Question 1

Table 15-4
A monopolist faces the following demand curve:
  
-Refer to Table 15-4. In order to maximize profits, the monopolist should produce

Accepted Answer

A)  7.5 units. 
B)  10 units. 
C)  where marginal revenue equals marginal cost. 
D)  Both a and c are correct. 
A)  7.5 units. 
B)  10 units. 
C)  where marginal revenue equals marginal cost. 
D)  Both a and c are correct.

Question 2

With perfect price discrimination the monopoly

Accepted Answer

A)  eliminates all price discrimination by charging each customer the same price. 
B)  charges each customer an amount equal to the monopolist's marginal cost of production. 
C)  eliminates deadweight loss. 
D)  eliminates profits and increases consumer surplus. 
A)  eliminates all price discrimination by charging each customer the same price. 
B)  charges each customer an amount equal to the monopolist's marginal cost of production. 
C)  eliminates deadweight loss. 
D)  eliminates profits and increases consumer surplus.

Question 3

Customers who purchase an audio CD from Sally's Sounds are charged 20% more than customers who purchase the audio CD from the Sally's Sounds website. This is an example of

Accepted Answer

A)  perfect price discrimination. 
B)  price discrimination. 
C)  deadweight loss. 
D)  socially inefficient output. 
A)  perfect price discrimination. 
B)  price discrimination. 
C)  deadweight loss. 
D)  socially inefficient output.

Question 4

The deadweight loss associated with a monopoly occurs because the monopolist

Accepted Answer

A)  maximizes profits. 
B)  produces an output level less than the socially optimal level. 
C)  produces an output level greater than the socially optimal level. 
D)  equates marginal revenue with marginal cost. 
A)  maximizes profits. 
B)  produces an output level less than the socially optimal level. 
C)  produces an output level greater than the socially optimal level. 
D)  equates marginal revenue with marginal cost.

Question 5

Copyrights and patents are examples of barriers to entry that give firms monopoly pricing powers.

Accepted Answer

A) True 
 B)False

Question 6

With no price discrimination, the monopolist sells every unit at the same price. Therefore

Accepted Answer

A)  marginal revenue is equal to price. 
B)  marginal revenue is equal to average revenue. 
C)  price is greater than marginal revenue. 
D)  Both a and b are correct. 
A)  marginal revenue is equal to price. 
B)  marginal revenue is equal to average revenue. 
C)  price is greater than marginal revenue. 
D)  Both a and b are correct.

Question 7

Scenario 15-11
Vincent operates a scenic tour business in Boston. He has one bus which can fit 50 people per tour and each tour lasts 2 hours. His total cost of operating one tour is fixed at $450. Vincent's cost is not reduced if he runs a tour with a partially full bus. While his cost is the same for all tours, Vincent charges each passenger his/her willingness to pay: adults $18 per trip, children $10 per trip, and senior citizens $12 per trip. At those rates, on a typical day Vincent's demand is:
   Assume that Vincent's customers are always available for the tour; therefore, he can fill his bus for each tour as long as there is sufficient total demand for the day.
-Refer to Scenario 15-11. One of Vincent's friends tells him he would be more profitable if he charged a single price of $18. Assuming no changes in consumer demand, what would Vincent's profit be if he charged every customer $18?

Accepted Answer

The answer of Scenario 15-11
Vincent operates a scenic tour business...

Question 8

Table 15-7
Sally owns the only shoe store in town. She has the following cost and revenue information.
  
-Refer to Table 15-7. What is total profit at the profit-maximizing quantity?

Accepted Answer

A)  $100 
B)  $245 
C)  $265 
D)  $395 
A)  $100 
B)  $245 
C)  $265 
D)  $395

Question 9

A monopoly is an inefficient way to produce a product because

Accepted Answer

A)  it can earn both short-run and long-run profits. 
B)  it faces a downward-sloping demand curve. 
C)  the cost to the monopolist of producing one more unit exceeds the value of that unit to potential buyers. 
D)  it produces a smaller level of output than would be produced in a competitive market. 
A)  it can earn both short-run and long-run profits. 
B)  it faces a downward-sloping demand curve. 
C)  the cost to the monopolist of producing one more unit exceeds the value of that unit to potential buyers. 
D)  it produces a smaller level of output than would be produced in a competitive market.

Question 10

For a monopoly firm, which of the following equalities is always true?

Accepted Answer

A)  price = marginal revenue 
B)  price = average revenue 
C)  price = total revenue 
D)  marginal revenue = marginal cost 
A)  price = marginal revenue 
B)  price = average revenue 
C)  price = total revenue 
D)  marginal revenue = marginal cost

Question 11

Table 15-7
Sally owns the only shoe store in town. She has the following cost and revenue information.
  
-Refer to Table 15-7. What is the total variable cost of production when Sally produces six pairs of shoes?

Accepted Answer

A)  $100 
B)  $295 
C)  $600 
D)  $620 
A)  $100 
B)  $295 
C)  $600 
D)  $620

Question 12

During the life of a drug patent, the monopoly pharmaceutical firm maximizes profit by producing the quantity at which marginal revenue equals marginal cost.

Accepted Answer

A) True 
 B)False

Question 13

Figure 15-9  
-Refer to Figure 15-9. The deadweight loss caused by a profit-maximizing monopoly amounts to

Accepted Answer

A)  $250. 
B)  $500. 
C)  $750. 
D)  $1,000. 
A)  $250. 
B)  $500. 
C)  $750. 
D)  $1,000.

Question 14

The simplest way for a monopoly to arise is for a single firm to

Accepted Answer

A)  decrease its price below its competitors' prices. 
B)  decrease production to increase demand for its product. 
C)  make pricing decisions jointly with other firms. 
D)  own a key resource. 
A)  decrease its price below its competitors' prices. 
B)  decrease production to increase demand for its product. 
C)  make pricing decisions jointly with other firms. 
D)  own a key resource.

Question 15

In a competitive market, a firm's supply curve dictates the amount it will supply. In a monopoly market the

Accepted Answer

A)  same is true. 
B)  supply curve conceptually makes sense, but in practice is never used. 
C)  supply curve will have limited predictive capacity. 
D)  decision about how much to supply is impossible to separate from the demand curve it faces. 
A)  same is true. 
B)  supply curve conceptually makes sense, but in practice is never used. 
C)  supply curve will have limited predictive capacity. 
D)  decision about how much to supply is impossible to separate from the demand curve it faces.

Question 16

For a long while, electricity producers were thought to be a classic example of a natural monopoly. People held this view because

Accepted Answer

A)  the average cost of producing units of electricity by one producer in a specific region was lower than if the same quantity were produced by two or more producers in the same region. 
B)  the average cost of producing units of electricity by one producer in a specific region was higher than if the same quantity were produced by two or more produced in the same region. 
C)  the marginal cost of producing units of electricity by one producer in a specific region was higher than if the same quantity were produced by two or more producers in the same region. 
D)  electricity is a special non-excludable good that could never be sold in a competitive market. 
A)  the average cost of producing units of electricity by one producer in a specific region was lower than if the same quantity were produced by two or more producers in the same region. 
B)  the average cost of producing units of electricity by one producer in a specific region was higher than if the same quantity were produced by two or more produced in the same region. 
C)  the marginal cost of producing units of electricity by one producer in a specific region was higher than if the same quantity were produced by two or more producers in the same region. 
D)  electricity is a special non-excludable good that could never be sold in a competitive market.

Question 17

Which of the following can defeat the profit-maximizing strategy of price discrimination?

Accepted Answer

A)  consumer surplus 
B)  deadweight loss 
C)  market power 
D)  arbitrage 
A)  consumer surplus 
B)  deadweight loss 
C)  market power 
D)  arbitrage

Question 18

How does a competitive market compare to a monopoly that engages in perfect price discrimination?

Accepted Answer

A)  In both cases, total social welfare is the same. 
B)  Total social welfare is higher in the competitive market than with the perfectly price discriminating monopoly. 
C)  In both cases, some potentially mutually beneficial trades do not occur. 
D)  Consumer surplus is the same in both cases. 
A)  In both cases, total social welfare is the same. 
B)  Total social welfare is higher in the competitive market than with the perfectly price discriminating monopoly. 
C)  In both cases, some potentially mutually beneficial trades do not occur. 
D)  Consumer surplus is the same in both cases.

Question 19

Which of the following are necessary characteristics of a monopoly? (i) The firm is the sole seller of its product.
(ii) The firm's product does not have close substitutes.
(iii) The firm generates a large economic profit.
(iv) The firm is located in a small geographic market.

Accepted Answer

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

Question 20

Name brand drugs are able to continue capitalizing on their market power even after generic drugs enter the market because (i) almost all people fear the generic drug companies are devoting too few resources to research and development.
(ii) some people fear that generic drugs are inferior.
(iii) some people are loyal to the name brand.

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)

Table 15-4 A monopolist faces the following demand curve: -Refer to Table 15-4. In order to maximize profits, the monopolist should produce

With perfect price discrimination the monopoly

Customers who purchase an audio CD from Sally's Sounds are charged 20% more than customers who purchase the audio CD from the Sally's Sounds website. This is an example of

The deadweight loss associated with a monopoly occurs because the monopolist

Copyrights and patents are examples of barriers to entry that give firms monopoly pricing powers.

With no price discrimination, the monopolist sells every unit at the same price. Therefore

Table 15-7 Sally owns the only shoe store in town. She has the following cost and revenue information. -Refer to Table 15-7. What is total profit at the profit-maximizing quantity?

A monopoly is an inefficient way to produce a product because

For a monopoly firm, which of the following equalities is always true?

Table 15-7 Sally owns the only shoe store in town. She has the following cost and revenue information. -Refer to Table 15-7. What is the total variable cost of production when Sally produces six pairs of shoes?

During the life of a drug patent, the monopoly pharmaceutical firm maximizes profit by producing the quantity at which marginal revenue equals marginal cost.

Figure 15-9 -Refer to Figure 15-9. The deadweight loss caused by a profit-maximizing monopoly amounts to

The simplest way for a monopoly to arise is for a single firm to

In a competitive market, a firm's supply curve dictates the amount it will supply. In a monopoly market the

For a long while, electricity producers were thought to be a classic example of a natural monopoly. People held this view because

Which of the following can defeat the profit-maximizing strategy of price discrimination?

How does a competitive market compare to a monopoly that engages in perfect price discrimination?

Which of the following are necessary characteristics of a monopoly? (i) The firm is the sole seller of its product. (ii) The firm's product does not have close substitutes. (iii) The firm generates a large economic profit. (iv) The firm is located in a small geographic market.

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 15-4 A monopolist faces the following demand curve: -Refer to Table 15-4. In order to maximize profits, the monopolist should produce

With perfect price discrimination the monopoly

Customers who purchase an audio CD from Sally's Sounds are charged 20% more than customers who purchase the audio CD from the Sally's Sounds website. This is an example of

The deadweight loss associated with a monopoly occurs because the monopolist

Copyrights and patents are examples of barriers to entry that give firms monopoly pricing powers.

With no price discrimination, the monopolist sells every unit at the same price. Therefore

Table 15-7 Sally owns the only shoe store in town. She has the following cost and revenue information. -Refer to Table 15-7. What is total profit at the profit-maximizing quantity?

A monopoly is an inefficient way to produce a product because

For a monopoly firm, which of the following equalities is always true?

Table 15-7 Sally owns the only shoe store in town. She has the following cost and revenue information. -Refer to Table 15-7. What is the total variable cost of production when Sally produces six pairs of shoes?

During the life of a drug patent, the monopoly pharmaceutical firm maximizes profit by producing the quantity at which marginal revenue equals marginal cost.

Figure 15-9 -Refer to Figure 15-9. The deadweight loss caused by a profit-maximizing monopoly amounts to

The simplest way for a monopoly to arise is for a single firm to

In a competitive market, a firm's supply curve dictates the amount it will supply. In a monopoly market the

For a long while, electricity producers were thought to be a classic example of a natural monopoly. People held this view because

Which of the following can defeat the profit-maximizing strategy of price discrimination?

How does a competitive market compare to a monopoly that engages in perfect price discrimination?

Which of the following are necessary characteristics of a monopoly? (i) The firm is the sole seller of its product. (ii) The firm's product does not have close substitutes. (iii) The firm generates a large economic profit. (iv) The firm is located in a small geographic market.

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