Question 1

The practice of price discrimination is associated with pure monopoly because

Accepted Answer

A)  it can be practiced whenever a firm's demand curve is downsloping. 
B)  monopolists have considerable ability to control output and price. 
C)  monopolists usually realize economies of scale. 
D)  most monopolists sell differentiated products. 
A)  it can be practiced whenever a firm's demand curve is downsloping. 
B)  monopolists have considerable ability to control output and price. 
C)  monopolists usually realize economies of scale. 
D)  most monopolists sell differentiated products. B

Question 2

Network effects and simultaneous consumption tend to foster the development of

Accepted Answer

A)  pure competition. 
B)  monopoly power. 
C)  net social benefits. 
D)  allocative efficiency. 
A)  pure competition. 
B)  monopoly power. 
C)  net social benefits. 
D)  allocative efficiency. B

Question 3

If a monopolist engages in price discrimination, it will

Accepted Answer

A)  realize a smaller profit. 
B)  charge a higher price where individual demand is inelastic and a lower price where individual demand is elastic. 
C)  produce a smaller output than when it did not discriminate. 
D)  charge a competitive price to all its customers. 
A)  realize a smaller profit. 
B)  charge a higher price where individual demand is inelastic and a lower price where individual demand is elastic. 
C)  produce a smaller output than when it did not discriminate. 
D)  charge a competitive price to all its customers. B

Question 4

Any activity designed to transfer income or wealth to a particular individual or firm at society's expense is called

Accepted Answer

A)  patent protection. 
B)  X-inefficiency. 
C)  price discrimination. 
D)  rent-seeking. 
A)  patent protection. 
B)  X-inefficiency. 
C)  price discrimination. 
D)  rent-seeking.

Question 5

(Last Word): Alex owns a luxury automobile and regularly purchases high-end fashion items online. Kara drives an old sedan and does most online shopping on eBay and Amazon. Suppose both Alex and Kara search the same online retailer for a nice watch to give on Fatherâ€™s Day. Based on Big Data and personalized pricing, we would expect

Accepted Answer

A)  Alex to see a higher price than Kara for the same watch. 
B)  Alex and Kara to see the same price for a given watch. 
C)  Alex to see a lower price than Kara for the same watch. 
D)  that either Alex or Kara might see a higher price for the same watch, as algorithms randomly determine what price each consumer sees. 
A)  Alex to see a higher price than Kara for the same watch. 
B)  Alex and Kara to see the same price for a given watch. 
C)  Alex to see a lower price than Kara for the same watch. 
D)  that either Alex or Kara might see a higher price for the same watch, as algorithms randomly determine what price each consumer sees.

Question 6

Marginal costs of a producer may be very small due to its product's ability to satisfy a large number of consumers at the same time. This characteristic of a product is called

Accepted Answer

A)  economies of scale. 
B)  rent-seeking. 
C)  simultaneous consumption. 
D)  consumer sovereignty. 
A)  economies of scale. 
B)  rent-seeking. 
C)  simultaneous consumption. 
D)  consumer sovereignty.

Question 7

The problem with adopting a fair-return pricing policy for a natural monopoly is that

Accepted Answer

A)  economic profits will be positive. 
B)  economic profits will be negative. 
C)  it is not productively efficient. 
D)  it is not allocatively efficient. 
A)  economic profits will be positive. 
B)  economic profits will be negative. 
C)  it is not productively efficient. 
D)  it is not allocatively efficient.

Question 8

Which of the following is characteristic of a pure monopolist's demand curve?

Accepted Answer

A)  Average revenue is less than price. 
B)  Its elasticity coefficient is 1 at all levels of output. 
C)  Price and marginal revenue are equal at all levels of output. 
D)  It is the same as the market demand curve. 
A)  Average revenue is less than price. 
B)  Its elasticity coefficient is 1 at all levels of output. 
C)  Price and marginal revenue are equal at all levels of output. 
D)  It is the same as the market demand curve.

Question 9

Suppose that a pure monopolist can sell 5 units of output at $4 per unit and 6 units at $3.90 per unit. The monopolist will produce and sell the sixth unit if its marginal cost is

Accepted Answer

A)  $4 or less. 
B)  $3.90 or less. 
C)  $3.50 or less. 
D)  $3.40 or less. 
A)  $4 or less. 
B)  $3.90 or less. 
C)  $3.50 or less. 
D)  $3.40 or less.

Question 10

A price-discriminating monopolist will follow a system where

Accepted Answer

A)  buyers with inelastic demand are charged higher prices than buyers with elastic demand. 
B)  buyers with inelastic demand are charged lower prices than buyers with elastic demand. 
C)  all buyers are charged the same price regardless of their elasticity of demand. 
D)  the price of the product is held the same even if the demand changes. 
A)  buyers with inelastic demand are charged higher prices than buyers with elastic demand. 
B)  buyers with inelastic demand are charged lower prices than buyers with elastic demand. 
C)  all buyers are charged the same price regardless of their elasticity of demand. 
D)  the price of the product is held the same even if the demand changes.

Question 11

The nondiscriminating pure monopolist must decrease price on all units of a product sold in order to sell more units. This explains why

Accepted Answer

A)  there are barriers to entry in pure monopoly. 
B)  a monopoly has a perfectly elastic demand curve. 
C)  marginal revenue is less than average revenue. 
D)  total revenues are greater than total costs at the profit maximizing level of output. 
A)  there are barriers to entry in pure monopoly. 
B)  a monopoly has a perfectly elastic demand curve. 
C)  marginal revenue is less than average revenue. 
D)  total revenues are greater than total costs at the profit maximizing level of output.

Question 12

When a pure monopolist is producing its profit-maximizing output, price will

Accepted Answer

A)  be less than MR. 
B)  equal neither MC nor MR. 
C)  equal MR. 
D)  equal MC. 
A)  be less than MR. 
B)  equal neither MC nor MR. 
C)  equal MR. 
D)  equal MC.

Question 13

Which case best represents a case of price discrimination?

Accepted Answer

A)  An insurance company offers discounts to safe drivers. 
B)  A major airline sells tickets to senior citizens at lower prices than to other passengers. 
C)  A professional baseball team pays two players with identical batting averages different salaries. 
D)  A utility company charges less for electricity used during off-peak hours, when it does not have to operate its less-efficient generating plants. 
A)  An insurance company offers discounts to safe drivers. 
B)  A major airline sells tickets to senior citizens at lower prices than to other passengers. 
C)  A professional baseball team pays two players with identical batting averages different salaries. 
D)  A utility company charges less for electricity used during off-peak hours, when it does not have to operate its less-efficient generating plants.

Question 14

If a regulatory commission wants to provide a natural monopoly with a fair return, it should establish a price that is equal to

Accepted Answer

A)  minimum average fixed cost. 
B)  average total cost. 
C)  marginal cost. 
D)  marginal revenue. 
A)  minimum average fixed cost. 
B)  average total cost. 
C)  marginal cost. 
D)  marginal revenue.

Question 15

If a monopoly is faced with competition from foreign multinational corporations or from potential new entrants, then it would probably

Accepted Answer

A)  raise price and reduce output. 
B)  reduce price and raise output. 
C)  start operating at the inelastic portion of its demand curve. 
D)  increase production so that MR > MC. 
A)  raise price and reduce output. 
B)  reduce price and raise output. 
C)  start operating at the inelastic portion of its demand curve. 
D)  increase production so that MR > MC.

Question 16

(Consider This) Children are charged less than adults for admission to professional baseball games but are charged the same prices as adults at the concession stands. This pricing system occurs because

Accepted Answer

A)  children have an elastic demand for game tickets but an inelastic demand for concession items. 
B)  children have an inelastic demand for game tickets but an elastic demand for concession items. 
C)  the seller can prevent children from buying game tickets for adults but cannot prevent children from buying concession items for adults. 
D)  children can personally "consume" only a single game ticket but can personally consume more than one concession item. 
A)  children have an elastic demand for game tickets but an inelastic demand for concession items. 
B)  children have an inelastic demand for game tickets but an elastic demand for concession items. 
C)  the seller can prevent children from buying game tickets for adults but cannot prevent children from buying concession items for adults. 
D)  children can personally "consume" only a single game ticket but can personally consume more than one concession item.

Question 17

If a monopolist were to produce in the inelastic segment of its demand curve,

Accepted Answer

A)  total revenue would be at a maximum. 
B)  marginal revenue would be positive. 
C)  the firm would not be maximizing profits. 
D)  it would necessarily incur a loss. 
A)  total revenue would be at a maximum. 
B)  marginal revenue would be positive. 
C)  the firm would not be maximizing profits. 
D)  it would necessarily incur a loss.

Question 18

A dilemma of regulation is that

Accepted Answer

A)  the regulated price that achieves allocative efficiency is also likely to result in persistent economic profits. 
B)  the regulated price that results in a "fair return" restricts output by more than would unregulated monopoly. 
C)  regulated pricing always conflicts with the "due process" provision of the Constitution. 
D)  the regulated price that achieves allocative efficiency is also likely to result in losses. 
A)  the regulated price that achieves allocative efficiency is also likely to result in persistent economic profits. 
B)  the regulated price that results in a "fair return" restricts output by more than would unregulated monopoly. 
C)  regulated pricing always conflicts with the "due process" provision of the Constitution. 
D)  the regulated price that achieves allocative efficiency is also likely to result in losses.

Question 19

In a monopoly at equilibrium, price is greater than marginal cost.

Accepted Answer

A) True 
 B)False

Question 20

In the short-run equilibrium, a monopolist's profits

Accepted Answer

A)  may be positive, negative, or zero. 
B)  are positive because of the monopolist's market power. 
C)  are positive if the product's elasticity of demand is less than 1. 
D)  are positive if the product's elasticity of demand is greater than 1. 
A)  may be positive, negative, or zero. 
B)  are positive because of the monopolist's market power. 
C)  are positive if the product's elasticity of demand is less than 1. 
D)  are positive if the product's elasticity of demand is greater than 1.

Exam 12: Pure Monopoly

The practice of price discrimination is associated with pure monopoly because

Network effects and simultaneous consumption tend to foster the development of

If a monopolist engages in price discrimination, it will

Any activity designed to transfer income or wealth to a particular individual or firm at society's expense is called

Marginal costs of a producer may be very small due to its product's ability to satisfy a large number of consumers at the same time. This characteristic of a product is called

The problem with adopting a fair-return pricing policy for a natural monopoly is that

Which of the following is characteristic of a pure monopolist's demand curve?

Suppose that a pure monopolist can sell 5 units of output at $4 per unit and 6 units at $3.90 per unit. The monopolist will produce and sell the sixth unit if its marginal cost is

A price-discriminating monopolist will follow a system where

The nondiscriminating pure monopolist must decrease price on all units of a product sold in order to sell more units. This explains why

When a pure monopolist is producing its profit-maximizing output, price will

Which case best represents a case of price discrimination?

If a regulatory commission wants to provide a natural monopoly with a fair return, it should establish a price that is equal to

If a monopoly is faced with competition from foreign multinational corporations or from potential new entrants, then it would probably

(Consider This) Children are charged less than adults for admission to professional baseball games but are charged the same prices as adults at the concession stands. This pricing system occurs because

If a monopolist were to produce in the inelastic segment of its demand curve,

A dilemma of regulation is that

In a monopoly at equilibrium, price is greater than marginal cost.

In the short-run equilibrium, a monopolist's profits

Limits, Alternatives, and Choices

The Market System and the Circular Flow

Demand, Supply, and Market Equilibrium

Market Failures: Public Goods and Externalities

Governments Role and Government Failure

Elasticity

Utility Maximization

Behavioral Economics

Businesses and the Costs of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Monopolistic Competition

Oligopoly and Strategic Behavior

Technology, Rd, and Efficiency

The Demand for Resources

Wage Determination

Rent, Interest, and Profit

Natural Resource and Energy Economics

Public Finance: Expenditures and Taxes

Antitrust Policy and Regulation

Agriculture: Economics and Policy

Income Inequality, Poverty, and Discrimination

Health Care

Immigration

International Trade

The Balance of Payments, Exchange Rates, and Trade Deficits

The Economics of Developing Countries

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