Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is a characteristic of a natural monopoly?

Accepted Answer

A)  Fixed costs are typically a small portion of total costs. 
B)  Average total cost declines over large regions of output. 
C)  The product sold is a natural resource such as diamonds or water. 
D)  All of the above are correct. 
A)  Fixed costs are typically a small portion of total costs. 
B)  Average total cost declines over large regions of output. 
C)  The product sold is a natural resource such as diamonds or water. 
D)  All of the above are correct.

Question 3

The output effect describes the situation when a monopolist sells more output and, all else equal, total revenue

Accepted Answer

A)  increases. 
B)  decreases. 
C)  is unchanged. 
D)  is maximized. 
A)  increases. 
B)  decreases. 
C)  is unchanged. 
D)  is maximized.

Question 4

A natural monopolist's ability to price its product is

Accepted Answer

A)  constrained by the market demand curve. 
B)  constrained by market supply. 
C)  not affected by market demand. 
D)  enhanced by regulatory control of the government. 
A)  constrained by the market demand curve. 
B)  constrained by market supply. 
C)  not affected by market demand. 
D)  enhanced by regulatory control of the government.

Question 5

The fundamental cause of monopolies is barriers to entry.

Accepted Answer

A) True 
 B)False

Question 6

When a monopolist reduces the quantity of output it produces and sells, the

Accepted Answer

A)  price of its output increases. 
B)  price of its output remains constant. 
C)  price of its output decreases. 
D)  profits for the firm always decrease. 
A)  price of its output increases. 
B)  price of its output remains constant. 
C)  price of its output decreases. 
D)  profits for the firm always decrease.

Question 7

Exclusive ownership of a key resource

Accepted Answer

A)  is the most common cause of a monopoly. 
B)  is a potential but rare cause of a monopoly. 
C)  explains the monopoly ownership of the US Postal Service. 
D)  explains why a single firm distributes water to a community. 
A)  is the most common cause of a monopoly. 
B)  is a potential but rare cause of a monopoly. 
C)  explains the monopoly ownership of the US Postal Service. 
D)  explains why a single firm distributes water to a community.

Question 8

The DeBeers Company faces very little competition from other firms in the wholesale diamond market. Why isn't the price of the wholesale diamonds $10,000 per carat?

Accepted Answer

A)  because the government would not allow such a high price 
B)  because stockholders would not allow such a high price 
C)  because the company would sell so few copies that they would earn higher profits by selling at a lower price 
D)  All of the above are correct. 
A)  because the government would not allow such a high price 
B)  because stockholders would not allow such a high price 
C)  because the company would sell so few copies that they would earn higher profits by selling at a lower price 
D)  All of the above are correct.

Question 9

When a monopoly increases its output and sales,

Accepted Answer

A)  both the output effect and the price effect work to increase total revenue. 
B)  the output effect works to increase total revenue, and the price effect works to decrease total revenue. 
C)  the output effect works to decrease total revenue, and the price effect works to increase total revenue. 
D)  both the output effect and the price effect work to decrease total revenue. 
A)  both the output effect and the price effect work to increase total revenue. 
B)  the output effect works to increase total revenue, and the price effect works to decrease total revenue. 
C)  the output effect works to decrease total revenue, and the price effect works to increase total revenue. 
D)  both the output effect and the price effect work to decrease total revenue.

Question 10

The process of buying a good in one market at a low price and selling the good in another market for a higher price in order to profit from the price difference is known as

Accepted Answer

A)  sabotage. 
B)  conspiracy. 
C)  arbitrage. 
D)  collusion. 
A)  sabotage. 
B)  conspiracy. 
C)  arbitrage. 
D)  collusion.

Question 11

Scenario 15-5
An airline knows that there are two types of travelers: business travelers and vacationers. For a particular flight, there are 100 business travelers who will pay $600 for a ticket while there are 50 vacationers who will pay $300 for a ticket. There are 150 seats available on the plane. Suppose the cost to the airline of providing the flight is $20,000, which includes the cost of the pilots, flight attendants, fuel, etc.
-Refer to Scenario 15-5. How much profit will the airline earn if it sets the price of each ticket at $300?

Accepted Answer

A)  -$15,000 
B)  -$5,000 
C)  $25,000 
D)  $45,000 
A)  -$15,000 
B)  -$5,000 
C)  $25,000 
D)  $45,000

Question 12

Table 15-5
A monopolist faces the following demand curve:
  
-Refer to Table 15-5. The monopolist has total fixed costs of $60 and has a constant marginal cost of $15. What is the profit-maximizing price?

Accepted Answer

A)  $4 
B)  $39 
C)  $36 
D)  $42 
A)  $4 
B)  $39 
C)  $36 
D)  $42

Question 13

Table 15-19
A monopolist faces the following demand curve:
  
-Refer to Table 15-19. If a monopolist faces a constant marginal cost of $7, how much output should the firm produce?

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 14

A monopoly can earn positive profits because it

Accepted Answer

A)  can sell unlimited quantities at any price it chooses. 
B)  takes the market price as given and can sell unlimited quantities. 
C)  can set the price it charges for its output but faces a horizontal demand curve. 
D)  can maintain a price such that total revenues will exceed total costs. 
A)  can sell unlimited quantities at any price it chooses. 
B)  takes the market price as given and can sell unlimited quantities. 
C)  can set the price it charges for its output but faces a horizontal demand curve. 
D)  can maintain a price such that total revenues will exceed total costs.

Question 15

Table 15-22
  
-Refer to Table 15-22. The marginal revenue, when the quantity changes from 30 to 40 units, is

Accepted Answer

The answer of Table 15-22
  
-Refer to Table 15-22....

Question 16

Scenario 15-5
An airline knows that there are two types of travelers: business travelers and vacationers. For a particular flight, there are 100 business travelers who will pay $600 for a ticket while there are 50 vacationers who will pay $300 for a ticket. There are 150 seats available on the plane. Suppose the cost to the airline of providing the flight is $20,000, which includes the cost of the pilots, flight attendants, fuel, etc.
-Refer to Scenario 15-5. How much additional profit can the airline earn by charging each customer their willingness to pay relative to charging a flat price of $300 per ticket?

Accepted Answer

A)  $10,000 
B)  $15,000 
C)  $30,000 
D)  $45,000 
A)  $10,000 
B)  $15,000 
C)  $30,000 
D)  $45,000

Question 17

Antitrust laws give the Justice Department the authority to challenge potential mergers between companies in an effort to safeguard society from monopoly power.

Accepted Answer

A) True 
 B)False

Question 18

Table 15-17
A monopolist faces the following demand curve:
  
-Refer to Table 15-17. Which of the following statements best describes the relationship between the price and the marginal revenue associated with values in the table?

Accepted Answer

A)  The price and marginal revenue are the same. 
B)  The price is greater than or equal to the marginal revenue. 
C)  The price is less than or equal to the marginal revenue. 
D)  The relationship cannot be determined from the information given. 
A)  The price and marginal revenue are the same. 
B)  The price is greater than or equal to the marginal revenue. 
C)  The price is less than or equal to the marginal revenue. 
D)  The relationship cannot be determined from the information given.

Question 19

Table 15-11
The following table shows quantity, price, and marginal cost information for a monopoly:
  
-Refer to Table 15-11. What would be the firm's marginal revenue at the profit­maximizing level of output?

Accepted Answer

A)  $7 
B)  $6 
C)  $5 
D)  $1 
A)  $7 
B)  $6 
C)  $5 
D)  $1

Question 20

Which of the following statements is not correct?

Accepted Answer

A)  Part of the deadweight loss associated with monopoly is measured by the monopolist's economic profit. 
B)  Marginal cost is always less than average total cost in a natural monopoly. 
C)  Discount coupons available free to the public are a type of price discrimination. 
D)  Anti-trust laws make it harder for firms to create synergies. 
A)  Part of the deadweight loss associated with monopoly is measured by the monopolist's economic profit. 
B)  Marginal cost is always less than average total cost in a natural monopoly. 
C)  Discount coupons available free to the public are a type of price discrimination. 
D)  Anti-trust laws make it harder for firms to create synergies.

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

Which of the following is a characteristic of a natural monopoly?

The output effect describes the situation when a monopolist sells more output and, all else equal, total revenue

A natural monopolist's ability to price its product is

The fundamental cause of monopolies is barriers to entry.

When a monopolist reduces the quantity of output it produces and sells, the

Exclusive ownership of a key resource

The DeBeers Company faces very little competition from other firms in the wholesale diamond market. Why isn't the price of the wholesale diamonds $10,000 per carat?

When a monopoly increases its output and sales,

The process of buying a good in one market at a low price and selling the good in another market for a higher price in order to profit from the price difference is known as

Table 15-5 A monopolist faces the following demand curve: -Refer to Table 15-5. The monopolist has total fixed costs of $60 and has a constant marginal cost of $15. What is the profit-maximizing price?

Table 15-19 A monopolist faces the following demand curve: -Refer to Table 15-19. If a monopolist faces a constant marginal cost of $7, how much output should the firm produce?

A monopoly can earn positive profits because it

Table 15-22 -Refer to Table 15-22. The marginal revenue, when the quantity changes from 30 to 40 units, is

Antitrust laws give the Justice Department the authority to challenge potential mergers between companies in an effort to safeguard society from monopoly power.

Table 15-17 A monopolist faces the following demand curve: -Refer to Table 15-17. Which of the following statements best describes the relationship between the price and the marginal revenue associated with values in the table?

Table 15-11 The following table shows quantity, price, and marginal cost information for a monopoly: -Refer to Table 15-11. What would be the firm's marginal revenue at the profitmaximizing level of output?

Which of the following statements is not correct?

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

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

Which of the following is a characteristic of a natural monopoly?

The output effect describes the situation when a monopolist sells more output and, all else equal, total revenue

A natural monopolist's ability to price its product is

The fundamental cause of monopolies is barriers to entry.

When a monopolist reduces the quantity of output it produces and sells, the

Exclusive ownership of a key resource

The DeBeers Company faces very little competition from other firms in the wholesale diamond market. Why isn't the price of the wholesale diamonds $10,000 per carat?

When a monopoly increases its output and sales,

The process of buying a good in one market at a low price and selling the good in another market for a higher price in order to profit from the price difference is known as

Table 15-5 A monopolist faces the following demand curve: -Refer to Table 15-5. The monopolist has total fixed costs of $60 and has a constant marginal cost of $15. What is the profit-maximizing price?

Table 15-19 A monopolist faces the following demand curve: -Refer to Table 15-19. If a monopolist faces a constant marginal cost of $7, how much output should the firm produce?

A monopoly can earn positive profits because it

Table 15-22 -Refer to Table 15-22. The marginal revenue, when the quantity changes from 30 to 40 units, is

Antitrust laws give the Justice Department the authority to challenge potential mergers between companies in an effort to safeguard society from monopoly power.

Table 15-17 A monopolist faces the following demand curve: -Refer to Table 15-17. Which of the following statements best describes the relationship between the price and the marginal revenue associated with values in the table?

Table 15-11 The following table shows quantity, price, and marginal cost information for a monopoly: -Refer to Table 15-11. What would be the firm's marginal revenue at the profit­maximizing level of output?

Which of the following statements is not correct?

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

Table 15-11 The following table shows quantity, price, and marginal cost information for a monopoly: -Refer to Table 15-11. What would be the firm's marginal revenue at the profitmaximizing level of output?