Question 1

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 2

Figure 15-3  
-Refer to Figure 15-3. Which of the following statements is correct?

Accepted Answer

A)  Panel C represents the typical demand curve for a perfectly competitive firm, and Panel B represents the typical demand curve for a monopoly. 
B)  Panel B represents the typical demand curve for a perfectly competitive firm, and Panel A represents the typical demand curve for a monopoly. 
C)  Panel A represents the typical demand curve for a perfectly competitive firm, and Panel C represents the typical demand curve for a monopoly. 
D)  Panel C represents the typical demand curve for a perfectly competitive firm, and Panel D represents the typical demand curve for a monopoly. 
A)  Panel C represents the typical demand curve for a perfectly competitive firm, and Panel B represents the typical demand curve for a monopoly. 
B)  Panel B represents the typical demand curve for a perfectly competitive firm, and Panel A represents the typical demand curve for a monopoly. 
C)  Panel A represents the typical demand curve for a perfectly competitive firm, and Panel C represents the typical demand curve for a monopoly. 
D)  Panel C represents the typical demand curve for a perfectly competitive firm, and Panel D represents the typical demand curve for a monopoly.

Question 3

For a typical natural monopoly, average total cost is

Accepted Answer

A)  rising, often because marginal costs are very large. 
B)  rising, often because fixed costs are very large. 
C)  declining, often because marginal costs are very large. 
D)  declining, often because fixed costs are very large. 
A)  rising, often because marginal costs are very large. 
B)  rising, often because fixed costs are very large. 
C)  declining, often because marginal costs are very large. 
D)  declining, often because fixed costs are very large.

Question 4

Selling a good at a price determined by the intersection of the demand curve and the marginal cost curve is consistent with the (i) socially-optimal level of output.
(ii) market solution for profit-maximizing competitive firms.
(iii) market solution for a profit-maximizing monopoly.

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 5

Figure 15-5  
-Refer to Figure 15-5. A profit-maximizing monopoly will charge a price of

Accepted Answer

A)  P1. 
B)  P2. 
C)  P3. 
D)  P4. 
A)  P1. 
B)  P2. 
C)  P3. 
D)  P4.

Question 6

Suppose a firm has a monopoly on the sale of widgets and faces a downward-sloping demand curve. When selling the 100th widget, the firm will always receive

Accepted Answer

A)  less marginal revenue on the 100th widget than it received on the 99th widget. 
B)  more average revenue on the 100th widget than it received on the 99th widget. 
C)  more total revenue on the 100 widgets than it received on the first 99 widgets. 
D)  a lower average cost per unit at 100 units of output than at 99 units of output. 
A)  less marginal revenue on the 100th widget than it received on the 99th widget. 
B)  more average revenue on the 100th widget than it received on the 99th widget. 
C)  more total revenue on the 100 widgets than it received on the first 99 widgets. 
D)  a lower average cost per unit at 100 units of output than at 99 units of output.

Question 7

Figure 15-4  
-Refer to Figure 15-4. Profit can always be increased by increasing the level of output by one unit if the monopolist is currently operating at (i) Q1.
(ii) Q2.
(iii) Q3.
(iv) Q4.

Accepted Answer

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

Question 8

If a pharmaceutical company discovers a new drug and successfully patents it, patent law gives the firm

Accepted Answer

A)  partial ownership of the right to sell the drug for a limited number of years. 
B)  partial ownership of the right to sell the drug for an unlimited number of years. 
C)  sole ownership of the right to sell the drug for a limited number of years. 
D)  sole ownership of the right to sell the drug for an unlimited number of years. 
A)  partial ownership of the right to sell the drug for a limited number of years. 
B)  partial ownership of the right to sell the drug for an unlimited number of years. 
C)  sole ownership of the right to sell the drug for a limited number of years. 
D)  sole ownership of the right to sell the drug for an unlimited number of years.

Question 9

If a monopolist has zero marginal costs, it will produce

Accepted Answer

A)  the output at which total revenue is maximized. 
B)  in the range in which marginal revenue is still increasing. 
C)  at the point at which marginal revenue is at a maximum. 
D)  in the range in which marginal revenue is negative. 
A)  the output at which total revenue is maximized. 
B)  in the range in which marginal revenue is still increasing. 
C)  at the point at which marginal revenue is at a maximum. 
D)  in the range in which marginal revenue is negative.

Question 10

A monopolist faces a

Accepted Answer

A)  horizontal demand curve. 
B)  vertical demand curve. 
C)  downward-sloping demand curve. 
D)  U-shaped demand curve. 
A)  horizontal demand curve. 
B)  vertical demand curve. 
C)  downward-sloping demand curve. 
D)  U-shaped demand curve.

Question 11

Table 15-19
A monopolist faces the following demand curve:
  
-Refer to Table 15-19. If a monopolist faces a constant marginal cost of $1, how much output should the firm produce in order to equate marginal revenue with marginal cost?

Accepted Answer

A)  3 units 
B)  4 units 
C)  5 units 
D)  6 units 
A)  3 units 
B)  4 units 
C)  5 units 
D)  6 units

Question 12

Which of the following statements is correct?

Accepted Answer

A)  If the monopolist's marginal revenue is greater than its marginal cost, the monopolist can increase profit by selling more units at a lower price per unit. 
B)  If the monopolist's marginal revenue is greater than its marginal cost, the monopolist can increase profit by selling fewer units at a higher price per unit. 
C)  When a monopolist produces where price equals the minimum of average total cost, it earns a positive economic profit. 
D)  If the monopolist is earning a positive economic profit, it must be producing where MR = Md. 
A)  If the monopolist's marginal revenue is greater than its marginal cost, the monopolist can increase profit by selling more units at a lower price per unit. 
B)  If the monopolist's marginal revenue is greater than its marginal cost, the monopolist can increase profit by selling fewer units at a higher price per unit. 
C)  When a monopolist produces where price equals the minimum of average total cost, it earns a positive economic profit. 
D)  If the monopolist is earning a positive economic profit, it must be producing where MR = Md.

Question 13

Goods that do not have close substitutes have downward-sloping demand curves.

Accepted Answer

A) True 
 B)False

Question 14

The laws governing patents and copyrights

Accepted Answer

A)  eliminate the need for firms to engage in research and development. 
B)  are intended to serve private interests, not the public's interest. 
C)  reduce fixed costs for firms that obtain them. 
D)  None of the above is correct. 
A)  eliminate the need for firms to engage in research and development. 
B)  are intended to serve private interests, not the public's interest. 
C)  reduce fixed costs for firms that obtain them. 
D)  None of the above is correct.

Question 15

Scenario 15-1
Consider a transportation corporation named Reading's that has just completed the development of a new light rail system in Minneapolis. Currently, there are plenty of seats on the train, and it is never crowded. Its capacity far exceeds the needs of the city. After just a few years of operation, the shareholders of Reading's experienced incredibly high rates of return on their investment due to the profitability of the corporation.
-Refer to Scenario 15-1. Which of the following statements is most likely to be true? (i) New entrants to the market know they will have a smaller market share than Reading's
Currently has.
(ii) Reading's is a natural monopoly.
(iii) Reading's is most likely experiencing increasing average total cost.

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 16

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.

Question 17

Table 15-9
Consider the following demand and cost information for a monopoly.
  
-Refer to Table 15-9. What is the marginal revenue of the 3rd unit?

Accepted Answer

A)  $4 
B)  $12 
C)  $20 
D)  $28 
A)  $4 
B)  $12 
C)  $20 
D)  $28

Question 18

The fundamental source of monopoly power is

Accepted Answer

A)  barriers to entry. 
B)  profit. 
C)  decreasing average total cost. 
D)  a product without close substitutes. 
A)  barriers to entry. 
B)  profit. 
C)  decreasing average total cost. 
D)  a product without close substitutes.

Question 19

Deadweight loss measures the loss in society's welfare that occurs because a monopolist can earn profits without the concern of new firms entering its industry.

Accepted Answer

A) True 
 B)False

Question 20

Table 15-16
A monopolist faces the following demand curve:
  
-Refer to Table 15-16. The monopolist has total fixed costs of $40 and a constant marginal cost of $5. At the profit-maximizing level of output, the monopolist's average total cost is

Accepted Answer

A)  $9.00. 
B)  $7.50. 
C)  $6.74. 
D)  $5.82. 
A)  $9.00. 
B)  $7.50. 
C)  $6.74. 
D)  $5.82.

Exam 15: Monopoly

Which of the following statements is correct?

Figure 15-3 -Refer to Figure 15-3. Which of the following statements is correct?

For a typical natural monopoly, average total cost is

Selling a good at a price determined by the intersection of the demand curve and the marginal cost curve is consistent with the (i) socially-optimal level of output. (ii) market solution for profit-maximizing competitive firms. (iii) market solution for a profit-maximizing monopoly.

Figure 15-5 -Refer to Figure 15-5. A profit-maximizing monopoly will charge a price of

Suppose a firm has a monopoly on the sale of widgets and faces a downward-sloping demand curve. When selling the 100th widget, the firm will always receive

Figure 15-4 -Refer to Figure 15-4. Profit can always be increased by increasing the level of output by one unit if the monopolist is currently operating at (i) Q1. (ii) Q2. (iii) Q3. (iv) Q4.

If a pharmaceutical company discovers a new drug and successfully patents it, patent law gives the firm

If a monopolist has zero marginal costs, it will produce

A monopolist faces a

Table 15-19 A monopolist faces the following demand curve: -Refer to Table 15-19. If a monopolist faces a constant marginal cost of $1, how much output should the firm produce in order to equate marginal revenue with marginal cost?

Which of the following statements is correct?

Goods that do not have close substitutes have downward-sloping demand curves.

The laws governing patents and copyrights

For a profit-maximizing monopolist,

Table 15-9 Consider the following demand and cost information for a monopoly. -Refer to Table 15-9. What is the marginal revenue of the 3rd unit?

The fundamental source of monopoly power is

Deadweight loss measures the loss in society's welfare that occurs because a monopolist can earn profits without the concern of new firms entering its industry.

Table 15-16 A monopolist faces the following demand curve: -Refer to Table 15-16. The monopolist has total fixed costs of $40 and a constant marginal cost of $5. At the profit-maximizing level of output, the monopolist's average total cost is

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