Question 1

The situation in which a person places greater value on a good as more and more 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 2

If the supply of labor to a monopsonist is everywhere unit elastic,then the wage will equal

Accepted Answer

A) the marginal expenditure. 
B) one-half of the marginal expenditure. 
C) the marginal revenue product of labor. 
D) one. 
A) the marginal expenditure. 
B) one-half of the marginal expenditure. 
C) the marginal revenue product of labor. 
D) one.

Question 3

A flour mill holding exclusive contracts to 95% of the wheat in a large geographic area may operate as a flour-producing monopoly locally because

Accepted Answer

A) the mill has a very inelastic supply curve. 
B) the mill is a natural monopoly. 
C) the mill controls a key input. 
D) the government will declare it a monopoly. 
A) the mill has a very inelastic supply curve. 
B) the mill is a natural monopoly. 
C) the mill controls a key input. 
D) the government will declare it a monopoly.

Question 4

A monopolist faces the (inverse)demand for its product: p = a - bQ.The monopolist has a marginal cost given by c 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.
c.For what values of F will the monopolist earn negative profit?

Accepted Answer

a.The monopolist will choose p = MR (or

Question 5

If the supply of labor to a monopsonist is everywhere unit elastic,and the marginal expenditure equals $1,then the wage will equal

Accepted Answer

A) 50¢. 
B) 75¢. 
C) $1. 
D) $2. 
A) 50¢. 
B) 75¢. 
C) $1. 
D) $2.

Question 6

An ad valorem tax imposed on a monopolist will reduce the deadweight loss generated by the monopolist.

Accepted Answer

A) True 
 B)False

Question 7

If the inverse demand curve a monopoly faces is p = 100 - 2Q,and MC is constant at 16,then the deadweight loss from monopoly equals

Accepted Answer

A) $21. 
B) $441. 
C) $882. 
D) $1,764. 
A) $21. 
B) $441. 
C) $882. 
D) $1,764.

Question 8

If the government sets a specific tax and an ad valorem tax so that they raise the same amount of tax revenue,why does the ad valorem tax reduce output less than the specific tax?

Accepted Answer

While the per unit amount of the specifi

Question 9

-The above figure shows the demand and marginal cost curves for a monopoly.The deadweight loss of this monopoly equals

Accepted Answer

A) h. 
B) c. 
C) c + f. 
D) c + d + e + f. 
A) h. 
B) c. 
C) c + f. 
D) c + d + e + f.

Question 10

The Lerner Index is

Accepted Answer

A) the ratio of the difference between price and marginal to price. 
B) equal to (Price - M
C) /Price. 
C) a measure of market power. 
D) All of the above. 
A) the ratio of the difference between price and marginal to price. 
B) equal to (Price - M
C) /Price. 
C) a measure of market power. 
D) All of the above.

Question 11

Draw a graph that shows a shift in the demand curve that causes the optimal monopoly price to change,while the quantity remains the same.

Accepted Answer

@#IMG-DLM& See the a

Question 12

Consider a town with a single movie theater,and that movie theater faces a downward sloping demand curve for its tickets.The movie theater has a fixed number of seats available for each show but the marginal cost of filling a seat is zero.Why might it be in the movie theater's interest to not to sell out every show even though the marginal cost of selling additional seats is virtually zero? (A graph will help your answer).

Accepted Answer

The firm may or may not choose to sell o

Question 13

The gap between the value a monopsony places on the last worker hired and the wage paid will increase when

Accepted Answer

A) the supply curve becomes more elastic at the optimum. 
B) the supply curve becomes less elastic at the optimum. 
C) the supply curve becomes horizontal. 
D) the value of the last unit of labor hired is greater than the cost. 
A) the supply curve becomes more elastic at the optimum. 
B) the supply curve becomes less elastic at the optimum. 
C) the supply curve becomes horizontal. 
D) the value of the last unit of labor hired is greater than the cost.

Question 14

If the government wants to regulate a natural monopoly,it will force the firm to set price equal to

Accepted Answer

A) average cost. 
B) marginal cost. 
C) marginal revenue. 
D) None of the above. 
A) average cost. 
B) marginal cost. 
C) marginal revenue. 
D) None of the above.

Question 15

A monopsonist purchaser of labor that could negotiate a different wage for each worker could

Accepted Answer

A) purchase less labor than a regular monopsonist. 
B) purchase more labor than a regular monopsonist. 
C) rotate the marginal expenditure curve to the left. 
D) shift the marginal expenditure curve to the left. 
A) purchase less labor than a regular monopsonist. 
B) purchase more labor than a regular monopsonist. 
C) rotate the marginal expenditure curve to the left. 
D) shift the marginal expenditure curve to the left.

Question 16

It is a conventional practice among apparel retailers to set the retail price of clothing at twice the cost paid to the manufacturer.For example,if the retailer pays $7 for a pair of jeans,the jeans will retail for $14.What must the price elasticity of demand be for this practice to be profit maximizing?

Accepted Answer

Since price is twice marginal

Question 17

If the demand shifts,then for a profit maximizing monopolist,

Accepted Answer

A) price will change while quantity will remain constant. 
B) price will change and quantity will change. 
C) Both A and B. 
D) Neither A nor B. 
A) price will change while quantity will remain constant. 
B) price will change and quantity will change. 
C) Both A and B. 
D) Neither A nor B.

Question 18

A monopolist faces the inverse demand for its output:
p = 30 - Q
The monopolist also has a constant marginal and average cost of $4/unit.The government is seeking ways to collect tax revenue from the monopolist and faces two proposals:
i.Impose a specific tax of t on the monopolist.
ii.Impose an ad valorem tax of a on the monopolist.
a.Suppose the government imposes a 20% ad valorem tax on the monopolist.What price and quantity does the monopolist choose and how much revenue does the government generate from the tax?
b.Rather than an ad valorem tax,what is the government's revenue from a specific tax of t imposed on the monopolist? Your answer should be in terms of t.
c.Show that a specific tax of $3.70/unit generates the same revenue as a 20% ad valorem tax (approximately).
d.Which tax has a greater distortion on the monopoly output?

Accepted Answer

a.With a 10% ad valorem tax,the governme

Question 19

If the inverse demand curve a monopoly faces is p = 100 - 2Q,and MC is constant at 16,then the firm's Lerner Index equals

Accepted Answer

A) 58/16. 
B) 16/42. 
C) 58/42. 
D) 42/58. 
A) 58/16. 
B) 16/42. 
C) 58/42. 
D) 42/58.

Question 20

When would a profit-maximizing monopolist that operates with no government intervention choose to produce the competitive level of output?

Accepted Answer

A monopolist that faces a perf

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

If the supply of labor to a monopsonist is everywhere unit elastic,then the wage will equal

A flour mill holding exclusive contracts to 95% of the wheat in a large geographic area may operate as a flour-producing monopoly locally because

If the supply of labor to a monopsonist is everywhere unit elastic,and the marginal expenditure equals $1,then the wage will equal

An ad valorem tax imposed on a monopolist will reduce the deadweight loss generated by the monopolist.

If the inverse demand curve a monopoly faces is p = 100 - 2Q,and MC is constant at 16,then the deadweight loss from monopoly equals

If the government sets a specific tax and an ad valorem tax so that they raise the same amount of tax revenue,why does the ad valorem tax reduce output less than the specific tax?

-The above figure shows the demand and marginal cost curves for a monopoly.The deadweight loss of this monopoly equals

The Lerner Index is

Draw a graph that shows a shift in the demand curve that causes the optimal monopoly price to change,while the quantity remains the same.

The gap between the value a monopsony places on the last worker hired and the wage paid will increase when

If the government wants to regulate a natural monopoly,it will force the firm to set price equal to

A monopsonist purchaser of labor that could negotiate a different wage for each worker could

If the demand shifts,then for a profit maximizing monopolist,

If the inverse demand curve a monopoly faces is p = 100 - 2Q,and MC is constant at 16,then the firm's Lerner Index equals

When would a profit-maximizing monopolist that operates with no government intervention choose to produce the competitive level of output?

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

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

If the supply of labor to a monopsonist is everywhere unit elastic,then the wage will equal

A flour mill holding exclusive contracts to 95% of the wheat in a large geographic area may operate as a flour-producing monopoly locally because

If the supply of labor to a monopsonist is everywhere unit elastic,and the marginal expenditure equals $1,then the wage will equal

An ad valorem tax imposed on a monopolist will reduce the deadweight loss generated by the monopolist.

If the inverse demand curve a monopoly faces is p = 100 - 2Q,and MC is constant at 16,then the deadweight loss from monopoly equals

If the government sets a specific tax and an ad valorem tax so that they raise the same amount of tax revenue,why does the ad valorem tax reduce output less than the specific tax?

-The above figure shows the demand and marginal cost curves for a monopoly.The deadweight loss of this monopoly equals

The Lerner Index is

Draw a graph that shows a shift in the demand curve that causes the optimal monopoly price to change,while the quantity remains the same.

The gap between the value a monopsony places on the last worker hired and the wage paid will increase when

If the government wants to regulate a natural monopoly,it will force the firm to set price equal to

A monopsonist purchaser of labor that could negotiate a different wage for each worker could

If the demand shifts,then for a profit maximizing monopolist,

If the inverse demand curve a monopoly faces is p = 100 - 2Q,and MC is constant at 16,then the firm's Lerner Index equals

When would a profit-maximizing monopolist that operates with no government intervention choose to produce the competitive level of output?

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