Question 1

One problem with government operation of monopolies is that

Accepted Answer

A)  a benevolent government is likely to be interested in generating profits for political gain. 
B)  monopolies typically have rising average costs. 
C)  the government typically has little incentive to reduce costs. 
D)  a government-regulated outcome will increase the profitability of the monopoly. 
A)  a benevolent government is likely to be interested in generating profits for political gain. 
B)  monopolies typically have rising average costs. 
C)  the government typically has little incentive to reduce costs. 
D)  a government-regulated outcome will increase the profitability of the monopoly.

Question 2

A monopolist maximizes profits by

Accepted Answer

A)  producing an output level where marginal revenue equals marginal cost. 
B)  charging a price equal to marginal revenue and marginal cost. 
C)  charging a price where marginal cost equals average total cost. 
D)  Both a and b are correct. 
A)  producing an output level where marginal revenue equals marginal cost. 
B)  charging a price equal to marginal revenue and marginal cost. 
C)  charging a price where marginal cost equals average total cost. 
D)  Both a and b are correct.

Question 3

Competitive firms have

Accepted Answer

A)  downward-sloping demand curves, and they can sell as much output as they desire at the market price. 
B)  downward-sloping demand curves, and they can sell only a limited quantity of output at each price. 
C)  horizontal demand curves, and they can sell as much output as they desire at the market price. 
D)  horizontal demand curves, and they can sell only a limited quantity of output at each price. 
A)  downward-sloping demand curves, and they can sell as much output as they desire at the market price. 
B)  downward-sloping demand curves, and they can sell only a limited quantity of output at each price. 
C)  horizontal demand curves, and they can sell as much output as they desire at the market price. 
D)  horizontal demand curves, and they can sell only a limited quantity of output at each price.

Question 4

The monopolist's profit-maximizing quantity of output is determined by the intersection of which of the following two curves?

Accepted Answer

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

Question 5

In reality, perfect price discrimination is

Accepted Answer

A)  used by about 75 percent of all monopolies. 
B)  used by about 50 percent of all monopolies. 
C)  seldom used by monopolies because it leads to lower profits. 
D)  rarely possible. 
A)  used by about 75 percent of all monopolies. 
B)  used by about 50 percent of all monopolies. 
C)  seldom used by monopolies because it leads to lower profits. 
D)  rarely possible.

Question 6

Which of the following is the preferred strategy for the government to follow to remedy the inefficient allocation of resources associated with monopolies?

Accepted Answer

A)  preventing mergers through antitrust laws 
B)  regulating the prices that monopolies can charge 
C)  doing nothing 
D)  None of the above strategies is preferred. Each is a viable strategy. 
A)  preventing mergers through antitrust laws 
B)  regulating the prices that monopolies can charge 
C)  doing nothing 
D)  None of the above strategies is preferred. Each is a viable strategy.

Question 7

Table 15-8
The following table provides information on the price, quantity, and average total cost for a monopoly.
  
-Refer to Table 15-8. How much extra revenue does the monopolist earn when he lowers the price from $18 to $12?

Accepted Answer

A)  $10 
B)  $12 
C)  $30 
D)  $41 
A)  $10 
B)  $12 
C)  $30 
D)  $41

Question 8

A monopolist's profit is equal to (Price - Marginal Cost) × Quantity.

Accepted Answer

A) True 
 B)False

Question 9

For a firm to price discriminate,

Accepted Answer

A)  it must be a natural monopoly. 
B)  it must be regulated by the government. 
C)  it must have some market power. 
D)  consumers must tell the firm what they are willing to pay for the product. 
A)  it must be a natural monopoly. 
B)  it must be regulated by the government. 
C)  it must have some market power. 
D)  consumers must tell the firm what they are willing to pay for the product.

Question 10

Table 15-10
The monopolist faces the following demand curve:
  
-Refer to Table 15-10. If the monopolist has total fixed costs of $40 and a constant marginal cost of $5, what is the profit-maximizing level of output?

Accepted Answer

A)  7 units 
B)  16 units 
C)  23 units 
D)  31 units 
A)  7 units 
B)  16 units 
C)  23 units 
D)  31 units

Question 11

For a monopoly market, total surplus can be defined as the value of the good to

Accepted Answer

A)  producers minus the cost incurred by consumers. 
B)  producers plus the cost incurred by consumers. 
C)  consumers minus the costs of producing the good. 
D)  consumers plus the cost of producing the good. 
A)  producers minus the cost incurred by consumers. 
B)  producers plus the cost incurred by consumers. 
C)  consumers minus the costs of producing the good. 
D)  consumers plus the cost of producing the good.

Question 12

Figure 15-8  
-Refer to Figure 15-8. What is the area of deadweight loss?

Accepted Answer

A)  the rectangle (A-
C) *X 
B)  the triangle 1/2[(A-
C) *(Y-X)] 
C)  the triangle 1/2[(A-
B) *(Y-X)] 
D)  the rectangle (A-
C) *X plus the triangle 1/2[(A-
C) *(Y-X)] 
A)  the rectangle (A-
C) *X 
B)  the triangle 1/2[(A-
C) *(Y-X)] 
C)  the triangle 1/2[(A-
B) *(Y-X)] 
D)  the rectangle (A-
C) *X plus the triangle 1/2[(A-
C) *(Y-X)]

Question 13

A natural monopoly arises when

Accepted Answer

A)  there are constant returns to scale over the relevant range of output. 
B)  there are economies of scale over the relevant range of output. 
C)  one firm owns a key natural resource. 
D)  the government gives a single firm the exclusive right to produce a particular good or service. 
A)  there are constant returns to scale over the relevant range of output. 
B)  there are economies of scale over the relevant range of output. 
C)  one firm owns a key natural resource. 
D)  the government gives a single firm the exclusive right to produce a particular good or service.

Question 14

Figure 15-13  
-Refer to Figure 15-13. A profit-maximizing monopolist would create a deadweight loss to society valued at

Accepted Answer

A)  $12. 
B)  $24. 
C)  $42. 
D)  $84. 
A)  $12. 
B)  $24. 
C)  $42. 
D)  $84.

Question 15

Perfect price discrimination

Accepted Answer

A)  eliminates deadweight loss. 
B)  reduces profits to the monopolist. 
C)  decreases the total quantity sold by the monopolist. 
D)  requires arbitrage in order for the monopolist to maximize profits. 
A)  eliminates deadweight loss. 
B)  reduces profits to the monopolist. 
C)  decreases the total quantity sold by the monopolist. 
D)  requires arbitrage in order for the monopolist to maximize profits.

Question 16

Some companies merge in order to lower costs through efficient joint production.

Accepted Answer

A) True 
 B)False

Question 17

Table 15-22
  
-Refer to Table 15-22. The marginal revenue becomes negative with the production of which unit of output?

Accepted Answer

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

Question 18

Figure 15-21  
-Refer to Figure 15-21. What is the price and quantity for this natural monopolist under fair return pricing?

Accepted Answer

A)  A and J 
B)  E and J 
C)  F and K 
D)  H and L 
A)  A and J 
B)  E and J 
C)  F and K 
D)  H and L

Question 19

Which of the following statements is not correct?

Accepted Answer

A)  The competitive firm produces where P = MC. 
B)  The monopolist produces where P = MC. 
C)  The competitive firm produces where MR = MC. 
D)  The monopolist produces where MR = Md. 
A)  The competitive firm produces where P = MC. 
B)  The monopolist produces where P = MC. 
C)  The competitive firm produces where MR = MC. 
D)  The monopolist produces where MR = Md.

Question 20

In a monopoly market, the socially efficient quantity of output is typically higher than the profit-maximizing quantity of output for the monopolist.

Accepted Answer

A) True 
 B)False

Exam 15: Monopoly

One problem with government operation of monopolies is that

A monopolist maximizes profits by

Competitive firms have

The monopolist's profit-maximizing quantity of output is determined by the intersection of which of the following two curves?

In reality, perfect price discrimination is

Which of the following is the preferred strategy for the government to follow to remedy the inefficient allocation of resources associated with monopolies?

Table 15-8 The following table provides information on the price, quantity, and average total cost for a monopoly. -Refer to Table 15-8. How much extra revenue does the monopolist earn when he lowers the price from $18 to $12?

A monopolist's profit is equal to (Price - Marginal Cost) × Quantity.

For a firm to price discriminate,

Table 15-10 The monopolist faces the following demand curve: -Refer to Table 15-10. If the monopolist has total fixed costs of $40 and a constant marginal cost of $5, what is the profit-maximizing level of output?

For a monopoly market, total surplus can be defined as the value of the good to

Figure 15-8 -Refer to Figure 15-8. What is the area of deadweight loss?

A natural monopoly arises when

Figure 15-13 -Refer to Figure 15-13. A profit-maximizing monopolist would create a deadweight loss to society valued at

Perfect price discrimination

Some companies merge in order to lower costs through efficient joint production.

Table 15-22 -Refer to Table 15-22. The marginal revenue becomes negative with the production of which unit of output?

Figure 15-21 -Refer to Figure 15-21. What is the price and quantity for this natural monopolist under fair return pricing?

Which of the following statements is not correct?

In a monopoly market, the socially efficient quantity of output is typically higher than the profit-maximizing quantity of output for the monopolist.

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

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