Question 1

If a firm in an industry experiences very high fixed costs and constant marginal cost,it is a good candidate for a natural monopoly.

Accepted Answer

A) True 
 B)False

Question 2

If the monopoly's demand curve intersects the AVC curve at minimum AVC,the firm will shut down.

Accepted Answer

A) True 
 B)False

Question 3

The situation where one person's demand for a good depends on the consumption of the good by others is called a

Accepted Answer

A) network externality. 
B) network internality. 
C) consumption externality. 
D) production externality. 
A) network externality. 
B) network internality. 
C) consumption externality. 
D) production externality.

Question 4

For the monopsonist,marginal expenditure is greater than the wage rate because the monopsonist

Accepted Answer

A) pays a wage higher than that paid in a competitive market. 
B) chooses the perfectly competitive quantity of labor. 
C) must increase the wage to all units of labor to attract more units of labor. 
D) must take the wage as given by the market. 
A) pays a wage higher than that paid in a competitive market. 
B) chooses the perfectly competitive quantity of labor. 
C) must increase the wage to all units of labor to attract more units of labor. 
D) must take the wage as given by the market.

Question 5

For a monopoly,marginal revenue is less than price because

Accepted Answer

A) the firm is a price taker. 
B) the firm must lower price if it wishes to sell more output. 
C) the firm can sell all of its output at any price. 
D) the demand for the firm's output is perfectly elastic. 
A) the firm is a price taker. 
B) the firm must lower price if it wishes to sell more output. 
C) the firm can sell all of its output at any price. 
D) the demand for the firm's output is perfectly elastic.

Question 6

For a profit maximizing monopolist,if the MC = 10 and price is set to be 20,then the elasticity at this price is

Accepted Answer

A) -2. 
B) -1. 
C) -0.5. 
D) 0. 
A) -2. 
B) -1. 
C) -0.5. 
D) 0.

Question 7

The situation in which a person places greater value on a good as fewer and fewer people possess it is called

Accepted Answer

A) Bandwagon Effect. 
B) Greater Value Effect. 
C) Snob Effect. 
D) Behavioral Effect. 
A) Bandwagon Effect. 
B) Greater Value Effect. 
C) Snob Effect. 
D) Behavioral Effect.

Question 8

A monopolist faces the (inverse)demand for its product: p = 50 - 2Q.The monopolist has a marginal cost of 10/unit and a fixed cost given by F.
a.Assume that F is sufficiently small such that the monopolist produces a strictly positive level of output.What is the profit-maximizing price and quantity?
b.Compute the maximum profit for the monopolist in terms of F.
c.For what values of F will the monopolists profit be negative?

Accepted Answer

a.The monopolist will choose p = MR (or

Question 9

-The above figure shows the demand and cost curves facing a monopoly.The monopoly maximizes profit by setting price equal to

Accepted Answer

A) $100. 
B) $200. 
C) $300. 
D) $400. 
A) $100. 
B) $200. 
C) $300. 
D) $400.

Question 10

The "Sonny Bono" Copyright Term Extension Act extended the copyright terms in the U.S.by 20 years.In addition,the act was applied to already existing copyrights.
a.Discuss the advantages and/or disadvantages in terms of efficiency and monopoly power from the extension of the lifespan of new copyrights.In theory,what determines the optimal term of a copyright?
b.Discuss the advantages and/or disadvantages in terms of efficiency and monopoly power from the extension of the lifespan of existing copyrights.

Accepted Answer

a.There are a number of issues students

Question 11

For profit-maximizing monopolies,explain why the boundaries on the Lerner Index are 0 and 1.

Accepted Answer

The Lerner Index equals (p - MC)/p.Becau

Question 12

A monopoly incurs a marginal cost of $1 for each unit produced.If the price elasticity of demand equals -2.0,the monopoly maximizes profit by charging a price of

Accepted Answer

A) $1. 
B) $1.50. 
C) $2. 
D) $3. 
A) $1. 
B) $1.50. 
C) $2. 
D) $3.

Question 13

-The above figure shows the demand and cost curves facing a monopoly.If the firm is a profit maximizer,its Lerner Index will equal

Accepted Answer

A) 1. 
B) 1/3. 
C) 1.5. 
D) 3. 
A) 1. 
B) 1/3. 
C) 1.5. 
D) 3.

Question 14

If the inverse demand function for a monopoly's product is p = a - bQ,then the firm's marginal revenue function is

Accepted Answer

A) a. 
B) a - (1/2)bQ. 
C) a - bQ. 
D) a - 2bQ. 
A) a. 
B) a - (1/2)bQ. 
C) a - bQ. 
D) a - 2bQ.

Question 15

If the government desires to raise a certain amount of revenue by taxing a monopoly,an ad valorem tax will

Accepted Answer

A) generate the same loss of consumer surplus as a specific tax. 
B) generate a greater loss of consumer surplus than a specific tax. 
C) generate a smaller loss of consumer surplus than a specific tax. 
D) generate no loss of consumer surplus. 
A) generate the same loss of consumer surplus as a specific tax. 
B) generate a greater loss of consumer surplus than a specific tax. 
C) generate a smaller loss of consumer surplus than a specific tax. 
D) generate no loss of consumer surplus.

Question 16

In a recent court case,an expert witness defined a monopoly as a firm that can "raise price without reducing its total revenue." What does this imply about the elasticity of demand? Would this definition hold for a profit-maximizing monopoly? Explain.

Accepted Answer

If the firm raises price,the quantity so

Question 17

If the inverse demand curve a monopoly faces is p = 100 - 2Q,and MC is constant at 16,then maximum profit

Accepted Answer

A) equals $336. 
B) equals $882. 
C) equals $1,218. 
D) cannot be determined solely from the information provided. 
A) equals $336. 
B) equals $882. 
C) equals $1,218. 
D) cannot be determined solely from the information provided.

Question 18

If the demand curve a monopolist faces is perfectly elastic,then the ratio of the firm's price to the marginal cost is

Accepted Answer

A) 0. 
B) 1. 
C) 2. 
D) None of the above-the answer cannot be determined. 
A) 0. 
B) 1. 
C) 2. 
D) None of the above-the answer cannot be determined.

Question 19

If the government's goal is to generate a certain amount of tax revenue,a specific tax and an ad valorem tax on a monopoly have the same impact on social welfare.

Accepted Answer

A) True 
 B)False

Question 20

Suppose that a mining company employs 80% of the available laborers in a town.Explain what will happen to the number of laborers hired and the wage rate paid by the mine if a minimum wage is set at the competitive level.

Accepted Answer

The mine was operating as a mo

If a firm in an industry experiences very high fixed costs and constant marginal cost,it is a good candidate for a natural monopoly.

If the monopoly's demand curve intersects the AVC curve at minimum AVC,the firm will shut down.

The situation where one person's demand for a good depends on the consumption of the good by others is called a

For the monopsonist,marginal expenditure is greater than the wage rate because the monopsonist

For a monopoly,marginal revenue is less than price because

For a profit maximizing monopolist,if the MC = 10 and price is set to be 20,then the elasticity at this price is

The situation in which a person places greater value on a good as fewer and fewer people possess it is called

-The above figure shows the demand and cost curves facing a monopoly.The monopoly maximizes profit by setting price equal to

For profit-maximizing monopolies,explain why the boundaries on the Lerner Index are 0 and 1.

A monopoly incurs a marginal cost of $1 for each unit produced.If the price elasticity of demand equals -2.0,the monopoly maximizes profit by charging a price of

-The above figure shows the demand and cost curves facing a monopoly.If the firm is a profit maximizer,its Lerner Index will equal

If the inverse demand function for a monopoly's product is p = a - bQ,then the firm's marginal revenue function is

If the government desires to raise a certain amount of revenue by taxing a monopoly,an ad valorem tax will

In a recent court case,an expert witness defined a monopoly as a firm that can "raise price without reducing its total revenue." What does this imply about the elasticity of demand? Would this definition hold for a profit-maximizing monopoly? Explain.

If the inverse demand curve a monopoly faces is p = 100 - 2Q,and MC is constant at 16,then maximum profit

If the demand curve a monopolist faces is perfectly elastic,then the ratio of the firm's price to the marginal cost is

If the government's goal is to generate a certain amount of tax revenue,a specific tax and an ad valorem tax on a monopoly have the same impact on social welfare.

Suppose that a mining company employs 80% of the available laborers in a town.Explain what will happen to the number of laborers hired and the wage rate paid by the mine if a minimum wage is set at the competitive level.

Introduction

Supply and Demand

A Consumers Constrained Choice

Demand

Consumer Welfare and Policy Analysis

Firms and Production

Costs

Competitive Firms and Markets

Properties and Applications of the Competitive Model

General Equilibrium and Economic Welfare

Pricing and Advertising

Game Theory

Oligopoly and Monopolistic Competition

Factor Markets

Uncertainty

Property Rights, Externalities, Rivalry, and Exclusion

Asymmetric Information

Contracts and Moral Hazards

Filters

Exam 11: Monopoly and Monopsony

If a firm in an industry experiences very high fixed costs and constant marginal cost,it is a good candidate for a natural monopoly.

If the monopoly's demand curve intersects the AVC curve at minimum AVC,the firm will shut down.

The situation where one person's demand for a good depends on the consumption of the good by others is called a

For the monopsonist,marginal expenditure is greater than the wage rate because the monopsonist

For a monopoly,marginal revenue is less than price because

For a profit maximizing monopolist,if the MC = 10 and price is set to be 20,then the elasticity at this price is

The situation in which a person places greater value on a good as fewer and fewer people possess it is called

-The above figure shows the demand and cost curves facing a monopoly.The monopoly maximizes profit by setting price equal to

For profit-maximizing monopolies,explain why the boundaries on the Lerner Index are 0 and 1.

A monopoly incurs a marginal cost of $1 for each unit produced.If the price elasticity of demand equals -2.0,the monopoly maximizes profit by charging a price of

-The above figure shows the demand and cost curves facing a monopoly.If the firm is a profit maximizer,its Lerner Index will equal

If the inverse demand function for a monopoly's product is p = a - bQ,then the firm's marginal revenue function is

If the government desires to raise a certain amount of revenue by taxing a monopoly,an ad valorem tax will

In a recent court case,an expert witness defined a monopoly as a firm that can "raise price without reducing its total revenue." What does this imply about the elasticity of demand? Would this definition hold for a profit-maximizing monopoly? Explain.

If the inverse demand curve a monopoly faces is p = 100 - 2Q,and MC is constant at 16,then maximum profit

If the demand curve a monopolist faces is perfectly elastic,then the ratio of the firm's price to the marginal cost is

If the government's goal is to generate a certain amount of tax revenue,a specific tax and an ad valorem tax on a monopoly have the same impact on social welfare.

Suppose that a mining company employs 80% of the available laborers in a town.Explain what will happen to the number of laborers hired and the wage rate paid by the mine if a minimum wage is set at the competitive level.

Introduction

Supply and Demand

A Consumers Constrained Choice

Demand

Consumer Welfare and Policy Analysis

Firms and Production

Costs

Competitive Firms and Markets

Properties and Applications of the Competitive Model

General Equilibrium and Economic Welfare

Pricing and Advertising

Game Theory

Oligopoly and Monopolistic Competition

Factor Markets

Uncertainty

Property Rights, Externalities, Rivalry, and Exclusion

Asymmetric Information

Contracts and Moral Hazards

Filters