Question 1

Figure 15-7  
-Refer to Figure 15-7. In order to maximize profits, the monopolist should charge a price of

Accepted Answer

A)  $12. 
B)  $9. 
C)  $20. 
D)  $23. 
A)  $12. 
B)  $9. 
C)  $20. 
D)  $23.

Question 2

Which of the following is a characteristic of a monopoly?

Accepted Answer

A)  low fixed costs as a portion of total costs 
B)  free entry and exit 
C)  barriers to entry 
D)  declining marginal cost 
A)  low fixed costs as a portion of total costs 
B)  free entry and exit 
C)  barriers to entry 
D)  declining marginal cost

Question 3

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

Accepted Answer

A)  Panel B represents the typical demand curve for a perfectly competitive firm. 
B)  Panel A represents the typical demand curve for a monopoly. 
C)  Panel A represents the typical demand curve for a perfectly competitive industry. 
D)  All of the above are correct. 
A)  Panel B represents the typical demand curve for a perfectly competitive firm. 
B)  Panel A represents the typical demand curve for a monopoly. 
C)  Panel A represents the typical demand curve for a perfectly competitive industry. 
D)  All of the above are correct.

Question 4

Which of the following is an example of a barrier to entry?

Accepted Answer

A)  Tom charges a higher price than his competitors for his golf lessons. 
B)  Dick charges a lower price than his competitors for his lawn-mowing services. 
C)  Harry offers free concerts on Sunday afternoons as a form of advertising. 
D)  Larry obtains a copyright for the new computer game that he invented. 
A)  Tom charges a higher price than his competitors for his golf lessons. 
B)  Dick charges a lower price than his competitors for his lawn-mowing services. 
C)  Harry offers free concerts on Sunday afternoons as a form of advertising. 
D)  Larry obtains a copyright for the new computer game that he invented.

Question 5

Suppose when a monopolist produces 50 units its average revenue is $8 per unit, its marginal revenue is $4 per unit, its marginal cost is $4 per unit, and its average total cost is $3 per unit. What can we conclude about this monopolist?

Accepted Answer

A)  The monopolist is currently maximizing profits, and its total profits are $200. 
B)  The monopolist is currently maximizing profits, and its total profits are $250. 
C)  The monopolist is not currently maximizing its profits; it should produce more units and charge a lower price to maximize profit. 
D)  The monopolist is not currently maximizing its profits; it should produce fewer units and charger a higher price to maximize profit. 
A)  The monopolist is currently maximizing profits, and its total profits are $200. 
B)  The monopolist is currently maximizing profits, and its total profits are $250. 
C)  The monopolist is not currently maximizing its profits; it should produce more units and charge a lower price to maximize profit. 
D)  The monopolist is not currently maximizing its profits; it should produce fewer units and charger a higher price to maximize profit.

Question 6

During the holiday season, high-end retailers frequently place a high price on merchandise on weekends and discount the price during the week. They do this because they believe that two groups of customers exist: shoppers with little free time and bargain hunters. Bargain hunters have time to shop around and frequently shop during the week. What do economists call this price strategy used by high-end retailers?

Accepted Answer

A)  oligopoly 
B)  price discrimination 
C)  compensating differential 
D)  in-kind transfers 
A)  oligopoly 
B)  price discrimination 
C)  compensating differential 
D)  in-kind transfers

Question 7

A competitive firm

Accepted Answer

A)  and a monopolist are price takers. 
B)  and a monopolist are price makers. 
C)  is a price taker, whereas a monopolist is a price maker. 
D)  is a price maker, whereas a monopolist is a price taker. 
A)  and a monopolist are price takers. 
B)  and a monopolist are price makers. 
C)  is a price taker, whereas a monopolist is a price maker. 
D)  is a price maker, whereas a monopolist is a price taker.

Question 8

Table 15-6
A monopolist faces the following demand curve:
  
-Refer to Table 15-6. Suppose the monopolist has total fixed costs equal to $5 and a variable cost equal to $4 per unit for all units produced. What would the total profit be if she charged $6 per unit for her product?

Accepted Answer

A)  $1 
B)  $3 
C)  $8 
D)  $15 
A)  $1 
B)  $3 
C)  $8 
D)  $15

Question 9

Most firms have

Accepted Answer

A)  no monopoly pricing power. 
B)  some monopoly pricing power. 
C)  absolute monopoly pricing power. 
D)  the ability to earn monopoly profits. 
A)  no monopoly pricing power. 
B)  some monopoly pricing power. 
C)  absolute monopoly pricing power. 
D)  the ability to earn monopoly profits.

Question 10

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. How much profit will Mega Media Cable TV earn if it sets the price at $150?

Accepted Answer

A)  $350,000 
B)  $450,000 
C)  $475,000 
D)  $575,000 
A)  $350,000 
B)  $450,000 
C)  $475,000 
D)  $575,000

Question 11

Patent and copyright laws encourage

Accepted Answer

A)  creative activity. 
B)  lower prices due to decreasing average total costs. 
C)  competition among firms. 
D)  All of the above are correct. 
A)  creative activity. 
B)  lower prices due to decreasing average total costs. 
C)  competition among firms. 
D)  All of the above are correct.

Question 12

Which of the following is not an example of a barrier to entry?

Accepted Answer

A)  Mighty Mitch's Mining Company owns a unique plot of land in Tanzania, under which lies the only large deposit of Tanzanite in the world. 
B)  A college student starts a part-time tutoring business. 
C)  A novelist obtains a copyright for her new book. 
D)  A taxi cab driver in New York City obtains a license to legally provide transportation in New York City. 
A)  Mighty Mitch's Mining Company owns a unique plot of land in Tanzania, under which lies the only large deposit of Tanzanite in the world. 
B)  A college student starts a part-time tutoring business. 
C)  A novelist obtains a copyright for her new book. 
D)  A taxi cab driver in New York City obtains a license to legally provide transportation in New York City.

Question 13

The price effect describes the situation when a monopolist lowers the price of 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 14

Table 15-9
Consider the following demand and cost information for a monopoly.
  
-Refer to Table 15-9. What is the monopolist's average total cost of production at the profit­maximizing price?

Accepted Answer

A)  $12 
B)  $14 
C)  $16 
D)  $17 
A)  $12 
B)  $14 
C)  $16 
D)  $17

Question 15

Consider a profit-maximizing monopoly pricing under the following conditions. The profit-maximizing price charged for goods produced is $12.The intersection of the marginal revenue and marginal cost curves occurs where output is 10 units and marginal cost is $6. The socially efficient level of production is 12 units. The demand curve and marginal cost curves are linear. What is the value of the deadweight loss created by the monopolist?

Accepted Answer

A)  $4 
B)  $6 
C)  $12 
D)  
D)  $16 
A)  $4 
B)  $6 
C)  $12 
D)  
D)  $16

Question 16

Suppose a profit-maximizing monopolist faces a constant marginal cost of $10, produces an output level of 100 units, and charges a price of $50. The socially efficient level of output is 200 units. Assume that the demand curve and marginal revenue curve are the typical downward-sloping straight lines. The monopoly deadweight loss equals $2,000.

Accepted Answer

A) True 
 B)False

Question 17

In the majority of cases where there is a natural monopoly in the United States, the government usually deals with the problem

Accepted Answer

A)  by splitting the natural monopoly into smaller companies. 
B)  through regulation. 
C)  by turning the natural monopoly into a public enterprise. 
D)  by doing nothing. 
A)  by splitting the natural monopoly into smaller companies. 
B)  through regulation. 
C)  by turning the natural monopoly into a public enterprise. 
D)  by doing nothing.

Question 18

Suppose ABC Aluminum Inc. owns 80% of the world's bauxite, a mineral used in the production of aluminum. Which of the following reasons describes the fundamental barrier to entry for the aluminum industry?

Accepted Answer

A)  monopoly resources 
B)  government regulation 
C)  the production process 
D)  Both a and b are correct. 
A)  monopoly resources 
B)  government regulation 
C)  the production process 
D)  Both a and b are correct.

Question 19

Even with market power, monopolists cannot achieve any level of profit they desire because they will sell lower quantities at higher prices.

Accepted Answer

A) True 
 B)False

Question 20

Figure 15-4  
-Refer to Figure 15-4. If the monopoly firm wants to maximize its profit, it should operate at a level of output equal to

Accepted Answer

A)  Q1. 
B)  Q2. 
C)  Q3. 
D)  Q4. 
A)  Q1. 
B)  Q2. 
C)  Q3. 
D)  Q4.

Figure 15-7 -Refer to Figure 15-7. In order to maximize profits, the monopolist should charge a price of

Which of the following is a characteristic of a monopoly?

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

Which of the following is an example of a barrier to entry?

Suppose when a monopolist produces 50 units its average revenue is $8 per unit, its marginal revenue is $4 per unit, its marginal cost is $4 per unit, and its average total cost is $3 per unit. What can we conclude about this monopolist?

A competitive firm

Table 15-6 A monopolist faces the following demand curve: -Refer to Table 15-6. Suppose the monopolist has total fixed costs equal to $5 and a variable cost equal to $4 per unit for all units produced. What would the total profit be if she charged $6 per unit for her product?

Most firms have

Patent and copyright laws encourage

Which of the following is not an example of a barrier to entry?

The price effect describes the situation when a monopolist lowers the price of output and, all else equal, total revenue

Table 15-9 Consider the following demand and cost information for a monopoly. -Refer to Table 15-9. What is the monopolist's average total cost of production at the profitmaximizing price?

In the majority of cases where there is a natural monopoly in the United States, the government usually deals with the problem

Suppose ABC Aluminum Inc. owns 80% of the world's bauxite, a mineral used in the production of aluminum. Which of the following reasons describes the fundamental barrier to entry for the aluminum industry?

Even with market power, monopolists cannot achieve any level of profit they desire because they will sell lower quantities at higher prices.

Figure 15-4 -Refer to Figure 15-4. If the monopoly firm wants to maximize its profit, it should operate at a level of output equal to

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

Figure 15-7 -Refer to Figure 15-7. In order to maximize profits, the monopolist should charge a price of

Which of the following is a characteristic of a monopoly?

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

Which of the following is an example of a barrier to entry?

Suppose when a monopolist produces 50 units its average revenue is $8 per unit, its marginal revenue is $4 per unit, its marginal cost is $4 per unit, and its average total cost is $3 per unit. What can we conclude about this monopolist?

A competitive firm

Table 15-6 A monopolist faces the following demand curve: -Refer to Table 15-6. Suppose the monopolist has total fixed costs equal to $5 and a variable cost equal to $4 per unit for all units produced. What would the total profit be if she charged $6 per unit for her product?

Most firms have

Patent and copyright laws encourage

Which of the following is not an example of a barrier to entry?

The price effect describes the situation when a monopolist lowers the price of output and, all else equal, total revenue

Table 15-9 Consider the following demand and cost information for a monopoly. -Refer to Table 15-9. What is the monopolist's average total cost of production at the profit­maximizing price?

In the majority of cases where there is a natural monopoly in the United States, the government usually deals with the problem

Suppose ABC Aluminum Inc. owns 80% of the world's bauxite, a mineral used in the production of aluminum. Which of the following reasons describes the fundamental barrier to entry for the aluminum industry?

Even with market power, monopolists cannot achieve any level of profit they desire because they will sell lower quantities at higher prices.

Figure 15-4 -Refer to Figure 15-4. If the monopoly firm wants to maximize its profit, it should operate at a level of output equal to

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 15-9 Consider the following demand and cost information for a monopoly. -Refer to Table 15-9. What is the monopolist's average total cost of production at the profitmaximizing price?