Question 1

Which of the following is a characteristic of pure monopoly?

Accepted Answer

A)  close substitute products 
B)  barriers to entry 
C)  the absence of market power 
D)  "price taking" 
A)  close substitute products 
B)  barriers to entry 
C)  the absence of market power 
D)  "price taking"

Question 2

Pure monopolists

Accepted Answer

A)  maximize MR. 
B)  are price takers. 
C)  operate where P > MC. 
D)  face demand curves that are perfectly inelastic. 
A)  maximize MR. 
B)  are price takers. 
C)  operate where P > MC. 
D)  face demand curves that are perfectly inelastic.

Question 3

The supply curve for a monopoly is

Accepted Answer

A)  the portion of the marginal cost curve that lies above the average variable cost curve. 
B)  the portion of the marginal cost curve that lies above the average total cost curve. 
C)  the portion of the marginal cost curve that lies above the average fixed cost curve. 
D)  not clearly defined. 
A)  the portion of the marginal cost curve that lies above the average variable cost curve. 
B)  the portion of the marginal cost curve that lies above the average total cost curve. 
C)  the portion of the marginal cost curve that lies above the average fixed cost curve. 
D)  not clearly defined.

Question 4

Which of the following is not a precondition for price discrimination?

Accepted Answer

A)  The commodity involved must be a durable good. 
B)  The good or service cannot be profitably resold by original buyers. 
C)  The seller must be able to segment the market, that is, to distinguish buyers with different elasticities of demand. 
D)  The seller must possess some degree of monopoly power. 
A)  The commodity involved must be a durable good. 
B)  The good or service cannot be profitably resold by original buyers. 
C)  The seller must be able to segment the market, that is, to distinguish buyers with different elasticities of demand. 
D)  The seller must possess some degree of monopoly power.

Question 5

Answer the question on the basis of the accompanying table, which shows the demand schedule facing a nondiscriminating monopolist. $\begin{array}{|c|c|}
\hline \mathrm{P} & \mathrm{Qd} \
\hline \$ 10 & 1 \
\hline 7 & 2 \
\hline 5 & 3 \
\hline 3 & 4 \
\hline 1 & 5 \
\hline
\end{array}$ The profit-maximizing monopolist will sell at a price

Accepted Answer

A)  of $10. 
B)  of $7. 
C)  of $5. 
D)  that cannot be determined with the information provided. 
A)  of $10. 
B)  of $7. 
C)  of $5. 
D)  that cannot be determined with the information provided.

Question 6

In a natural monopoly case, the socially optimal pricing policy rule will often result in negative economic profits for the firm.

Accepted Answer

A) True 
 B)False

Question 7

A pure monopolist is producing an output such that ATC = $4, P = $5, MC = $2, and MR = $3. This firm is realizing

Accepted Answer

A)  a loss that could be reduced by producing more output. 
B)  a loss that could be reduced by producing less output. 
C)  an economic profit that could be increased by producing more output. 
D)  an economic profit that could be increased by producing less output. 
A)  a loss that could be reduced by producing more output. 
B)  a loss that could be reduced by producing less output. 
C)  an economic profit that could be increased by producing more output. 
D)  an economic profit that could be increased by producing less output.

Question 8

An important economic problem associated with pure monopoly is that, at the profit-maximizing outputs, resources are

Accepted Answer

A)  overallocated because price exceeds marginal cost. 
B)  overallocated because marginal cost exceeds price. 
C)  underallocated because price exceeds marginal cost. 
D)  underallocated because marginal cost exceeds price. 
A)  overallocated because price exceeds marginal cost. 
B)  overallocated because marginal cost exceeds price. 
C)  underallocated because price exceeds marginal cost. 
D)  underallocated because marginal cost exceeds price.

Question 9

A monopolist can use its pricing strategy as a barrier to entry by other firms.

Accepted Answer

A) True 
 B)False

Question 10

An unregulated pure monopolist will maximize profits by producing that output at which

Accepted Answer

A)  P = MC. 
B)  P = ATC. 
C)  MR = MC. 
D)  MC = AC. 
A)  P = MC. 
B)  P = ATC. 
C)  MR = MC. 
D)  MC = AC.

Question 11

X-inefficiency is said to occur when a monopolist's

Accepted Answer

A)  average cost is greater than the minimum possible average cost. 
B)  marginal costs are greater than the minimum possible average cost. 
C)  output level is higher than is socially optimal. 
D)  price is higher than its average cost. 
A)  average cost is greater than the minimum possible average cost. 
B)  marginal costs are greater than the minimum possible average cost. 
C)  output level is higher than is socially optimal. 
D)  price is higher than its average cost.

Question 12

A firm will earn economic profits whenever

Accepted Answer

A)  marginal revenue exceeds marginal costs. 
B)  marginal revenue exceeds variable costs. 
C)  average revenue exceeds average total costs. 
D)  average revenue exceeds average variable costs. 
A)  marginal revenue exceeds marginal costs. 
B)  marginal revenue exceeds variable costs. 
C)  average revenue exceeds average total costs. 
D)  average revenue exceeds average variable costs.

Question 13

Suppose that a monopolist calculates that at its present output level, marginal revenue is $1.00 and marginal cost is $2.00. It could maximize profits or minimize losses by

Accepted Answer

A)  decreasing price and increasing output. 
B)  increasing price and decreasing output. 
C)  decreasing price and leaving output unchanged. 
D)  decreasing output and leaving price unchanged. 
A)  decreasing price and increasing output. 
B)  increasing price and decreasing output. 
C)  decreasing price and leaving output unchanged. 
D)  decreasing output and leaving price unchanged.

Question 14

One defining characteristic of pure monopoly is that

Accepted Answer

A)  the monopolist is a price taker. 
B)  the monopolist uses advertising. 
C)  the monopolist produces a product with no close substitutes. 
D)  there is relatively easy entry into the industry, but exit is difficult. 
A)  the monopolist is a price taker. 
B)  the monopolist uses advertising. 
C)  the monopolist produces a product with no close substitutes. 
D)  there is relatively easy entry into the industry, but exit is difficult.

Question 15

A nondiscriminating profit-maximizing monopolist

Accepted Answer

A)  will never produce in the output range where marginal revenue is positive. 
B)  will never produce in the output range where demand is inelastic. 
C)  will never produce in the output range where demand is elastic. 
D)  may produce where demand is either elastic or inelastic, depending on the level of production costs. 
A)  will never produce in the output range where marginal revenue is positive. 
B)  will never produce in the output range where demand is inelastic. 
C)  will never produce in the output range where demand is elastic. 
D)  may produce where demand is either elastic or inelastic, depending on the level of production costs.

Question 16

A price-discriminating monopolist will set a higher price where demand is more elastic and a lower price where demand is less elastic.

Accepted Answer

A) True 
 B)False

Question 17

Assume that a monopolist faces a linear demand curve. If the firm is operating at an output level where marginal revenue is positive, the firm

Accepted Answer

A)  has maximized total revenues. 
B)  could raise revenues by raising prices. 
C)  can always increase profits by lowering its price. 
D)  is operating on the elastic portion of its demand curve. 
A)  has maximized total revenues. 
B)  could raise revenues by raising prices. 
C)  can always increase profits by lowering its price. 
D)  is operating on the elastic portion of its demand curve.

Question 18

Suppose that a monopolist calculates that at its present output level, marginal cost is $4.00 and marginal revenue is $5.00. The firm could increase profits by

Accepted Answer

A)  decreasing price and increasing output. 
B)  increasing price and decreasing output. 
C)  decreasing price and leaving output unchanged. 
D)  decreasing output and leaving prices unchanged. 
A)  decreasing price and increasing output. 
B)  increasing price and decreasing output. 
C)  decreasing price and leaving output unchanged. 
D)  decreasing output and leaving prices unchanged.

Question 19

Which of the following is not a barrier to entry in an industry?

Accepted Answer

A)  economies of scale 
B)  profit maximization 
C)  strategic pricing 
D)  government licensing 
A)  economies of scale 
B)  profit maximization 
C)  strategic pricing 
D)  government licensing

Question 20

If a price-discriminating monopolist sells the same product in two markets but charges a higher price in market X and a lower price in market Y, the pricing difference indicates that demand is

Accepted Answer

A)  more elastic in market X than in market Y. 
B)  less elastic in market X than in market Y. 
C)  less elastic in market Y than in market X. 
D)  the same in both markets X and Y. 
A)  more elastic in market X than in market Y. 
B)  less elastic in market X than in market Y. 
C)  less elastic in market Y than in market X. 
D)  the same in both markets X and Y.

Exam 12: Pure Monopoly

Which of the following is a characteristic of pure monopoly?

Pure monopolists

The supply curve for a monopoly is

Which of the following is not a precondition for price discrimination?

Answer the question on the basis of the accompanying table, which shows the demand schedule facing a nondiscriminating monopolist. \ 10 1 7 2 5 3 3 4 1 5 The profit-maximizing monopolist will sell at a price

In a natural monopoly case, the socially optimal pricing policy rule will often result in negative economic profits for the firm.

A pure monopolist is producing an output such that ATC = $4, P = $5, MC = $2, and MR = $3. This firm is realizing

An important economic problem associated with pure monopoly is that, at the profit-maximizing outputs, resources are

A monopolist can use its pricing strategy as a barrier to entry by other firms.

An unregulated pure monopolist will maximize profits by producing that output at which

X-inefficiency is said to occur when a monopolist's

A firm will earn economic profits whenever

Suppose that a monopolist calculates that at its present output level, marginal revenue is $1.00 and marginal cost is $2.00. It could maximize profits or minimize losses by

One defining characteristic of pure monopoly is that

A nondiscriminating profit-maximizing monopolist

A price-discriminating monopolist will set a higher price where demand is more elastic and a lower price where demand is less elastic.

Assume that a monopolist faces a linear demand curve. If the firm is operating at an output level where marginal revenue is positive, the firm

Suppose that a monopolist calculates that at its present output level, marginal cost is $4.00 and marginal revenue is $5.00. The firm could increase profits by

Which of the following is not a barrier to entry in an industry?

If a price-discriminating monopolist sells the same product in two markets but charges a higher price in market X and a lower price in market Y, the pricing difference indicates that demand is

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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