perfectly competitive industry producing the same good. 
C) A monopoly will produce less and charge a higher price than would a perfectly competitive industry producing the same good. 
D) A monopoly will produce less and charge a lower price than would a perfectly competitive industry producing the same good. 
A) A monopoly will produce more and charge a higher price than would a perfectly competitive industry producing the same good. 
B) A monopoly will produce more and advertise more than would a perfectly competitive industry producing the same good. 
C) A monopoly will produce less and charge a higher price than would a perfectly competitive industry producing the same good. 
D) A monopoly will produce less and charge a lower price than would a perfectly competitive industry producing the same good.

Question 12

Holding everything else constant, government approval of horizontal mergers is more likely to be granted if the 'market' that firms are in are broadly defined rather than narrowly defined.

Accepted Answer

A) True 
 B)False

Question 13

Figure 9.3   Figure 9.3 above shows the demand and cost curves facing a monopolist.
-Refer to Figure 9.3.Suppose the monopolist represented in the diagram above produces positive output.The profit-maximising/loss-minimising output level is

Accepted Answer

A) 630 units 
B) 800 units 
C) 850 units 
D) 880 units 
A) 630 units 
B) 800 units 
C) 850 units 
D) 880 units

Question 14

A monopoly is a firm that is the only seller of a good or service that does not have a close substitute.

Accepted Answer

A) True 
 B)False

Question 15

Table 9.2   The government of a small developing country has granted exclusive rights to Linden Enterprises for the production of plastic syringes.Table 9.2 shows the cost and demand data for this government protected monopolist.
-Refer to Table 9.2.What is the profit-maximising quantity and price for the monopolist?

Accepted Answer

A) Quantity = 8 cases, Price = $9 
B) Quantity = 7 cases, Price = $10 
C) Quantity = 9 cases, Price = $8 
D) Quantity = 10 cases, Price = $7 
A) Quantity = 8 cases, Price = $9 
B) Quantity = 7 cases, Price = $10 
C) Quantity = 9 cases, Price = $8 
D) Quantity = 10 cases, Price = $7

Question 16

Compared to perfect competition, the consumer surplus in a monopoly

Accepted Answer

A) is unchanged because price and output are the same. 
B) is lower because price is higher and output is lower. 
C) is higher because price is higher and output is the same. 
D) is eliminated. 
A) is unchanged because price and output are the same. 
B) is lower because price is higher and output is lower. 
C) is higher because price is higher and output is the same. 
D) is eliminated.

Question 17

Many universities practice yield management.As a result, they offer different financial aid packages to different students.One result of yield management is that universities often

Accepted Answer

A) offer a less generous financial aid package to students who apply for an early admission decision. 
B) offer a more generous financial aid package to students who apply for an early admission decision. 
C) offer a less generous financial aid package to students with relatively high family incomes. 
D) offer a less generous financial aid package to students who don't participate in many extracurricular activities when they are in high school. 
A) offer a less generous financial aid package to students who apply for an early admission decision. 
B) offer a more generous financial aid package to students who apply for an early admission decision. 
C) offer a less generous financial aid package to students with relatively high family incomes. 
D) offer a less generous financial aid package to students who don't participate in many extracurricular activities when they are in high school.

Question 18

What does a monopolist face, compared to a monopolistic competitor?

Accepted Answer

A) A more elastic demand curve. 
B) A more inelastic demand curve. 
C) A more elastic demand curve at higher prices and a more inelastic demand curve at lower prices. 
D) A demand curve that has a price elasticity coefficient of zero. 
A) A more elastic demand curve. 
B) A more inelastic demand curve. 
C) A more elastic demand curve at higher prices and a more inelastic demand curve at lower prices. 
D) A demand curve that has a price elasticity coefficient of zero.

Question 19

Suppose that a price-discriminating producer divides its market into two segments.If the firm sells its product at a price of $34 in the market segment with relatively less-elastic customer demand, the price in the market segment with more-elastic customer demand will be

Accepted Answer

A) greater than $34. 
B) less than $34. 
C) less than marginal revenue in that market segment. 
D) equal to marginal revenue in that market segment. 
A) greater than $34. 
B) less than $34. 
C) less than marginal revenue in that market segment. 
D) equal to marginal revenue in that market segment.

Question 20

What is a possible advantage of a horizontal merger for the economy?

Accepted Answer

A) The merging firms could avoid losses. 
B) The merged firm might reap economies of scale which could translate into lower prices. 
C) The degree of competition in the industry will be intensified. 
D) The government stands to collect more corporate income tax revenue. 
A) The merging firms could avoid losses. 
B) The merged firm might reap economies of scale which could translate into lower prices. 
C) The degree of competition in the industry will be intensified. 
D) The government stands to collect more corporate income tax revenue.

To maximise profit a monopolist will produce where

Network externalities refer to the situation where the usefulness of a product increases with the number of consumers who use it.

Figure 9.2 Figure 9.2 above shows the demand and cost curves facing a monopolist. -Refer to Figure 9.2.If the firm's average total cost curve is ATC₁, the firm will

A firm that is the only seller of a good or service that does not have a close substitute is called

Table 9.2 The government of a small developing country has granted exclusive rights to Linden Enterprises for the production of plastic syringes.Table 9.2 shows the cost and demand data for this government protected monopolist. -Refer to Table 9.2.The amount of profit that the firm earns is

Why is calling long distance often more expensive on weekdays between 8 am and 5 pm than in the evening hours?

One reason patent protection is vitally important to pharmaceutical firms is

A public franchise gives the exclusive right to produce a product for 20 years from the date the product is invented.

Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly.Which of the following statements comparing the conditions in the industry under both market structures is true?

Holding everything else constant, government approval of horizontal mergers is more likely to be granted if the 'market' that firms are in are broadly defined rather than narrowly defined.

Figure 9.3 Figure 9.3 above shows the demand and cost curves facing a monopolist. -Refer to Figure 9.3.Suppose the monopolist represented in the diagram above produces positive output.The profit-maximising/loss-minimising output level is

A monopoly is a firm that is the only seller of a good or service that does not have a close substitute.

Compared to perfect competition, the consumer surplus in a monopoly

Many universities practice yield management.As a result, they offer different financial aid packages to different students.One result of yield management is that universities often

What does a monopolist face, compared to a monopolistic competitor?

Suppose that a price-discriminating producer divides its market into two segments.If the firm sells its product at a price of $34 in the market segment with relatively less-elastic customer demand, the price in the market segment with more-elastic customer demand will be

What is a possible advantage of a horizontal merger for the economy?

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Consumer Choice and Behavioural Economics

Technology Production and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: The Competitive Model in a More Realistic

Oligopoly: Markets With Few Competitors

The Markets for Labour and Other Factors of Production

Comparative Advantage and the Gains From International Trade

Government Intervention in the Market

Externalities, Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters

Exam 9: Monopoly Markets

To maximise profit a monopolist will produce where

Network externalities refer to the situation where the usefulness of a product increases with the number of consumers who use it.

Figure 9.2 Figure 9.2 above shows the demand and cost curves facing a monopolist. -Refer to Figure 9.2.If the firm's average total cost curve is ATC1, the firm will

A firm that is the only seller of a good or service that does not have a close substitute is called

Table 9.2 The government of a small developing country has granted exclusive rights to Linden Enterprises for the production of plastic syringes.Table 9.2 shows the cost and demand data for this government protected monopolist. -Refer to Table 9.2.The amount of profit that the firm earns is

Why is calling long distance often more expensive on weekdays between 8 am and 5 pm than in the evening hours?

One reason patent protection is vitally important to pharmaceutical firms is

A public franchise gives the exclusive right to produce a product for 20 years from the date the product is invented.

Assume a hypothetical case where an industry begins as perfectly competitive and then becomes a monopoly.Which of the following statements comparing the conditions in the industry under both market structures is true?

Holding everything else constant, government approval of horizontal mergers is more likely to be granted if the 'market' that firms are in are broadly defined rather than narrowly defined.

Figure 9.3 Figure 9.3 above shows the demand and cost curves facing a monopolist. -Refer to Figure 9.3.Suppose the monopolist represented in the diagram above produces positive output.The profit-maximising/loss-minimising output level is

A monopoly is a firm that is the only seller of a good or service that does not have a close substitute.

Compared to perfect competition, the consumer surplus in a monopoly

Many universities practice yield management.As a result, they offer different financial aid packages to different students.One result of yield management is that universities often

What does a monopolist face, compared to a monopolistic competitor?

Suppose that a price-discriminating producer divides its market into two segments.If the firm sells its product at a price of $34 in the market segment with relatively less-elastic customer demand, the price in the market segment with more-elastic customer demand will be

What is a possible advantage of a horizontal merger for the economy?

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Consumer Choice and Behavioural Economics

Technology Production and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: The Competitive Model in a More Realistic

Oligopoly: Markets With Few Competitors

The Markets for Labour and Other Factors of Production

Comparative Advantage and the Gains From International Trade

Government Intervention in the Market

Externalities, Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters

Figure 9.2 Figure 9.2 above shows the demand and cost curves facing a monopolist. -Refer to Figure 9.2.If the firm's average total cost curve is ATC₁, the firm will