Question 1

The profit-maximizing output of a pure monopoly is not socially optimal, because in equilibrium

Accepted Answer

A)  price equals minimum average total cost. 
B)  marginal revenue equals marginal cost. 
C)  marginal cost exceeds price. 
D)  price exceeds marginal cost. 
A)  price equals minimum average total cost. 
B)  marginal revenue equals marginal cost. 
C)  marginal cost exceeds price. 
D)  price exceeds marginal cost.

Question 2

To practice long-run price discrimination, a monopolist must

Accepted Answer

A)  be a natural monopoly. 
B)  charge one price to all buyers. 
C)  permit the resale of the product by the original buyers. 
D)  be able to separate buyers into different markets with different price elasticities. 
A)  be a natural monopoly. 
B)  charge one price to all buyers. 
C)  permit the resale of the product by the original buyers. 
D)  be able to separate buyers into different markets with different price elasticities.

Question 3

Price discrimination is

Accepted Answer

A)  always legal. 
B)  always illegal. 
C)  only illegal if it hurts consumers more than nondiscrimination. 
D)  only illegal if used to lessen or eliminate competition. 
A)  always legal. 
B)  always illegal. 
C)  only illegal if it hurts consumers more than nondiscrimination. 
D)  only illegal if used to lessen or eliminate competition.

Question 4

Other things equal, a price-discriminating monopolist will

Accepted Answer

A)  realize a smaller economic profit than a nondiscriminating monopolist. 
B)  produce a larger output than a nondiscriminating monopolist. 
C)  produce the same output as a nondiscriminating monopolist. 
D)  produce a smaller output than a nondiscriminating monopolist. 
A)  realize a smaller economic profit than a nondiscriminating monopolist. 
B)  produce a larger output than a nondiscriminating monopolist. 
C)  produce the same output as a nondiscriminating monopolist. 
D)  produce a smaller output than a nondiscriminating monopolist.

Question 5

In the short run, a monopolist's economic profits

Accepted Answer

A)  are always positive because the monopolist is a price-maker. 
B)  are usually negative because of government price regulation. 
C)  are always zero because consumers prefer to buy from competitive sellers. 
D)  may be positive or negative depending on market demand and cost conditions. 
A)  are always positive because the monopolist is a price-maker. 
B)  are usually negative because of government price regulation. 
C)  are always zero because consumers prefer to buy from competitive sellers. 
D)  may be positive or negative depending on market demand and cost conditions.

Question 6

The higher prices charged by monopolists

Accepted Answer

A)  are like a private tax that redistributes income from consumers to monopoly sellers. 
B)  are socially optimal because they better reflect how much society values the good relative to the resources used to produce it. 
C)  return to consumers through the public goods provided by monopolies. 
D)  have no effect on the distribution of income. 
A)  are like a private tax that redistributes income from consumers to monopoly sellers. 
B)  are socially optimal because they better reflect how much society values the good relative to the resources used to produce it. 
C)  return to consumers through the public goods provided by monopolies. 
D)  have no effect on the distribution of income.

Question 7

Which of the following statements is correct?

Accepted Answer

A)  The pure monopolist will maximize profit by producing at that point on the demand curve where elasticity is zero. 
B)  In seeking the profit-maximizing output, the pure monopolist underallocates resources to its production. 
C)  The pure monopolist maximizes profits by producing that output at which the differential between price and average cost is the greatest. 
D)  Purely monopolistic sellers earn only normal profits in the long run. 
A)  The pure monopolist will maximize profit by producing at that point on the demand curve where elasticity is zero. 
B)  In seeking the profit-maximizing output, the pure monopolist underallocates resources to its production. 
C)  The pure monopolist maximizes profits by producing that output at which the differential between price and average cost is the greatest. 
D)  Purely monopolistic sellers earn only normal profits in the long run.

Question 8

A pure monopolist should never produce in the

Accepted Answer

A)  elastic segment of its demand curve, because it can increase total revenue and reduce total cost by lowering price. 
B)  inelastic segment of its demand curve, because it can increase total revenue and reduce total cost by increasing price. 
C)  inelastic segment of its demand curve, because it can always increase total revenue by more than it increases total cost by reducing price. 
D)  segment of its demand curve, where the price elasticity coefficient is greater than one. 
A)  elastic segment of its demand curve, because it can increase total revenue and reduce total cost by lowering price. 
B)  inelastic segment of its demand curve, because it can increase total revenue and reduce total cost by increasing price. 
C)  inelastic segment of its demand curve, because it can always increase total revenue by more than it increases total cost by reducing price. 
D)  segment of its demand curve, where the price elasticity coefficient is greater than one.

Question 9

In the short run a pure monopolist will maximize profits by producing at that level of output where the difference between price and average total cost is at a maximum.

Accepted Answer

A) True 
 B)False

Question 10

Because of their large-scale level of production, pure monopolists overallocate resources to their industry by producing beyond the P = MC output.

Accepted Answer

A) True 
 B)False

Question 11

What do economies of scale, the ownership of essential raw materials, and patents have in common?

Accepted Answer

A)  They must all be present before price discrimination can be practiced. 
B)  They are all barriers to entry. 
C)  They all help explain why a monopolist's demand and marginal revenue curves coincide. 
D)  They all help explain why the long-run average cost curve is U-shaped. 
A)  They must all be present before price discrimination can be practiced. 
B)  They are all barriers to entry. 
C)  They all help explain why a monopolist's demand and marginal revenue curves coincide. 
D)  They all help explain why the long-run average cost curve is U-shaped.

Question 12

One major barrier to entry under pure monopoly arises from

Accepted Answer

A)  the availability of close substitutes for a product. 
B)  ownership of essential resources. 
C)  the price taking ability of the firm. 
D)  diseconomies of scale. 
A)  the availability of close substitutes for a product. 
B)  ownership of essential resources. 
C)  the price taking ability of the firm. 
D)  diseconomies of scale.

Question 13

Pure monopolists may obtain economic profits in the long run because

Accepted Answer

A)  of advertising. 
B)  marginal revenue is constant as sales increase. 
C)  of barriers to entry. 
D)  of rising average fixed costs. 
A)  of advertising. 
B)  marginal revenue is constant as sales increase. 
C)  of barriers to entry. 
D)  of rising average fixed costs.

Question 14

"Price makers" refers to firms that

Accepted Answer

A)  face a downward-sloping demand curve. 
B)  are pure monopolies, rather than monopolistic competitors. 
C)  have no ability to influence the market price. 
D)  are pure monopolies or monopolistic competitors, but not oligopolies. 
A)  face a downward-sloping demand curve. 
B)  are pure monopolies, rather than monopolistic competitors. 
C)  have no ability to influence the market price. 
D)  are pure monopolies or monopolistic competitors, but not oligopolies.

Question 15

A purely monopolistic firm

Accepted Answer

A)  has no entry barriers. 
B)  faces a downsloping demand curve. 
C)  produces a product or service for which there are many close substitutes. 
D)  earns only a normal profit in the long run. 
A)  has no entry barriers. 
B)  faces a downsloping demand curve. 
C)  produces a product or service for which there are many close substitutes. 
D)  earns only a normal profit in the long run.

Question 16

In which one of the following market models is X-inefficiency most likely to be the greatest?

Accepted Answer

A)  pure competition 
B)  oligopoly 
C)  monopolistic competition 
D)  pure monopoly 
A)  pure competition 
B)  oligopoly 
C)  monopolistic competition 
D)  pure monopoly

Question 17

Which of the following conditions is not required for price discrimination?

Accepted Answer

A)  Buyers with different elasticities must be physically separate from each other. 
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)  Buyers with different elasticities must be physically separate from each other. 
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 18

With nonrivalrous consumption, such as in the case of online music and movies, as more consumers buy the product,

Accepted Answer

A)  the average cost of the output declines because the marginal cost is very small. 
B)  marginal cost is low, but the average cost of the output will be rising. 
C)  the average cost of the output will be rising because marginal cost is quite high. 
D)  marginal cost is quite high, but the average cost of the output will be declining. 
A)  the average cost of the output declines because the marginal cost is very small. 
B)  marginal cost is low, but the average cost of the output will be rising. 
C)  the average cost of the output will be rising because marginal cost is quite high. 
D)  marginal cost is quite high, but the average cost of the output will be declining.

Question 19

Under which of the following conditions would a profit-maximizing monopolist necessarily raise price?

Accepted Answer

A)  if product demand was price-elastic 
B)  if marginal revenue is positive 
C)  if marginal revenue was greater than marginal cost 
D)  if marginal cost was greater than marginal revenue 
A)  if product demand was price-elastic 
B)  if marginal revenue is positive 
C)  if marginal revenue was greater than marginal cost 
D)  if marginal cost was greater than marginal revenue

Question 20

Because the monopolist's demand curve is downsloping,

Accepted Answer

A)  MR will equal price. 
B)  price must be lowered to sell more output. 
C)  the elasticity coefficient will increase as price is lowered. 
D)  its supply curve will also be downsloping. 
A)  MR will equal price. 
B)  price must be lowered to sell more output. 
C)  the elasticity coefficient will increase as price is lowered. 
D)  its supply curve will also be downsloping.

Exam 12: Pure Monopoly

The profit-maximizing output of a pure monopoly is not socially optimal, because in equilibrium

To practice long-run price discrimination, a monopolist must

Price discrimination is

Other things equal, a price-discriminating monopolist will

In the short run, a monopolist's economic profits

The higher prices charged by monopolists

Which of the following statements is correct?

A pure monopolist should never produce in the

In the short run a pure monopolist will maximize profits by producing at that level of output where the difference between price and average total cost is at a maximum.

Because of their large-scale level of production, pure monopolists overallocate resources to their industry by producing beyond the P = MC output.

What do economies of scale, the ownership of essential raw materials, and patents have in common?

One major barrier to entry under pure monopoly arises from

Pure monopolists may obtain economic profits in the long run because

"Price makers" refers to firms that

A purely monopolistic firm

In which one of the following market models is X-inefficiency most likely to be the greatest?

Which of the following conditions is not required for price discrimination?

With nonrivalrous consumption, such as in the case of online music and movies, as more consumers buy the product,

Under which of the following conditions would a profit-maximizing monopolist necessarily raise price?

Because the monopolist's demand curve is downsloping,

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

Filters