Question 1

Because a monopoly's demand curve is the same as the market demand curve for its product

Accepted Answer

A)  the monopoly's marginal revenue equals its price. 
B)  the monopoly is a price taker. 
C)  the monopoly must lower its price to sell more of its product. 
D)  the monopoly's average total cost always falls as it increases its output. 
A)  the monopoly's marginal revenue equals its price. 
B)  the monopoly is a price taker. 
C)  the monopoly must lower its price to sell more of its product. 
D)  the monopoly's average total cost always falls as it increases its output.

Question 2

A firm that has the ability to control to some degree the price of the product it sells

Accepted Answer

A)  is also able to dictate the quantity purchased. 
B)  faces a demand curve that is inelastic throughout the range of market demand. 
C)  is a price maker. 
D)  faces a perfectly inelastic demand curve. 
A)  is also able to dictate the quantity purchased. 
B)  faces a demand curve that is inelastic throughout the range of market demand. 
C)  is a price maker. 
D)  faces a perfectly inelastic demand curve.

Question 3

-Refer to Figure 9-2. If the firm's average total cost curve is ATC3, the firm will

Accepted Answer

A)  suffer a loss. 
B)  break even. 
C)  make a profit. 
D)  face competition. 
A)  suffer a loss. 
B)  break even. 
C)  make a profit. 
D)  face competition.

Question 4

Assume that a monopolist practices perfect price discrimination. The firm's marginal revenue curve will

Accepted Answer

A)  be perfectly elastic. 
B)  be equal to its demand curve. 
C)  will be perfectly inelastic. 
D)  will lie below its demand curve. 
A)  be perfectly elastic. 
B)  be equal to its demand curve. 
C)  will be perfectly inelastic. 
D)  will lie below its demand curve.

Question 5

A perfectly competitive firm cannot practice price discrimination because

Accepted Answer

A)  a firm that breaks even in the long run cannot afford to engage in yield management. 
B)  it does not advertise; this prevents the firm from marketing its product to different segments of the market. 
C)  each consumer in a perfectly competitive market has the same willingness to pay. 
D)  the firm can only charge the market price. 
A)  a firm that breaks even in the long run cannot afford to engage in yield management. 
B)  it does not advertise; this prevents the firm from marketing its product to different segments of the market. 
C)  each consumer in a perfectly competitive market has the same willingness to pay. 
D)  the firm can only charge the market price.

Question 6

Firms price discriminate

Accepted Answer

A)  to reduce the quantity sold so as to reduce production costs. 
B)  to increase profits. 
C)  to take advantage of customers. 
D)  to increase total economic surplus. 
A)  to reduce the quantity sold so as to reduce production costs. 
B)  to increase profits. 
C)  to take advantage of customers. 
D)  to increase total economic surplus.

Question 7

-Refer to Figure 9-5. If the monopolist charges price P* for output Q*, in order to maximise profit or minimise loss in the short run, it should

Accepted Answer

A)  continue to produce because price is greater than average variable cost. 
B)  shut down because price is greater than marginal cost. 
C)  shut down because price is less than average total cost. 
D)  continue to produce because a monopolist always earns a profit. 
A)  continue to produce because price is greater than average variable cost. 
B)  shut down because price is greater than marginal cost. 
C)  shut down because price is less than average total cost. 
D)  continue to produce because a monopolist always earns a profit.

Question 8

Governments grant patents to

Accepted Answer

A)  compensate firms for research and development costs. 
B)  encourage competition. 
C)  encourage low prices. 
D)  encourage firms to reveal secret production techniques. 
A)  compensate firms for research and development costs. 
B)  encourage competition. 
C)  encourage low prices. 
D)  encourage firms to reveal secret production techniques.

Question 9

-Refer to Figure 9-16. Graph (a) represents a monopolist who cannot price discriminate and graph (b) represents a monopolist practicing perfect price discrimination. On each graph, identify the monopoly price, the monopoly output, the efficient output, and the areas representing profit, consumer surplus, and deadweight loss.

Accepted Answer

are converted to profit. In graph (a), t

Question 10

-Refer to Figure 9-3. Suppose the monopolist represented in the diagram above produces positive output. What is the price charged at the profit-maximising/loss-minimising output level?

Accepted Answer

A)  $38 
B)  $54 
C)  $68 
D)  $75 
A)  $38 
B)  $54 
C)  $68 
D)  $75

Question 11

In which market structure is it not possible to practice price discrimination?

Accepted Answer

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

Question 12

-Refer to Table 9-1. What is the marginal revenue from the sale of the 12th unit?

Accepted Answer

A)  $75 
B)  $50 
C)  $20 
D)  -$5 
A)  $75 
B)  $50 
C)  $20 
D)  -$5

Question 13

Most pharmaceutical firms selling prescription drugs continue to earn economic profits long after the patents on the prescription drugs expire because they have established a strong foothold in the market.

Accepted Answer

A) True 
 B)False

Question 14

Joss is a marketing consultant. Iris and Daphne are potential customers interested in commissioning Joss to undertake a market survey and compile the findings in a report. Iris is willing to pay $500 for the service while Daphne is willing to pay $800. Suppose that the opportunity cost of Joss's time is $1200. Assume that Iris and Daphne do not know each other. Which of the following statements is true?

Accepted Answer

A)  Joss should charge each customer $600; that way he will earn his opportunity cost and it will be fair to both Iris and Daphne. 
B)  Joss should charge Iris $500 and Daphne no more than $700; that way he earns his opportunity cost and there is no loss in economic surplus. 
C)  Joss should charge Iris $500 and Daphne $800; that way economic surplus is maximised. 
D)  Joss should charge Iris $500, but charging Daphne $800 is unfair because it allows Joss to earn more than his opportunity cost. 
A)  Joss should charge each customer $600; that way he will earn his opportunity cost and it will be fair to both Iris and Daphne. 
B)  Joss should charge Iris $500 and Daphne no more than $700; that way he earns his opportunity cost and there is no loss in economic surplus. 
C)  Joss should charge Iris $500 and Daphne $800; that way economic surplus is maximised. 
D)  Joss should charge Iris $500, but charging Daphne $800 is unfair because it allows Joss to earn more than his opportunity cost.

Question 15

Consider the following actions undertaken by a firm: a. charging the same price for products of different quality
B. charging different prices to different consumers for the same product when the variation cannot be explained by cost differences
C. charging different prices for products of different qualities
D. charging a lower price to match a competitor's price
Which of the above will be considered price discrimination?

Accepted Answer

A)  a, b, c, and d 
B)  a, b, and d only 
C)  b and d only 
D)  a and b only 
A)  a, b, c, and d 
B)  a, b, and d only 
C)  b and d only 
D)  a and b only

Question 16

-Refer to Table 9-1. What is the firm's profit-maximising output and what is the price charged to sell this output?

Accepted Answer

A)  P = $85; Q = 10 
B)  P = $80; Q = 11 
C)  P = $70; Q = 13 
D)  P = $65; Q = 14 
A)  P = $85; Q = 10 
B)  P = $80; Q = 11 
C)  P = $70; Q = 13 
D)  P = $65; Q = 14

Question 17

Governments grant patents to encourage

Accepted Answer

A)  research and development on new products. 
B)  competition. 
C)  low prices. 
D)  firms to form public enterprises. 
A)  research and development on new products. 
B)  competition. 
C)  low prices. 
D)  firms to form public enterprises.

Question 18

Suppose a monopoly is producing its profit-maximising output level. Now suppose the government imposes a lump-sum tax on the monopoly, independent of its output. As a result, the monopolist will increase the price of its product to cover its higher cost.

Accepted Answer

A) True 
 B)False

Question 19

A market economy benefits from market power

Accepted Answer

A)  if the majority of the population are entrepreneurs. 
B)  if firms with market power do research and development with the profits earned. 
C)  if market power gets so bad the government creates public enterprises. 
D)  under no circumstances. 
A)  if the majority of the population are entrepreneurs. 
B)  if firms with market power do research and development with the profits earned. 
C)  if market power gets so bad the government creates public enterprises. 
D)  under no circumstances.

Question 20

A monopoly is a seller of a product

Accepted Answer

A)  with many substitutes. 
B)  without a close substitute. 
C)  with a perfectly inelastic demand. 
D)  without a well-defined demand curve. 
A)  with many substitutes. 
B)  without a close substitute. 
C)  with a perfectly inelastic demand. 
D)  without a well-defined demand curve.

Because a monopoly's demand curve is the same as the market demand curve for its product

A firm that has the ability to control to some degree the price of the product it sells

-Refer to Figure 9-2. If the firm's average total cost curve is ATC₃, the firm will

Assume that a monopolist practices perfect price discrimination. The firm's marginal revenue curve will

A perfectly competitive firm cannot practice price discrimination because

Firms price discriminate

-Refer to Figure 9-5. If the monopolist charges price P* for output Q*, in order to maximise profit or minimise loss in the short run, it should

Governments grant patents to

-Refer to Figure 9-3. Suppose the monopolist represented in the diagram above produces positive output. What is the price charged at the profit-maximising/loss-minimising output level?

In which market structure is it not possible to practice price discrimination?

-Refer to Table 9-1. What is the marginal revenue from the sale of the 12th unit?

Most pharmaceutical firms selling prescription drugs continue to earn economic profits long after the patents on the prescription drugs expire because they have established a strong foothold in the market.

-Refer to Table 9-1. What is the firm's profit-maximising output and what is the price charged to sell this output?

Governments grant patents to encourage

Suppose a monopoly is producing its profit-maximising output level. Now suppose the government imposes a lump-sum tax on the monopoly, independent of its output. As a result, the monopolist will increase the price of its product to cover its higher cost.

A market economy benefits from market power

A monopoly is a seller of a product

Economics Foundations and Models

Choices and Trade - Offs in the Market

Where Prices Come Frome : The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency , Government Price Setting and Taxes

Concumer Choice and Behavioural Economics

Technology , Production and Costs

Firms in Perfectly Compitive Markets

Monopolistic Competition : The Competitive Model in More Realistic Setting

Oligopoly : Firms in Less Competitve Markets

The Market for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

Externalities , Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters

Exam 9: Monopoly Markets

Because a monopoly's demand curve is the same as the market demand curve for its product

A firm that has the ability to control to some degree the price of the product it sells

-Refer to Figure 9-2. If the firm's average total cost curve is ATC3, the firm will

Assume that a monopolist practices perfect price discrimination. The firm's marginal revenue curve will

A perfectly competitive firm cannot practice price discrimination because

Firms price discriminate

-Refer to Figure 9-5. If the monopolist charges price P* for output Q*, in order to maximise profit or minimise loss in the short run, it should

Governments grant patents to

-Refer to Figure 9-3. Suppose the monopolist represented in the diagram above produces positive output. What is the price charged at the profit-maximising/loss-minimising output level?

In which market structure is it not possible to practice price discrimination?

-Refer to Table 9-1. What is the marginal revenue from the sale of the 12th unit?

Most pharmaceutical firms selling prescription drugs continue to earn economic profits long after the patents on the prescription drugs expire because they have established a strong foothold in the market.

-Refer to Table 9-1. What is the firm's profit-maximising output and what is the price charged to sell this output?

Governments grant patents to encourage

Suppose a monopoly is producing its profit-maximising output level. Now suppose the government imposes a lump-sum tax on the monopoly, independent of its output. As a result, the monopolist will increase the price of its product to cover its higher cost.

A market economy benefits from market power

A monopoly is a seller of a product

Economics Foundations and Models

Choices and Trade - Offs in the Market

Where Prices Come Frome : The Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency , Government Price Setting and Taxes

Concumer Choice and Behavioural Economics

Technology , Production and Costs

Firms in Perfectly Compitive Markets

Monopolistic Competition : The Competitive Model in More Realistic Setting

Oligopoly : Firms in Less Competitve Markets

The Market for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

Externalities , Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters

-Refer to Figure 9-2. If the firm's average total cost curve is ATC₃, the firm will