Question 1

The government prefers an ad valorem tax to a specific tax that reduces the monopoly output by the same amount because

Accepted Answer

A) consumers are not harmed by the ad valorem tax. 
B) the monopoly prefers the ad valorem tax. 
C) consumers prefer the ad valorem tax. 
D) the ad valorem tax transfers more revenue from the monopoly to the government. 
A) consumers are not harmed by the ad valorem tax. 
B) the monopoly prefers the ad valorem tax. 
C) consumers prefer the ad valorem tax. 
D) the ad valorem tax transfers more revenue from the monopoly to the government.

Question 2

Why do patents stimulate research?

Accepted Answer

A) Patents give firms time to do research. 
B) Patents give firms the opportunity to recover research costs and thus a profit motive. 
C) Firms would research as much even without patents. 
D) Patents don't stimulate research. 
A) Patents give firms time to do research. 
B) Patents give firms the opportunity to recover research costs and thus a profit motive. 
C) Firms would research as much even without patents. 
D) Patents don't stimulate research.

Question 3

If a monopoly discovers that the demand for its output has become more elastic at the original output level,then it will respond by

Accepted Answer

A) producing more and setting a higher price. 
B) setting a lower price. 
C) setting a higher price. 
D) producing more while leaving price unchanged. 
A) producing more and setting a higher price. 
B) setting a lower price. 
C) setting a higher price. 
D) producing more while leaving price unchanged.

Question 4

Limited government licenses that create a monopoly do so because

Accepted Answer

A) the license generates a marginal cost advantage. 
B) the monopoly will become a natural monopoly. 
C) a barrier to enter the market exists. 
D) All of the above. 
A) the license generates a marginal cost advantage. 
B) the monopoly will become a natural monopoly. 
C) a barrier to enter the market exists. 
D) All of the above.

Question 5

Which of the following is an example of the bandwagon effect?

Accepted Answer

A) A larger cellphone consumer group makes a cellphone service more attractive. 
B) The more people use Facebook,the more attractive it is to consumers. 
C) With more broadband services,more high-definition webpages become available. 
D) All of the above. 
A) A larger cellphone consumer group makes a cellphone service more attractive. 
B) The more people use Facebook,the more attractive it is to consumers. 
C) With more broadband services,more high-definition webpages become available. 
D) All of the above.

Question 6

-The above figure shows the demand and cost curves facing a monopoly.Maximum profit equals

Accepted Answer

A) $0. 
B) $100. 
C) $1,000. 
D) $2,500. 
A) $0. 
B) $100. 
C) $1,000. 
D) $2,500.

Question 7

A monopsonist faces an upward-sloping labor supply curve.This means that his marginal expenditures on labor are

Accepted Answer

A) greater than the wage. 
B) equal to the wage plus the increase in the wage resulting from hiring one more unit of labor hired. 
C) greater than the wage because hiring more workers requires to pay all workers more. 
D) All of the above. 
A) greater than the wage. 
B) equal to the wage plus the increase in the wage resulting from hiring one more unit of labor hired. 
C) greater than the wage because hiring more workers requires to pay all workers more. 
D) All of the above.

Question 8

What is the advantage of the government imposing an ad valorem tax over a specific tax when facing a monopoly?

Accepted Answer

When comparing an ad valorem t

Question 9

One difference between a monopoly and a competitive firm is that

Accepted Answer

A) only a monopoly is a price taker. 
B) only a monopoly maximizes profit by setting marginal revenue equal to marginal cost. 
C) only a monopoly faces a downward-sloping demand curve. 
D) None of the above. 
A) only a monopoly is a price taker. 
B) only a monopoly maximizes profit by setting marginal revenue equal to marginal cost. 
C) only a monopoly faces a downward-sloping demand curve. 
D) None of the above.

Question 10

The SSS Co.has a patent on a particular medication.The medication sells for $1 per daily dose and marginal cost is estimated to be a constant at 20¢.Assuming linear demand and marginal cost curves,use this information to estimate the deadweight loss from monopoly pricing if the firm currently sells 1,000 doses per day.Can this loss be justified?

Accepted Answer

The firm's Lerner Index equals 0.8 which

Question 11

Because the labor supply curve for a monopsonist is upward sloping,the monopsonist

Accepted Answer

A) hires zero units of labor. 
B) chooses the perfectly competitive quantity of labor. 
C) must increase the wage to attract more units of labor. 
D) must take the wage as given by the market. 
A) hires zero units of labor. 
B) chooses the perfectly competitive quantity of labor. 
C) must increase the wage to attract more units of labor. 
D) must take the wage as given by the market.

Question 12

Humana Hospital's price/marginal cost ratio of 2.3 is most likely to decline if

Accepted Answer

A) the number of nearby hospitals increases. 
B) the number of nearby hospitals decreases. 
C) the demand curve for hospital services shifts rightward. 
D) the demand curve for hospital services becomes steeper. 
A) the number of nearby hospitals increases. 
B) the number of nearby hospitals decreases. 
C) the demand curve for hospital services shifts rightward. 
D) the demand curve for hospital services becomes steeper.

Question 13

Government actions that create monopolies

Accepted Answer

A) spur product innovation by the monopoly. 
B) create deadweight loss. 
C) result in lower average costs of production. 
D) ensure that firms price at marginal cost. 
A) spur product innovation by the monopoly. 
B) create deadweight loss. 
C) result in lower average costs of production. 
D) ensure that firms price at marginal cost.

Question 14

For a monopoly,marginal revenue is less than price because

Accepted Answer

A) the demand for the firm's output is downward sloping. 
B) the firm has no supply curve. 
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 demand for the firm's output is downward sloping. 
B) the firm has no supply curve. 
C) the firm can sell all of its output at any price. 
D) the demand for the firm's output is perfectly elastic.

Question 15

If a monopoly is operating on the demand curve where price elasticity is equal to -3,and price equals 3,then MR is equal to

Accepted Answer

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

Question 16

Because of market power,wages are higher under monopsony than under competitive conditions.

Accepted Answer

A) True 
 B)False

Question 17

A specific tax imposed on a monopolist may increase the price by more than the tax.

Accepted Answer

A) True 
 B)False

Question 18

Suppose a monopoly producer is also a monopsonist in the labor market.Demand for the output is p = 100 - Q.The production function is Q = L,and the labor supply curve is
w = 10 + L.How much labor does the firm hire? What wage is paid?

Accepted Answer

The firm's marginal revenue product of l

Question 19

A monopoly faces an inverse demand curve of P = 100 - 2Q.The marginal cost curve is
MC = .5Q.What government price ceiling would represent optimal price regulation?

Accepted Answer

Setting P = 100 - 2Q

Question 20

Should a monopoly charge low introductory price in a two-period model?

Accepted Answer

A) Yes,if the extra profit in the second period is greater than the foregone in the first period. 
B) Yes,if the demand in the second period is greater than the demand in the first period. 
C) No.The first period profit is counted more. 
D) No.Profit maximization decisions should be made separately. 
A) Yes,if the extra profit in the second period is greater than the foregone in the first period. 
B) Yes,if the demand in the second period is greater than the demand in the first period. 
C) No.The first period profit is counted more. 
D) No.Profit maximization decisions should be made separately.

The government prefers an ad valorem tax to a specific tax that reduces the monopoly output by the same amount because

Why do patents stimulate research?

If a monopoly discovers that the demand for its output has become more elastic at the original output level,then it will respond by

Limited government licenses that create a monopoly do so because

Which of the following is an example of the bandwagon effect?

-The above figure shows the demand and cost curves facing a monopoly.Maximum profit equals

A monopsonist faces an upward-sloping labor supply curve.This means that his marginal expenditures on labor are

What is the advantage of the government imposing an ad valorem tax over a specific tax when facing a monopoly?

One difference between a monopoly and a competitive firm is that

Because the labor supply curve for a monopsonist is upward sloping,the monopsonist

Humana Hospital's price/marginal cost ratio of 2.3 is most likely to decline if

Government actions that create monopolies

For a monopoly,marginal revenue is less than price because

If a monopoly is operating on the demand curve where price elasticity is equal to -3,and price equals 3,then MR is equal to

Because of market power,wages are higher under monopsony than under competitive conditions.

A specific tax imposed on a monopolist may increase the price by more than the tax.

Suppose a monopoly producer is also a monopsonist in the labor market.Demand for the output is p = 100 - Q.The production function is Q = L,and the labor supply curve is w = 10 + L.How much labor does the firm hire? What wage is paid?

A monopoly faces an inverse demand curve of P = 100 - 2Q.The marginal cost curve is MC = .5Q.What government price ceiling would represent optimal price regulation?

Should a monopoly charge low introductory price in a two-period model?

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 government prefers an ad valorem tax to a specific tax that reduces the monopoly output by the same amount because

Why do patents stimulate research?

If a monopoly discovers that the demand for its output has become more elastic at the original output level,then it will respond by

Limited government licenses that create a monopoly do so because

Which of the following is an example of the bandwagon effect?

-The above figure shows the demand and cost curves facing a monopoly.Maximum profit equals

A monopsonist faces an upward-sloping labor supply curve.This means that his marginal expenditures on labor are

What is the advantage of the government imposing an ad valorem tax over a specific tax when facing a monopoly?

One difference between a monopoly and a competitive firm is that

Because the labor supply curve for a monopsonist is upward sloping,the monopsonist

Humana Hospital's price/marginal cost ratio of 2.3 is most likely to decline if

Government actions that create monopolies

For a monopoly,marginal revenue is less than price because

If a monopoly is operating on the demand curve where price elasticity is equal to -3,and price equals 3,then MR is equal to

Because of market power,wages are higher under monopsony than under competitive conditions.

A specific tax imposed on a monopolist may increase the price by more than the tax.

Suppose a monopoly producer is also a monopsonist in the labor market.Demand for the output is p = 100 - Q.The production function is Q = L,and the labor supply curve is w = 10 + L.How much labor does the firm hire? What wage is paid?

A monopoly faces an inverse demand curve of P = 100 - 2Q.The marginal cost curve is MC = .5Q.What government price ceiling would represent optimal price regulation?

Should a monopoly charge low introductory price in a two-period model?

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