Question 1

If profits are maximized (or losses minimized),which of the following conditions is common to both unregulated monopoly and pure competition?

Accepted Answer

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

Question 2

A pure monopolist:

Accepted Answer

A)  will realize an economic profit if price exceeds ATC at the profit-maximizing/loss-minimizing level of output. 
B)  will realize an economic profit if ATC exceeds MR at the profit-maximizing/loss-minimizing level of output. 
C)  will realize an economic loss if MC intersects the downsloping portion of MR. 
D)  always realizes an economic profit. 
A)  will realize an economic profit if price exceeds ATC at the profit-maximizing/loss-minimizing level of output. 
B)  will realize an economic profit if ATC exceeds MR at the profit-maximizing/loss-minimizing level of output. 
C)  will realize an economic loss if MC intersects the downsloping portion of MR. 
D)  always realizes an economic profit.

Question 3

Pure monopoly refers to:

Accepted Answer

A)  any market in which the demand curve to the firm is downsloping. 
B)  a standardized product being produced by many firms. 
C)  a single firm producing a product for which there are no close substitutes. 
D)  a large number of firms producing a differentiated product. 
A)  any market in which the demand curve to the firm is downsloping. 
B)  a standardized product being produced by many firms. 
C)  a single firm producing a product for which there are no close substitutes. 
D)  a large number of firms producing a differentiated product.

Question 4

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 5

If a monopolist's marginal revenue is $3.00 and its marginal cost is $4.50,it will increase its profits by:

Accepted Answer

A)  reducing output and raising price. 
B)  reducing both output and price. 
C)  increasing both price and output. 
D)  raising price while keeping output unchanged. 
A)  reducing output and raising price. 
B)  reducing both output and price. 
C)  increasing both price and output. 
D)  raising price while keeping output unchanged.

Question 6

(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 7

(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.Which of the following conditions of price discrimination explains why this occurs?

Accepted Answer

A)  The seller must have some monopoly power;that is,it must be able to set the product price. 
B)  The seller must be able to identify buyers by group characteristics such as age or income. 
C)  Groups must have different elasticities of demand for the product. 
D)  The items can be bought by people in the low-price group and transferred to members of the high-price group. 
A)  The seller must have some monopoly power;that is,it must be able to set the product price. 
B)  The seller must be able to identify buyers by group characteristics such as age or income. 
C)  Groups must have different elasticities of demand for the product. 
D)  The items can be bought by people in the low-price group and transferred to members of the high-price group.

Question 8

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 9

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 10

Answer the question on the basis of the following demand and cost data for a pure monopolist: $\begin{array}{l}
\begin{array}{ccc}
&\text { Demand Data }&\
&&\text { Quantity }\
\text { Price } & & \text { Demanded } \
\hline
\$ 5.50 & & 3 \
5.00 & & 4 \
4.50 & & 5 \
3.85 & & 6 \
3.35 & & 7 \
2.90 & & 8 \
2.50 & & 9
\end{array}
\begin{array}{ccc}
&\text { Cost Data }&
\\
\text { Output } & & \text { Total Cost } \
\hline
3& & \$ 5.00 \
4&&6.00\
5 & & 6.00 \
6 & & 7.50 \
7 & & 9.00 \
8 & & 11.00 \
9 & & 14.00
\end{array}
\end{array}$ Refer to the data.The profit-maximizing level of output will be:

Accepted Answer

A)  4 units. 
B)  7 units. 
C)  6 units. 
D)  5 units. 
A)  4 units. 
B)  7 units. 
C)  6 units. 
D)  5 units.

Question 11

Suppose that a pure monopolist can sell 4 units of output at $2 per unit and 5 units at $1.75 per unit.The monopolist will produce and sell the fifth unit if its marginal cost is:

Accepted Answer

A)  $1 or less. 
B)  $.75 or less. 
C)  $1.75 or less. 
D)  $2 or less. 
A)  $1 or less. 
B)  $.75 or less. 
C)  $1.75 or less. 
D)  $2 or less.

Question 12

For an imperfectly competitive firm:

Accepted Answer

A)  total revenue is a straight,upsloping line because a firm's sales are independent of product price. 
B)  the marginal revenue curve lies above the demand curve because any reduction in price applies to all units sold. 
C)  the marginal revenue curve lies below the demand curve because any reduction in price applies to all units sold. 
D)  the marginal revenue curve lies below the demand curve because any reduction in price applies only to the extra unit sold. 
A)  total revenue is a straight,upsloping line because a firm's sales are independent of product price. 
B)  the marginal revenue curve lies above the demand curve because any reduction in price applies to all units sold. 
C)  the marginal revenue curve lies below the demand curve because any reduction in price applies to all units sold. 
D)  the marginal revenue curve lies below the demand curve because any reduction in price applies only to the extra unit sold.

Question 13

Suppose that a pure monopolist can sell 20 units of output at $10 per unit and 21 units at $9.75 per unit.The marginal revenue of the 21st unit of output is:

Accepted Answer

A)  $9.75. 
B)  $204.75. 
C)  $4.75. 
D)  $.25. 
A)  $9.75. 
B)  $204.75. 
C)  $4.75. 
D)  $.25.

Question 14

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 15

The nondiscriminating pure monopolist's demand curve:

Accepted Answer

A)  is the industry demand curve. 
B)  shows a direct or positive relationship between price and quantity demanded. 
C)  tends to be inelastic at high prices and elastic at low prices. 
D)  is identical to its marginal revenue curve. 
A)  is the industry demand curve. 
B)  shows a direct or positive relationship between price and quantity demanded. 
C)  tends to be inelastic at high prices and elastic at low prices. 
D)  is identical to its marginal revenue curve.

Question 16

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 17

The gains to monopolists from exercising market power:

Accepted Answer

A)  exceed the losses to consumers in monopoly markets,resulting in a net gain to society. 
B)  equal the losses to consumers in monopoly markets,resulting in no net change for society. 
C)  are less than the losses to consumers in monopoly markets,resulting in a net loss to society. 
D)  create smaller deadweight losses than occur in purely competitive industries. 
A)  exceed the losses to consumers in monopoly markets,resulting in a net gain to society. 
B)  equal the losses to consumers in monopoly markets,resulting in no net change for society. 
C)  are less than the losses to consumers in monopoly markets,resulting in a net loss to society. 
D)  create smaller deadweight losses than occur in purely competitive industries.

Question 18

Suppose a pure monopolist is charging a price of $12 and the associated marginal revenue is $9.We thus know that:

Accepted Answer

A)  demand is inelastic at this price. 
B)  the firm is maximizing profits. 
C)  total revenue is increasing. 
D)  total revenue is at a maximum. 
A)  demand is inelastic at this price. 
B)  the firm is maximizing profits. 
C)  total revenue is increasing. 
D)  total revenue is at a maximum.

Question 19

Large minimum efficient scale of plant combined with limited market demand may lead to:

Accepted Answer

A)  natural monopoly. 
B)  patent monopoly. 
C)  government franchise monopoly. 
D)  shared monopoly. 
A)  natural monopoly. 
B)  patent monopoly. 
C)  government franchise monopoly. 
D)  shared monopoly.

Question 20

If the variable costs of a profit-maximizing pure monopolist decline,the firm should:

Accepted Answer

A)  produce more output and charge a higher price. 
B)  produce more output and charge a lower price. 
C)  reduce both output and price. 
D)  raise both output and price. 
A)  produce more output and charge a higher price. 
B)  produce more output and charge a lower price. 
C)  reduce both output and price. 
D)  raise both output and price.

If profits are maximized (or losses minimized),which of the following conditions is common to both unregulated monopoly and pure competition?

A pure monopolist:

Pure monopoly refers to:

Pure monopolists may obtain economic profits in the long run because:

If a monopolist's marginal revenue is $3.00 and its marginal cost is $4.50,it will increase its profits by:

(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:

(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.Which of the following conditions of price discrimination explains why this occurs?

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:

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

Suppose that a pure monopolist can sell 4 units of output at $2 per unit and 5 units at $1.75 per unit.The monopolist will produce and sell the fifth unit if its marginal cost is:

For an imperfectly competitive firm:

Suppose that a pure monopolist can sell 20 units of output at $10 per unit and 21 units at $9.75 per unit.The marginal revenue of the 21^st unit of output is:

Which of the following is a characteristic of pure monopoly?

The nondiscriminating pure monopolist's demand curve:

The higher prices charged by monopolists:

The gains to monopolists from exercising market power:

Suppose a pure monopolist is charging a price of $12 and the associated marginal revenue is $9.We thus know that:

Large minimum efficient scale of plant combined with limited market demand may lead to:

If the variable costs of a profit-maximizing pure monopolist decline,the firm should:

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 Cost of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Monopolistic Competition and Oligopoly

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

Filters

Exam 12: Pure Monopoly

If profits are maximized (or losses minimized),which of the following conditions is common to both unregulated monopoly and pure competition?

A pure monopolist:

Pure monopoly refers to:

Pure monopolists may obtain economic profits in the long run because:

If a monopolist's marginal revenue is $3.00 and its marginal cost is $4.50,it will increase its profits by:

(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:

(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.Which of the following conditions of price discrimination explains why this occurs?

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:

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

Suppose that a pure monopolist can sell 4 units of output at $2 per unit and 5 units at $1.75 per unit.The monopolist will produce and sell the fifth unit if its marginal cost is:

For an imperfectly competitive firm:

Suppose that a pure monopolist can sell 20 units of output at $10 per unit and 21 units at $9.75 per unit.The marginal revenue of the 21st unit of output is:

Which of the following is a characteristic of pure monopoly?

The nondiscriminating pure monopolist's demand curve:

The higher prices charged by monopolists:

The gains to monopolists from exercising market power:

Suppose a pure monopolist is charging a price of $12 and the associated marginal revenue is $9.We thus know that:

Large minimum efficient scale of plant combined with limited market demand may lead to:

If the variable costs of a profit-maximizing pure monopolist decline,the firm should:

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 Cost of Production

Pure Competition in the Short Run

Pure Competition in the Long Run

Monopolistic Competition and Oligopoly

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

Filters

Suppose that a pure monopolist can sell 20 units of output at $10 per unit and 21 units at $9.75 per unit.The marginal revenue of the 21^st unit of output is: