Question 1

Table 15-1
  
-Refer to Table 15-1. If the monopolist wants to maximize its revenue, how many units of its product should it sell?

Accepted Answer

A)  4 
B)  5 
C)  6 
D)  8 
A)  4 
B)  5 
C)  6 
D)  8

Question 2

Scenario 15-7
Black Box Cable TV is able to purchase an exclusive right to sell a premium movie channel (PMC) in its market area. Let's assume that Black Box Cable pays $150,000 a year for the exclusive marketing rights to PMC. Since Black Box has already installed cable to all of the homes in its market area, the marginal cost of delivering PMC to subscribers is zero. The manager of Black Box needs to know what price to charge for the PMC service to maximize her profit. Before setting price, she hires an economist to estimate demand for the PMC service. The economist discovers that there are two types of subscribers who value premium movie channels. First are the 4,000 die-hard TV viewers who will pay as much as $150 a year for the new PMC premium channel. Second, the PMC channel will appeal to 20,000 occasional TV viewers who will pay as much as $20 a year for a subscription to PMC.
-Refer to Scenario 15-7. What is the deadweight loss associated with the nondiscriminating pricing policy compared to the price discriminating policy?

Accepted Answer

A)  $375,000 
B)  $400,000 
C)  $475,000 
D)  It cannot be determined from the information provided. 
A)  $375,000 
B)  $400,000 
C)  $475,000 
D)  It cannot be determined from the information provided.

Question 3

Which of the following statements is (are) true of a monopoly? (i) A monopoly has the ability to set the price of its product at whatever level it desires.
(ii) A monopoly's total revenue will always increase when it increases the price of its product.
(iii) The more a monopoly increases output, the higher the profits.

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 4

Which of the following statements is correct for both a monopolist and a perfectly competitive firm? (i) The firm maximizes profits by equating marginal revenue with marginal cost.
(ii) The firm maximizes profits by equating price with marginal cost.
(iii) Demand equals marginal revenue.
(iv) Average revenue equals price.

Accepted Answer

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

Question 5

A monopolist

Accepted Answer

A)  has a supply curve that is upward-sloping, just like a competitive firm. 
B)  does not have a supply curve because the monopolist sets its price at the same time it chooses the quantity to supply. 
C)  has a horizontal supply curve, just like a competitive firm. 
D)  does not have a supply curve because marginal revenue exceeds the price it charges for its products. 
A)  has a supply curve that is upward-sloping, just like a competitive firm. 
B)  does not have a supply curve because the monopolist sets its price at the same time it chooses the quantity to supply. 
C)  has a horizontal supply curve, just like a competitive firm. 
D)  does not have a supply curve because marginal revenue exceeds the price it charges for its products.

Question 6

Compared to the monopoly outcome with a single price, imperfect price discrimination (i) sometimes raises total surplus.
(ii) sometimes lowers total surplus.
(iii) always leads to a lower quantity of output.

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)

Question 7

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 8

The socially efficient level of production occurs where the marginal cost curve intersects

Accepted Answer

A)  average variable cost. 
B)  average total cost. 
C)  demand. 
D)  marginal revenue. 
A)  average variable cost. 
B)  average total cost. 
C)  demand. 
D)  marginal revenue.

Question 9

A monopolist that can practice perfect price discrimination will not impose a deadweight loss on society.

Accepted Answer

A) True 
 B)False

Question 10

Table 15-21
Tommy's Tie Company, a monopolist, has the following cost and revenue information. Assume that Tommy's is
able to engage in perfect price discrimination.
  
-Refer to Table 15-21. If the monopolist can engage in perfect price discrimination, what is the average revenue when 7 ties are sold?

Accepted Answer

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

Question 11

If the government regulates the price that a natural monopolist can charge to be equal to the firm's average total cost, the firm will

Accepted Answer

A)  earn zero profits. 
B)  earn positive profits, causing other firms to enter the industry. 
C)  earn negative profits, causing the firm to exit the industry. 
D)  minimize costs in order to lower the price that it charges. 
A)  earn zero profits. 
B)  earn positive profits, causing other firms to enter the industry. 
C)  earn negative profits, causing the firm to exit the industry. 
D)  minimize costs in order to lower the price that it charges.

Question 12

Figure 15-23  
-Refer to Figure 15-23. What type of monopoly is shown in the figure?

Accepted Answer

The answer of Figure 15-23  
-Refer to Figure 15-23....

Question 13

The economic inefficiency of a monopolist can be measured by the

Accepted Answer

A)  deadweight loss. 
B)  value of the unrealized trades that could be made if the monopolist produced the socially-efficient output. 
C)  area above marginal cost but beneath demand from the monopoly output to the socially-efficient output. 
D)  All of the above are correct. 
A)  deadweight loss. 
B)  value of the unrealized trades that could be made if the monopolist produced the socially-efficient output. 
C)  area above marginal cost but beneath demand from the monopoly output to the socially-efficient output. 
D)  All of the above are correct.

Question 14

Table 15-12
The following table provides information on the price, quantity, and average total cost for a monopoly.
  
-Refer to Table 15-12. If the firm produces the profit-maximizing level of output, it will earn profits of

Accepted Answer

A)  $18. 
B)  $24. 
C)  $15. 
D)  $12. 
A)  $18. 
B)  $24. 
C)  $15. 
D)  $12.

Question 15

Scenario 15-8
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 20,000 occasional sports viewers who will pay as much as $25 a year for a subscription to it.
-Refer to Scenario 15-8. If Mega Media Cable TV is unable to price discriminate, what price will it choose to maximize its profit, and what is the amount of the profit?

Accepted Answer

A)  price = $25; profit = $575,000 
B)  price = $25; profit = $475,000 
C)  price = $150; profit = $450,000 
D)  price = $150; profit = $350,000 
A)  price = $25; profit = $575,000 
B)  price = $25; profit = $475,000 
C)  price = $150; profit = $450,000 
D)  price = $150; profit = $350,000

Question 16

Comparing firms in perfectly competitive markets to monopoly firms, which can earn economic profits in the long run?

Accepted Answer

The answer of Comparing firms in perfectly competitive markets to...

Question 17

Which of the following is not a reason for the existence of a monopoly?

Accepted Answer

A)  patents 
B)  marginal-cost pricing 
C)  economies of scale 
D)  trademarks 
A)  patents 
B)  marginal-cost pricing 
C)  economies of scale 
D)  trademarks

Question 18

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 19

Drug companies are allowed to be monopolists in the drugs they discover in order to

Accepted Answer

A)  increase the availability of expensive but useful medications. 
B)  increase the overall welfare of society through better health because drug companies continually produce better medications. 
C)  encourage research. 
D)  All of the above are correct. 
A)  increase the availability of expensive but useful medications. 
B)  increase the overall welfare of society through better health because drug companies continually produce better medications. 
C)  encourage research. 
D)  All of the above are correct.

Question 20

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

Table 15-1 -Refer to Table 15-1. If the monopolist wants to maximize its revenue, how many units of its product should it sell?

A monopolist

Compared to the monopoly outcome with a single price, imperfect price discrimination (i) sometimes raises total surplus. (ii) sometimes lowers total surplus. (iii) always leads to a lower quantity of output.

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

The socially efficient level of production occurs where the marginal cost curve intersects

A monopolist that can practice perfect price discrimination will not impose a deadweight loss on society.

Table 15-21 Tommy's Tie Company, a monopolist, has the following cost and revenue information. Assume that Tommy's is able to engage in perfect price discrimination. -Refer to Table 15-21. If the monopolist can engage in perfect price discrimination, what is the average revenue when 7 ties are sold?

If the government regulates the price that a natural monopolist can charge to be equal to the firm's average total cost, the firm will

Figure 15-23 -Refer to Figure 15-23. What type of monopoly is shown in the figure?

The economic inefficiency of a monopolist can be measured by the

Table 15-12 The following table provides information on the price, quantity, and average total cost for a monopoly. -Refer to Table 15-12. If the firm produces the profit-maximizing level of output, it will earn profits of

Comparing firms in perfectly competitive markets to monopoly firms, which can earn economic profits in the long run?

Which of the following is not a reason for the existence of a monopoly?

Monopolies use their market power to

Drug companies are allowed to be monopolists in the drugs they discover in order to

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

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

Filters

Exam 15: Monopoly

Table 15-1 -Refer to Table 15-1. If the monopolist wants to maximize its revenue, how many units of its product should it sell?

A monopolist

Compared to the monopoly outcome with a single price, imperfect price discrimination (i) sometimes raises total surplus. (ii) sometimes lowers total surplus. (iii) always leads to a lower quantity of output.

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

The socially efficient level of production occurs where the marginal cost curve intersects

A monopolist that can practice perfect price discrimination will not impose a deadweight loss on society.

If the government regulates the price that a natural monopolist can charge to be equal to the firm's average total cost, the firm will

Figure 15-23 -Refer to Figure 15-23. What type of monopoly is shown in the figure?

The economic inefficiency of a monopolist can be measured by the

Table 15-12 The following table provides information on the price, quantity, and average total cost for a monopoly. -Refer to Table 15-12. If the firm produces the profit-maximizing level of output, it will earn profits of

Comparing firms in perfectly competitive markets to monopoly firms, which can earn economic profits in the long run?

Which of the following is not a reason for the existence of a monopoly?

Monopolies use their market power to

Drug companies are allowed to be monopolists in the drugs they discover in order to

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

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

Filters