Question 1

When we compare economic welfare in a monopoly market to a competitive market, the profits earned by the monopolist represent

Accepted Answer

A)  a transfer of benefits from the consumer to the producer. 
B)  a loss in total welfare. 
C)  the higher marginal costs incurred by the monopolists in comparison to competitive firms. 
D)  the higher marginal revenues gained by the monopolists in comparison to competitive firms. 
A)  a transfer of benefits from the consumer to the producer. 
B)  a loss in total welfare. 
C)  the higher marginal costs incurred by the monopolists in comparison to competitive firms. 
D)  the higher marginal revenues gained by the monopolists in comparison to competitive firms.

Question 2

A patent gives a single person or firm the exclusive right to sell some good or service forever.

Accepted Answer

A) True 
 B)False

Question 3

Figure 15-1  
-Refer to Figure 15-1. Considering the relationship between average total cost and marginal cost, the marginal cost curve for this firm must

Accepted Answer

A)  lie entirely above the average total cost curve. 
B)  lie entirely below the average total cost curve. 
C)  be U-shaped. 
D)  be horizontal. 
A)  lie entirely above the average total cost curve. 
B)  lie entirely below the average total cost curve. 
C)  be U-shaped. 
D)  be horizontal.

Question 4

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. What is Vincent's cost of serving all passengers demanding a tour on a typical day?

Accepted Answer

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

Question 5

Table 15-2
Tanya has the following demand curve for selling taffy. Assume that Tanya has a marginal cost of $3 per unit.
  
-Refer to Table 15-2. What is Tanya's profit-maximizing level of output?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 6

The practice of selling the same goods to different customers at different prices, but with the same marginal cost, is known as

Accepted Answer

A)  price segregation. 
B)  price discrimination. 
C)  arbitrage. 
D)  monopoly pricing. 
A)  price segregation. 
B)  price discrimination. 
C)  arbitrage. 
D)  monopoly pricing.

Question 7

Figure 15-23  
-Refer to Figure 15-23. If a regulator requires the firm to charge a marginal cost price, what is the amount of profit or loss earned by the firm?

Accepted Answer

The answer of Figure 15-23  
-Refer to Figure 15-23....

Question 8

Scenario 15-3
A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $30, its average revenue is $60, and its average total cost is $34.
-Refer to Scenario 15-3. At Q = 500, the firm's marginal cost is

Accepted Answer

A)  $34. 
B)  less than $30. 
C)  $30. 
B)  greater than $34. 
A)  $34. 
B)  less than $30. 
C)  $30. 
B)  greater than $34.

Question 9

Which statement best describes the effect(s) that occur when a monopoly firm reduces the price of its product?

Accepted Answer

A)  The "price effect" causes total revenue to fall. 
B)  The "output effect" causes total revenue to rise. 
C)  The "revenue effect" causes total revenue to remain constant. 
D)  Both a and b are correct. 
A)  The "price effect" causes total revenue to fall. 
B)  The "output effect" causes total revenue to rise. 
C)  The "revenue effect" causes total revenue to remain constant. 
D)  Both a and b are correct.

Question 10

Scenario 15-2
Consider a local, privately-owned electrical cooperative named Poweshiek Power Company (PPCo). PPCo has just completed a clean-coal-burning electrical power plant in Iowa. Currently, PPCo can meet the electricity needs of all residents in the county. In fact, its capacity far exceeds the needs of the county. After just a few years of operation, the shareholders of PPCo experienced incredibly high rates of return on their investment due to the profitability of the corporation.
-Refer to Scenario 15-2. PPCo will continue to be a monopolist in the electricity industry only if

Accepted Answer

A)  population growth leads to an increased demand for electricity. 
B)  there are no new entrants to the market. 
C)  the price of natural gas decreases. 
D)  All of the above are correct. 
A)  population growth leads to an increased demand for electricity. 
B)  there are no new entrants to the market. 
C)  the price of natural gas decreases. 
D)  All of the above are correct.

Question 11

Scenario 15-10
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 15-10. What is Vincent's total revenue on a typical day?

Accepted Answer

A)  $1,500 
B)  $1,800 
C)  $2,170 
D)  $2,700 
A)  $1,500 
B)  $1,800 
C)  $2,170 
D)  $2,700

Question 12

A monopolist produces where P = MC = MR.

Accepted Answer

A) True 
 B)False

Question 13

When a monopolist increases the amount of output that it produces and sells, average revenue

Accepted Answer

A)  increases, and marginal revenue increases. 
B)  increases, and marginal revenue decreases. 
C)  decreases, and marginal revenue increases. 
D)  decreases, and marginal revenue decreases. 
A)  increases, and marginal revenue increases. 
B)  increases, and marginal revenue decreases. 
C)  decreases, and marginal revenue increases. 
D)  decreases, and marginal revenue decreases.

Question 14

Which of the following statements is not correct?

Accepted Answer

A)  Consumers will likely benefit in the form of lower prices from buying a product made by a natural monopoly than if the market were served by several firms. 
B)  Monopolists typically charge higher prices than competitive firms. 
C)  Monopolists typically produce larger quantities of output than competitive firms. 
D)  Consumers may benefit from monopolies if the firms invest their higher profits into something that benefits society such as medical research. 
A)  Consumers will likely benefit in the form of lower prices from buying a product made by a natural monopoly than if the market were served by several firms. 
B)  Monopolists typically charge higher prices than competitive firms. 
C)  Monopolists typically produce larger quantities of output than competitive firms. 
D)  Consumers may benefit from monopolies if the firms invest their higher profits into something that benefits society such as medical research.

Question 15

Because monopoly firms do not have to compete with other firms, the outcome in a market with a monopoly

Accepted Answer

A)  is often not in the best interest of society. 
B)  maximizes total economic well-being. 
C)  is efficient. 
D)  benefits consumers more so than the producer. 
A)  is often not in the best interest of society. 
B)  maximizes total economic well-being. 
C)  is efficient. 
D)  benefits consumers more so than the producer.

Question 16

Figure 15-18  
-Refer to Figure 15-18. If the monopoly firm is not allowed to price discriminate, then consumer surplus amounts to

Accepted Answer

A)  $1,000. 
B)  $2,000. 
C)  $3,000. 
D)  $4,000. 
A)  $1,000. 
B)  $2,000. 
C)  $3,000. 
D)  $4,000.

Question 17

Table 15-19
A monopolist faces the following demand curve:
  
-Refer to Table 15-19. If a monopolist faces a constant marginal cost of $5, 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 18

What happens to the price and quantity sold of a drug when its patent runs out? (i) The price will fall.
(ii) The quantity sold will fall.
(iii) The marginal cost of producing the drug will rise.

Accepted Answer

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

Question 19

Table 15-17
A monopolist faces the following demand curve:
  
-Refer to Table 15-17. If the marginal cost of production is constant at $18 per unit, this profit-maximizing monopolist will choose to produce

Accepted Answer

A)  20 units. 
B)  30 units. 
C)  40 units. 
D)  50 units. 
A)  20 units. 
B)  30 units. 
C)  40 units. 
D)  50 units.

Question 20

Figure 15-25  
-Refer to Figure 15-25. If this firm profit maximizes, which letter represents the price it will charge?

Accepted Answer

When we compare economic welfare in a monopoly market to a competitive market, the profits earned by the monopolist represent

A patent gives a single person or firm the exclusive right to sell some good or service forever.

Figure 15-1 -Refer to Figure 15-1. Considering the relationship between average total cost and marginal cost, the marginal cost curve for this firm must

Table 15-2 Tanya has the following demand curve for selling taffy. Assume that Tanya has a marginal cost of $3 per unit. -Refer to Table 15-2. What is Tanya's profit-maximizing level of output?

The practice of selling the same goods to different customers at different prices, but with the same marginal cost, is known as

Figure 15-23 -Refer to Figure 15-23. If a regulator requires the firm to charge a marginal cost price, what is the amount of profit or loss earned by the firm?

Scenario 15-3 A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $30, its average revenue is $60, and its average total cost is $34. -Refer to Scenario 15-3. At Q = 500, the firm's marginal cost is

Which statement best describes the effect(s) that occur when a monopoly firm reduces the price of its product?

A monopolist produces where P = MC = MR.

When a monopolist increases the amount of output that it produces and sells, average revenue

Which of the following statements is not correct?

Because monopoly firms do not have to compete with other firms, the outcome in a market with a monopoly

Figure 15-18 -Refer to Figure 15-18. If the monopoly firm is not allowed to price discriminate, then consumer surplus amounts to

Table 15-19 A monopolist faces the following demand curve: -Refer to Table 15-19. If a monopolist faces a constant marginal cost of $5, how much output should the firm produce in order to equate marginal revenue with marginal cost?

What happens to the price and quantity sold of a drug when its patent runs out? (i) The price will fall. (ii) The quantity sold will fall. (iii) The marginal cost of producing the drug will rise.

Table 15-17 A monopolist faces the following demand curve: -Refer to Table 15-17. If the marginal cost of production is constant at $18 per unit, this profit-maximizing monopolist will choose to produce

Figure 15-25 -Refer to Figure 15-25. If this firm profit maximizes, which letter represents the price it will charge?

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

When we compare economic welfare in a monopoly market to a competitive market, the profits earned by the monopolist represent

A patent gives a single person or firm the exclusive right to sell some good or service forever.

Figure 15-1 -Refer to Figure 15-1. Considering the relationship between average total cost and marginal cost, the marginal cost curve for this firm must

Table 15-2 Tanya has the following demand curve for selling taffy. Assume that Tanya has a marginal cost of $3 per unit. -Refer to Table 15-2. What is Tanya's profit-maximizing level of output?

The practice of selling the same goods to different customers at different prices, but with the same marginal cost, is known as

Figure 15-23 -Refer to Figure 15-23. If a regulator requires the firm to charge a marginal cost price, what is the amount of profit or loss earned by the firm?

Scenario 15-3 A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $30, its average revenue is $60, and its average total cost is $34. -Refer to Scenario 15-3. At Q = 500, the firm's marginal cost is

Which statement best describes the effect(s) that occur when a monopoly firm reduces the price of its product?

A monopolist produces where P = MC = MR.

When a monopolist increases the amount of output that it produces and sells, average revenue

Which of the following statements is not correct?

Because monopoly firms do not have to compete with other firms, the outcome in a market with a monopoly

Figure 15-18 -Refer to Figure 15-18. If the monopoly firm is not allowed to price discriminate, then consumer surplus amounts to

Table 15-19 A monopolist faces the following demand curve: -Refer to Table 15-19. If a monopolist faces a constant marginal cost of $5, how much output should the firm produce in order to equate marginal revenue with marginal cost?

What happens to the price and quantity sold of a drug when its patent runs out? (i) The price will fall. (ii) The quantity sold will fall. (iii) The marginal cost of producing the drug will rise.

Table 15-17 A monopolist faces the following demand curve: -Refer to Table 15-17. If the marginal cost of production is constant at $18 per unit, this profit-maximizing monopolist will choose to produce

Figure 15-25 -Refer to Figure 15-25. If this firm profit maximizes, which letter represents the price it will charge?

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