Question 1

When comparing a monopoly firm and a competitive firm in the long run,which of the following statements is not correct?

Accepted Answer

A) A monopoly firm does not need to produce output at the lowest possible cost but a competitive firm must. 
B) A monopoly firm earns economic profit at its profit-maximizing level of output but a competitive firm does not. 
C) A monopoly firm operates at the minimum point on its average cost curve but a competitive firm does not. 
D) A monopoly firm will produce more than the efficient level of output but a competitive firm will always produce the efficient level of output. 
A) A monopoly firm does not need to produce output at the lowest possible cost but a competitive firm must. 
B) A monopoly firm earns economic profit at its profit-maximizing level of output but a competitive firm does not. 
C) A monopoly firm operates at the minimum point on its average cost curve but a competitive firm does not. 
D) A monopoly firm will produce more than the efficient level of output but a competitive firm will always produce the efficient level of output.

Question 2

A dynamic analysis of a monopoly suggests that:

Accepted Answer

A) certain monopoly firms increase total surplus in the market. 
B) monopoly power in markets should be restricted to induce innovation. 
C) any form of monopoly is inefficient. 
D) monopoly power should be restricted in order to ensure fair market prices. 
A) certain monopoly firms increase total surplus in the market. 
B) monopoly power in markets should be restricted to induce innovation. 
C) any form of monopoly is inefficient. 
D) monopoly power should be restricted in order to ensure fair market prices.

Question 3

Acme Baseball Bats is a monopoly firm.If the marginal cost of producing a baseball bat is $30,and the absolute value of price elasticity of demand for Acme Baseball Bat Company is estimated to be 4,at what price should Acme set its price if it wants to maximize profits?

Accepted Answer

A) $30 
B) $40 
C) $50 
D) $60 
A) $30 
B) $40 
C) $50 
D) $60

Question 4

Which of the following statements correctly identifies the relationship between marginal revenue and price elasticity of demand?

Accepted Answer

A) When price elasticity of demand is infinite,marginal revenue is greater than price. 
B) When price elasticity of demand is equal to one,marginal revenue is zero. 
C) When price elasticity of demand is more than one,marginal revenue is negative. 
D) When price elasticity of demand is less than one,marginal revenue is positive. 
A) When price elasticity of demand is infinite,marginal revenue is greater than price. 
B) When price elasticity of demand is equal to one,marginal revenue is zero. 
C) When price elasticity of demand is more than one,marginal revenue is negative. 
D) When price elasticity of demand is less than one,marginal revenue is positive.

Question 5

The demand curve for a firm operating in a monopoly market is the same as _____.

Accepted Answer

A) its average revenue curve 
B) the industry supply curve 
C) its marginal revenue curve 
D) its marginal cost curve 
A) its average revenue curve 
B) the industry supply curve 
C) its marginal revenue curve 
D) its marginal cost curve

Question 6

If P = price and MC = marginal cost,the price markup of a monopolist is expressed as _____.

Accepted Answer

A) (P - M
C) /MC 
B) (P - M
C) /P 
C) (MC - P)/MC 
D) (MC - P)/P 
A) (P - M
C) /MC 
B) (P - M
C) /P 
C) (MC - P)/MC 
D) (MC - P)/P

Question 7

Suppose your pharmaceutical company,which operates as a monopoly,has a patent on a drug with an estimated price elasticity of demand of 1.2.If the marginal cost of producing each pill is $3,at what price should you sell your drug if profit maximization is your objective?

Accepted Answer

A) $3 
B) $9 
C) $16 
D) $18 
A) $3 
B) $9 
C) $16 
D) $18

Question 8

When the value of the Lerner index is zero for a firm:

Accepted Answer

A) its demand curve is steeply sloped. 
B) its demand curve is non-linear. 
C) the demand for its product is unit elastic. 
D) the demand for its product is perfectly elastic. 
A) its demand curve is steeply sloped. 
B) its demand curve is non-linear. 
C) the demand for its product is unit elastic. 
D) the demand for its product is perfectly elastic.

Question 9

The following figure shows the marginal cost [MC],average cost [AC],marginal revenue [MR],and demand curves for a profit-maximizing monopolist.
Figure 11-2  
-Refer to Figure 11-2.The equilibrium price in the monopoly market is _____.

Accepted Answer

A) OA 
B) OB 
C) OI 
D) OM 
A) OA 
B) OB 
C) OI 
D) OM

Question 10

The following figure shows the demand curve and the marginal revenue curve of a monopolist.On the horizontal axis,OG = GF.
Figure 11-5  
-Refer to Figure 11-5.A fall in price will decrease total revenue _____.

Accepted Answer

A) between the points E and F 
B) between the points E and A 
C) between the points A and F 
D) at point G 
A) between the points E and F 
B) between the points E and A 
C) between the points A and F 
D) at point G

Question 11

The following figure shows the demand curve and the marginal revenue curve of a monopolist.On the horizontal axis,OG = GF.
Figure 11-5  
-Refer to Figure 11-5.Between points E and A on the demand curve,the price elasticity of demand:

Accepted Answer

A) is equal to one. 
B) exceeds one. 
C) is equal to zero. 
D) is less than one. 
A) is equal to one. 
B) exceeds one. 
C) is equal to zero. 
D) is less than one.

Question 12

Why do gas stations near airports have a higher price markup than gas stations at busy intersections in the city?

Accepted Answer

A) Gas stations at busy intersections have to contend with more competition than gas stations within the city. 
B) Gas stations within the city are less convenient for consumers than gas stations at the airport. 
C) Gas stations at airports face a smaller price elasticity of demand than gas stations in the city. 
D) Gas stations at airports have higher fixed costs than gas stations in the city. 
A) Gas stations at busy intersections have to contend with more competition than gas stations within the city. 
B) Gas stations within the city are less convenient for consumers than gas stations at the airport. 
C) Gas stations at airports face a smaller price elasticity of demand than gas stations in the city. 
D) Gas stations at airports have higher fixed costs than gas stations in the city.

Question 13

The following figure shows the marginal revenue [MR],demand,and average cost [AC] curves for a profit-maximizing monopolist in the long run.
Figure 11-3  
-Refer to Figure 11-3.The profit of the monopolist is shown by the area _____.

Accepted Answer

A) AFCO 
B) IHB 
C) AFGB 
D) AFHB 
A) AFCO 
B) IHB 
C) AFGB 
D) AFHB

Question 14

Which of the following conditions generally holds when a monopoly firm is producing its profit-maximizing level of output?

Accepted Answer

A) Marginal cost [MC] = marginal revenue [MR] = average cost [AC] = average revenue [AR] B) MC = MR > AC C) MC = MR = price D) MC = MR < AR A) Marginal cost [MC] = marginal revenue [MR] = average cost [AC] = average revenue [AR] B) MC = MR > AC C) MC = MR = price D) MC = MR < AR

Question 15

The use of antitrust statutes by the United States Federal Trade Commission and the Antitrust Division of the U.S.Department of Justice has declined over the years.Which of the following statements is the correct reason for this decrease in antitrust enforcement?

Accepted Answer

A) The increase in the number of firms over the years has reduced monopoly power in most markets. 
B) The prosecution of monopoly firms leads to a decrease in total surplus. 
C) The dynamic view of monopoly is increasingly being used in the policymaking arena. 
D) With the spread of globalization,it is difficult to prosecute companies that operate from many different countries. 
A) The increase in the number of firms over the years has reduced monopoly power in most markets. 
B) The prosecution of monopoly firms leads to a decrease in total surplus. 
C) The dynamic view of monopoly is increasingly being used in the policymaking arena. 
D) With the spread of globalization,it is difficult to prosecute companies that operate from many different countries.

Question 16

The shape of the monopolist's demand curve indicates that:

Accepted Answer

A) profit per unit increases as more units are sold. 
B) demand for the good produced by a monopoly firm is elastic. 
C) the firm practices price discrimination. 
D) price and output are inversely related for the firm. 
A) profit per unit increases as more units are sold. 
B) demand for the good produced by a monopoly firm is elastic. 
C) the firm practices price discrimination. 
D) price and output are inversely related for the firm.

Question 17

Magic Cigarette Company produces packs of cigarettes at a marginal cost of $2 per pack.If they currently sell their product at $5 per pack,what is the value of the Lerner index of monopoly power?

Accepted Answer

A) 0.4 
B) 0.6 
C) 2.5 
D) 5 
A) 0.4 
B) 0.6 
C) 2.5 
D) 5

Question 18

The deadweight loss of a monopoly arises from:

Accepted Answer

A) the loss of consumer surplus being greater than the gain in producer surplus. 
B) the transfer of producer surplus to consumers. 
C) the loss in producer surplus being greater than the gain in consumer surplus. 
D) the combined loss of consumer and producer surplus. 
A) the loss of consumer surplus being greater than the gain in producer surplus. 
B) the transfer of producer surplus to consumers. 
C) the loss in producer surplus being greater than the gain in consumer surplus. 
D) the combined loss of consumer and producer surplus.

Question 19

The following figure shows the demand curve and the marginal revenue curve of a monopolist.On the horizontal axis,OG = GF.
Figure 11-5  
-Refer to Figure 11-5.At quantity G,the price elasticity of demand:

Accepted Answer

A) is equal to one. 
B) exceeds one. 
C) is equal to zero. 
D) is less than one. 
A) is equal to one. 
B) exceeds one. 
C) is equal to zero. 
D) is less than one.

Question 20

The Lerner index shows monopoly power as the markup of _____,as a percentage of the product's price.

Accepted Answer

A) price over average cost 
B) price over marginal cost 
C) profits over price 
D) total revenue over price 
A) price over average cost 
B) price over marginal cost 
C) profits over price 
D) total revenue over price

When comparing a monopoly firm and a competitive firm in the long run,which of the following statements is not correct?

A dynamic analysis of a monopoly suggests that:

Acme Baseball Bats is a monopoly firm.If the marginal cost of producing a baseball bat is $30,and the absolute value of price elasticity of demand for Acme Baseball Bat Company is estimated to be 4,at what price should Acme set its price if it wants to maximize profits?

Which of the following statements correctly identifies the relationship between marginal revenue and price elasticity of demand?

The demand curve for a firm operating in a monopoly market is the same as _____.

If P = price and MC = marginal cost,the price markup of a monopolist is expressed as _____.

Suppose your pharmaceutical company,which operates as a monopoly,has a patent on a drug with an estimated price elasticity of demand of 1.2.If the marginal cost of producing each pill is $3,at what price should you sell your drug if profit maximization is your objective?

When the value of the Lerner index is zero for a firm:

The following figure shows the marginal cost [MC],average cost [AC],marginal revenue [MR],and demand curves for a profit-maximizing monopolist. Figure 11-2 -Refer to Figure 11-2.The equilibrium price in the monopoly market is _____.

The following figure shows the demand curve and the marginal revenue curve of a monopolist.On the horizontal axis,OG = GF. Figure 11-5 -Refer to Figure 11-5.A fall in price will decrease total revenue _____.

The following figure shows the demand curve and the marginal revenue curve of a monopolist.On the horizontal axis,OG = GF. Figure 11-5 -Refer to Figure 11-5.Between points E and A on the demand curve,the price elasticity of demand:

Why do gas stations near airports have a higher price markup than gas stations at busy intersections in the city?

The following figure shows the marginal revenue [MR],demand,and average cost [AC] curves for a profit-maximizing monopolist in the long run. Figure 11-3 -Refer to Figure 11-3.The profit of the monopolist is shown by the area _____.

Which of the following conditions generally holds when a monopoly firm is producing its profit-maximizing level of output?

The use of antitrust statutes by the United States Federal Trade Commission and the Antitrust Division of the U.S.Department of Justice has declined over the years.Which of the following statements is the correct reason for this decrease in antitrust enforcement?

The shape of the monopolist's demand curve indicates that:

Magic Cigarette Company produces packs of cigarettes at a marginal cost of $2 per pack.If they currently sell their product at $5 per pack,what is the value of the Lerner index of monopoly power?

The deadweight loss of a monopoly arises from:

The following figure shows the demand curve and the marginal revenue curve of a monopolist.On the horizontal axis,OG = GF. Figure 11-5 -Refer to Figure 11-5.At quantity G,the price elasticity of demand:

The Lerner index shows monopoly power as the markup of _____,as a percentage of the product's price.

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

Filters

Exam 11: Monopoly

When comparing a monopoly firm and a competitive firm in the long run,which of the following statements is not correct?

A dynamic analysis of a monopoly suggests that:

Acme Baseball Bats is a monopoly firm.If the marginal cost of producing a baseball bat is $30,and the absolute value of price elasticity of demand for Acme Baseball Bat Company is estimated to be 4,at what price should Acme set its price if it wants to maximize profits?

Which of the following statements correctly identifies the relationship between marginal revenue and price elasticity of demand?

The demand curve for a firm operating in a monopoly market is the same as _____.

If P = price and MC = marginal cost,the price markup of a monopolist is expressed as _____.

Suppose your pharmaceutical company,which operates as a monopoly,has a patent on a drug with an estimated price elasticity of demand of 1.2.If the marginal cost of producing each pill is $3,at what price should you sell your drug if profit maximization is your objective?

When the value of the Lerner index is zero for a firm:

The following figure shows the marginal cost [MC],average cost [AC],marginal revenue [MR],and demand curves for a profit-maximizing monopolist. Figure 11-2 -Refer to Figure 11-2.The equilibrium price in the monopoly market is _____.

The following figure shows the demand curve and the marginal revenue curve of a monopolist.On the horizontal axis,OG = GF. Figure 11-5 -Refer to Figure 11-5.A fall in price will decrease total revenue _____.

The following figure shows the demand curve and the marginal revenue curve of a monopolist.On the horizontal axis,OG = GF. Figure 11-5 -Refer to Figure 11-5.Between points E and A on the demand curve,the price elasticity of demand:

Why do gas stations near airports have a higher price markup than gas stations at busy intersections in the city?

The following figure shows the marginal revenue [MR],demand,and average cost [AC] curves for a profit-maximizing monopolist in the long run. Figure 11-3 -Refer to Figure 11-3.The profit of the monopolist is shown by the area _____.

Which of the following conditions generally holds when a monopoly firm is producing its profit-maximizing level of output?

The use of antitrust statutes by the United States Federal Trade Commission and the Antitrust Division of the U.S.Department of Justice has declined over the years.Which of the following statements is the correct reason for this decrease in antitrust enforcement?

The shape of the monopolist's demand curve indicates that:

Magic Cigarette Company produces packs of cigarettes at a marginal cost of $2 per pack.If they currently sell their product at $5 per pack,what is the value of the Lerner index of monopoly power?

The deadweight loss of a monopoly arises from:

The following figure shows the demand curve and the marginal revenue curve of a monopolist.On the horizontal axis,OG = GF. Figure 11-5 -Refer to Figure 11-5.At quantity G,the price elasticity of demand:

The Lerner index shows monopoly power as the markup of _____,as a percentage of the product's price.

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

Filters