Question 1

Figure 9.1  
-Refer to Figure 9.1.Which of the following statements about the firm depicted in the diagram is true?

Accepted Answer

A) The fact that this firm is a natural monopoly is shown by the continually declining long-run average total cost as output rises. 
B) The fact that this firm is a natural monopoly is shown by the continually declining market demand curve as output rises. 
C) The fact that this firm is a natural monopoly is shown by the continually declining marginal revenue curve as output rises. 
D) The fact that this firm is a natural monopoly is shown by the fact that marginal cost lies below the long-run average total cost where the firm maximises its profits. 
A) The fact that this firm is a natural monopoly is shown by the continually declining long-run average total cost as output rises. 
B) The fact that this firm is a natural monopoly is shown by the continually declining market demand curve as output rises. 
C) The fact that this firm is a natural monopoly is shown by the continually declining marginal revenue curve as output rises. 
D) The fact that this firm is a natural monopoly is shown by the fact that marginal cost lies below the long-run average total cost where the firm maximises its profits.

Question 2

A necessary condition for successful price discrimination is

Accepted Answer

A) The seller must possess market power. 
B) The buyer must possess market power. 
C) Transactions costs must be zero. 
D) Buyers must have identical inelastic demands. 
A) The seller must possess market power. 
B) The buyer must possess market power. 
C) Transactions costs must be zero. 
D) Buyers must have identical inelastic demands.

Question 3

If a theatre company expects $250 000 in ticket revenue from five performances and $288 000 in ticket revenue if it adds a sixth performance, the

Accepted Answer

A) marginal revenue of the sixth performance is $48 000. 
B) marginal revenue of the sixth performance is $38 000. 
C) cost of staging the sixth performance is probably higher than the cost of staging the previous five. 
D) company will be making a loss on the sixth performance because its ticket sales will be less than the average received from the previous five. 
A) marginal revenue of the sixth performance is $48 000. 
B) marginal revenue of the sixth performance is $38 000. 
C) cost of staging the sixth performance is probably higher than the cost of staging the previous five. 
D) company will be making a loss on the sixth performance because its ticket sales will be less than the average received from the previous five.

Question 4

A firm that engages in price discrimination must be able to identify the preferences of every customer it serves.

Accepted Answer

A) True 
 B)False

Question 5

If a monopolist's price is $50 at 63 units of output, and marginal revenue equals marginal cost, and average total cost equals $43, then what is the firm's total profit?

Accepted Answer

A) $3150. 
B) $2709. 
C) $441. 
D) $7. 
A) $3150. 
B) $2709. 
C) $441. 
D) $7.

Question 6

Consider the following actions undertaken by a firm:
a.charging the same price for products of different quality
b.charging different prices to different consumers for the same product when the variation cannot be explained by cost differences
c.charging different prices for products of different qualities
d.charging a lower price to match a competitor's price
The actions that will be considered price discrimination are

Accepted Answer

A) a, b, c, and d 
B) a, b, and d only 
C) b and d only 
D) a and b only 
A) a, b, c, and d 
B) a, b, and d only 
C) b and d only 
D) a and b only

Question 7

Perfect price discrimination will lead a firm to produce up to the point where price equals marginal cost, the efficient level of output.

Accepted Answer

A) True 
 B)False

Question 8

Research has shown that most economic profits from selling a prescription drug are eliminated 20 years after the drug is first offered for sale.The main reason for the elimination of profits is

Accepted Answer

A) after 20 years most people who have taken the drug have passed away or are cured of the illness the drug was intended to treat. 
B) firms sell their patent rights to other firms so that they can concentrate on finding drugs to treat new illnesses. 
C) the quantity demanded of the drug has increased enough that the demand becomes inelastic and revenue falls. 
D) after 20 years patent protection is ended and other firms can produce less expensive generic versions of the drug. 
A) after 20 years most people who have taken the drug have passed away or are cured of the illness the drug was intended to treat. 
B) firms sell their patent rights to other firms so that they can concentrate on finding drugs to treat new illnesses. 
C) the quantity demanded of the drug has increased enough that the demand becomes inelastic and revenue falls. 
D) after 20 years patent protection is ended and other firms can produce less expensive generic versions of the drug.

Question 9

If we use a narrow definition of monopoly, then a monopoly is defined as a firm

Accepted Answer

A) that has been granted special production rights by the government. 
B) that can ignore the actions of all other firms because it produces a superior product compared to its rivals' products. 
C) that can ignore the actions of all other firms because it produces a product for which there are no close substitutes. 
D) that has the largest market share in an industry. 
A) that has been granted special production rights by the government. 
B) that can ignore the actions of all other firms because it produces a superior product compared to its rivals' products. 
C) that can ignore the actions of all other firms because it produces a product for which there are no close substitutes. 
D) that has the largest market share in an industry.

Question 10

Wendell can sell five motor homes per week at a price of $22 000.If he lowers the price of motor homes to $20 000 per week he will sell six motor homes.The marginal revenue of the sixth motor home is

Accepted Answer

A) $10 000 
B) $12 000 
C) $20 000 
D) $22 000 
A) $10 000 
B) $12 000 
C) $20 000 
D) $22 000

Question 11

Long-run economic profits would most likely exist in which market structure?

Accepted Answer

A) Monopoly, monopolistic competition and oligopoly 
B) Monopoly and oligopoly 
C) Monopoly and monopolistic competition 
D) Monopoly only 
A) Monopoly, monopolistic competition and oligopoly 
B) Monopoly and oligopoly 
C) Monopoly and monopolistic competition 
D) Monopoly only

Question 12

Which of the following is not a way by which price-discriminating firms can segment a market?

Accepted Answer

A) On the basis of time of purchase, for example long-distance calling 
B) By requiring an advance purchase, for example air tickets 
C) On basis of the buyer's location, for example requiring out-of-state students to pay higher tuition 
D) On the basis of the supplier's marginal cost of production, for example requiring customers to pay a premium for customising options 
A) On the basis of time of purchase, for example long-distance calling 
B) By requiring an advance purchase, for example air tickets 
C) On basis of the buyer's location, for example requiring out-of-state students to pay higher tuition 
D) On the basis of the supplier's marginal cost of production, for example requiring customers to pay a premium for customising options

Question 13

A merger between the Ford Motor Company and General Motors would be an example of a

Accepted Answer

A) vertical merger. 
B) horizontal merger. 
C) conglomerate merger. 
D) trust. 
A) vertical merger. 
B) horizontal merger. 
C) conglomerate merger. 
D) trust.

Question 14

A snack shop inside a hotel in a busy city has a monopoly on food sales if it is the only food vendor in the hotel that is open 24 hours a day.

Accepted Answer

A) True 
 B)False

Question 15

What is the difference between price discrimination and other forms of discrimination?
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

Discrimination based on race or gender a

Question 16

Table 9.1   A monopoly producer of foreign language translation software faces a demand and cost structure as given in Table 9.1.
-Refer to Table 9.1.The marginal revenue from the sale of the 12th unit is

Accepted Answer

A) $75 
B) $50 
C) $20 
D) -$5 
A) $75 
B) $50 
C) $20 
D) -$5

Question 17

If a monopolist practices perfect price discrimination,

Accepted Answer

A) the firm will break even in the long run. 
B) consumer surplus will be equal to the deadweight loss. 
C) producer surplus will equal consumer surplus. 
D) consumer surplus will be zero. 
A) the firm will break even in the long run. 
B) consumer surplus will be equal to the deadweight loss. 
C) producer surplus will equal consumer surplus. 
D) consumer surplus will be zero.

Question 18

a.What is the defining characteristic of a natural monopoly?
b.Should the government break up a natural monopoly into two or more firms to make the industry more competitive?
c.Suppose the government wants to ensure that some of the benefits of declining average total cost are passed on to consumers.To achieve this goal, it requires that the natural monopoly set its price equal to marginal cost.Is this a feasible goal? Explain.
d.What is an alternative to marginal cost pricing that ensures that consumers reap some of the benefits of declining average total cost?
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

a.The defining characteristic is the pre

Question 19

Figure 9.12   Figure 9.12 shows the cost and demand curves for the ETSA.
-Refer to Figure 9.12.Why won't regulators require that ETSA Power produce the economically efficient output level?

Accepted Answer

A) Because there is insufficient demand at that output level 
B) Because at the economically efficient output level, the marginal cost of producing the last unit sold exceeds the consumers' marginal value for that last unit 
C) Because Erickson Power will earn zero profit 
D) Because Erickson Power will sustain persistent losses and will not continue in business in the long run 
A) Because there is insufficient demand at that output level 
B) Because at the economically efficient output level, the marginal cost of producing the last unit sold exceeds the consumers' marginal value for that last unit 
C) Because Erickson Power will earn zero profit 
D) Because Erickson Power will sustain persistent losses and will not continue in business in the long run

Question 20

Some consumer electronic products such as plasma TVs, DVD players and digital cameras are introduced at very high prices, but over time, their prices start falling (beyond what could be attributed to falling costs as companies take advantage of economies of scale and cheaper technologies).Which of the following is the best explanation for this observation?

Accepted Answer

A) More firms are likely to enter the consumer electronic market over time, forcing market prices down. 
B) Early adopters of these new products typically have a higher demand and higher income compared to those who are willing to wait. 
C) Early adopters are more quality conscious and are willing to pay higher prices for the initial production of these goods. 
D) After satisfying the demand for early adopters, firms lower price to attract the more price sensitive consumers. 
A) More firms are likely to enter the consumer electronic market over time, forcing market prices down. 
B) Early adopters of these new products typically have a higher demand and higher income compared to those who are willing to wait. 
C) Early adopters are more quality conscious and are willing to pay higher prices for the initial production of these goods. 
D) After satisfying the demand for early adopters, firms lower price to attract the more price sensitive consumers.

Figure 9.1 -Refer to Figure 9.1.Which of the following statements about the firm depicted in the diagram is true?

A necessary condition for successful price discrimination is

If a theatre company expects $250 000 in ticket revenue from five performances and $288 000 in ticket revenue if it adds a sixth performance, the

A firm that engages in price discrimination must be able to identify the preferences of every customer it serves.

If a monopolist's price is $50 at 63 units of output, and marginal revenue equals marginal cost, and average total cost equals $43, then what is the firm's total profit?

Perfect price discrimination will lead a firm to produce up to the point where price equals marginal cost, the efficient level of output.

Research has shown that most economic profits from selling a prescription drug are eliminated 20 years after the drug is first offered for sale.The main reason for the elimination of profits is

If we use a narrow definition of monopoly, then a monopoly is defined as a firm

Wendell can sell five motor homes per week at a price of $22 000.If he lowers the price of motor homes to $20 000 per week he will sell six motor homes.The marginal revenue of the sixth motor home is

Long-run economic profits would most likely exist in which market structure?

Which of the following is not a way by which price-discriminating firms can segment a market?

A merger between the Ford Motor Company and General Motors would be an example of a

A snack shop inside a hotel in a busy city has a monopoly on food sales if it is the only food vendor in the hotel that is open 24 hours a day.

What is the difference between price discrimination and other forms of discrimination? __________________________________________________________________________________________________________________________________________________________________________________________

Table 9.1 A monopoly producer of foreign language translation software faces a demand and cost structure as given in Table 9.1. -Refer to Table 9.1.The marginal revenue from the sale of the 12^th unit is

If a monopolist practices perfect price discrimination,

Figure 9.12 Figure 9.12 shows the cost and demand curves for the ETSA. -Refer to Figure 9.12.Why won't regulators require that ETSA Power produce the economically efficient output level?

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

Figure 9.1 -Refer to Figure 9.1.Which of the following statements about the firm depicted in the diagram is true?

A necessary condition for successful price discrimination is

If a theatre company expects $250 000 in ticket revenue from five performances and $288 000 in ticket revenue if it adds a sixth performance, the

A firm that engages in price discrimination must be able to identify the preferences of every customer it serves.

If a monopolist's price is $50 at 63 units of output, and marginal revenue equals marginal cost, and average total cost equals $43, then what is the firm's total profit?

Perfect price discrimination will lead a firm to produce up to the point where price equals marginal cost, the efficient level of output.

Research has shown that most economic profits from selling a prescription drug are eliminated 20 years after the drug is first offered for sale.The main reason for the elimination of profits is

If we use a narrow definition of monopoly, then a monopoly is defined as a firm

Wendell can sell five motor homes per week at a price of $22 000.If he lowers the price of motor homes to $20 000 per week he will sell six motor homes.The marginal revenue of the sixth motor home is

Long-run economic profits would most likely exist in which market structure?

Which of the following is not a way by which price-discriminating firms can segment a market?

A merger between the Ford Motor Company and General Motors would be an example of a

A snack shop inside a hotel in a busy city has a monopoly on food sales if it is the only food vendor in the hotel that is open 24 hours a day.

What is the difference between price discrimination and other forms of discrimination? __________________________________________________________________________________________________________________________________________________________________________________________

Table 9.1 A monopoly producer of foreign language translation software faces a demand and cost structure as given in Table 9.1. -Refer to Table 9.1.The marginal revenue from the sale of the 12th unit is

If a monopolist practices perfect price discrimination,

Figure 9.12 Figure 9.12 shows the cost and demand curves for the ETSA. -Refer to Figure 9.12.Why won't regulators require that ETSA Power produce the economically efficient output level?

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

Table 9.1 A monopoly producer of foreign language translation software faces a demand and cost structure as given in Table 9.1. -Refer to Table 9.1.The marginal revenue from the sale of the 12^th unit is