Question 1

How do the price and quantity of a monopoly compare to that of a perfectly competitive industry?

Accepted Answer

A monopolist sells a smaller q

Question 2

A narrow definition of monopoly is that a firm is a monopoly if it can ignore

Accepted Answer

A)  government antitrust laws. 
B)  the pricing decisions of its suppliers. 
C)  the pricing decisions of firms that produce complementary products. 
D)  the actions of all other firms. 
A)  government antitrust laws. 
B)  the pricing decisions of its suppliers. 
C)  the pricing decisions of firms that produce complementary products. 
D)  the actions of all other firms.

Question 3

Suppose an industry is made up of 25 firms, all with equal market share. The four-firm concentration ratio of this industry is

Accepted Answer

A)  16%. 
B)  20%. 
C)  25%. 
D)  It cannot be determined from the information given. 
A)  16%. 
B)  20%. 
C)  25%. 
D)  It cannot be determined from the information given.

Question 4

A snack shop inside a hotel in a busy city has a monopoly on food sales if it is the only food vendor in the hotel that is open 24 hours a day.

Accepted Answer

A) True 
 B)False

Question 5

Economic efficiency in a free market occurs when

Accepted Answer

A)  consumer surplus is maximised. 
B)  producer surplus is maximised. 
C)  the sum of consumer surplus and producer surplus is maximised. 
D)  price is as low as possible. 
A)  consumer surplus is maximised. 
B)  producer surplus is maximised. 
C)  the sum of consumer surplus and producer surplus is maximised. 
D)  price is as low as possible.

Question 6

In discussions of barriers to entry, what is meant by the term 'virtuous cycle'?

Accepted Answer

A)  A virtuous cycle refers to successful research and development that leads to information that is used to develop other new products. 
B)  A virtuous cycle refers to a firm using the profits from a monopoly in one market to establish a monopoly in another market. 
C)  A virtuous cycle refers to the situation where the pursuit of self-interest in establishing an entry barrier leads to an increase in social welfare (the 'invisible hand'). 
D)  A virtuous cycle refers to a situation where if a firm can attract enough customers initially, it can attract additional customers because its product's value has been increased by other customers using it, which attracts even more customers. 
A)  A virtuous cycle refers to successful research and development that leads to information that is used to develop other new products. 
B)  A virtuous cycle refers to a firm using the profits from a monopoly in one market to establish a monopoly in another market. 
C)  A virtuous cycle refers to the situation where the pursuit of self-interest in establishing an entry barrier leads to an increase in social welfare (the 'invisible hand'). 
D)  A virtuous cycle refers to a situation where if a firm can attract enough customers initially, it can attract additional customers because its product's value has been increased by other customers using it, which attracts even more customers.

Question 7

Insurance companies typically charge women lower prices than men for automobile insurance. Is this an example of price discrimination?

Accepted Answer

A)  No, because, on average, women have better driving records than men and the costs of insuring men are greater than the costs of insuring women. 
B)  Yes, because the costs of selling insurance to men and women are the same. 
C)  Yes, because insurance companies can prevent arbitrage; that is, women cannot transfer their insurance coverage to men. 
D)  No, because there are too many insurance companies for any one company to have market power. A firm must possess market power in order to practice price discrimination. 
A)  No, because, on average, women have better driving records than men and the costs of insuring men are greater than the costs of insuring women. 
B)  Yes, because the costs of selling insurance to men and women are the same. 
C)  Yes, because insurance companies can prevent arbitrage; that is, women cannot transfer their insurance coverage to men. 
D)  No, because there are too many insurance companies for any one company to have market power. A firm must possess market power in order to practice price discrimination.

Question 8

If a monopolist engages in first-degree price discrimination, it will produce the same output level as a perfectly competitive industry.

Accepted Answer

A) True 
 B)False

Question 9

If a monopolist's marginal revenue is $25 a unit and its marginal cost is $25, then

Accepted Answer

A)  to maximise profit the firm should increase output. 
B)  to maximise profit the firm should decrease output. 
C)  to maximise profit the firm should continue to produce the output it is producing. 
D)  Not enough information is given to say what the firm should do to maximise profit. 
A)  to maximise profit the firm should increase output. 
B)  to maximise profit the firm should decrease output. 
C)  to maximise profit the firm should continue to produce the output it is producing. 
D)  Not enough information is given to say what the firm should do to maximise profit.

Question 10

Consider the following pricing strategies: a. perfect price discrimination
B. charging different prices to different groups of customers
C. optimal two-part tariff
D. single-price monopoly pricing
Which of the pricing strategies leads to the economically efficient output level?

Accepted Answer

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

Question 11

The term 'early adopters' refers to

Accepted Answer

A)  firms that are the first to implement a new technology that is used to produce new goods or services. 
B)  book clubs that are first to recommend best-selling books to their members. 
C)  consumers who respond quickly to fads, seasonal changes, etc. 
D)  consumers who are willing to pay high prices to be among the first to own new products. 
A)  firms that are the first to implement a new technology that is used to produce new goods or services. 
B)  book clubs that are first to recommend best-selling books to their members. 
C)  consumers who respond quickly to fads, seasonal changes, etc. 
D)  consumers who are willing to pay high prices to be among the first to own new products.

Question 12

A monopoly is a firm that is the only seller of a good or service that does not have a close substitute.

Accepted Answer

A) True 
 B)False

Question 13

Draw a graph that shows producer surplus, consumer surplus, and deadweight loss in a market where the seller practices perfect price discrimination. Be sure to identify the demand curve, the marginal revenue curve, the marginal cost curve, and the profit-maximising quantity on the graph.

Accepted Answer

The perfect price discriminator sells Q₃

Question 14

To maximise profit, a monopolist will produce and sell a quantity such that for the last unit sold, marginal revenue equals marginal cost, and will charge a price given by the demand curve at that output level.

Accepted Answer

A) True 
 B)False

Question 15

If a per-unit tax on output sold is imposed on a monopoly's product, the monopolist will increase its market price by the full amount of the tax.

Accepted Answer

A) True 
 B)False

Question 16

To be a natural monopoly a firm must

Accepted Answer

A)  control a key resource input. 
B)  have economies of scale that are so large that it can supply the entire market at a lower cost than two or more firms. 
C)  have significant network externalities. 
D)  be very large relative to the total market. 
A)  control a key resource input. 
B)  have economies of scale that are so large that it can supply the entire market at a lower cost than two or more firms. 
C)  have significant network externalities. 
D)  be very large relative to the total market.

Question 17

Which of the following products allows the seller to identify different groups of consumers (segment the market) at virtually no cost?

Accepted Answer

A)  early bird dinner specials 
B)  books sold online 
C)  a pair of Bose speakers 
D)  iPhones 
A)  early bird dinner specials 
B)  books sold online 
C)  a pair of Bose speakers 
D)  iPhones

Question 18

If a firm's average total cost is less than price where MR = MC,

Accepted Answer

A)  the firm should shut down. 
B)  the firm should raise its price. 
C)  the firm should continue to produce the output it is producing. 
D)  the firm should cut back on its output to lower its cost. 
A)  the firm should shut down. 
B)  the firm should raise its price. 
C)  the firm should continue to produce the output it is producing. 
D)  the firm should cut back on its output to lower its cost.

Question 19

-Refer to Figure 9-4. What is the amount of the monopoly's profit?

Accepted Answer

A)  $2700 
B)  $4200 
C)  $10 400 
D)  $12 600 
A)  $2700 
B)  $4200 
C)  $10 400 
D)  $12 600

Question 20

What is perfect price discrimination and why do economists believe that no firm is able to practice perfect price discrimination?

Accepted Answer

Perfect price discrimination, also known

How do the price and quantity of a monopoly compare to that of a perfectly competitive industry?

A narrow definition of monopoly is that a firm is a monopoly if it can ignore

Suppose an industry is made up of 25 firms, all with equal market share. The four-firm concentration ratio of this industry is

A snack shop inside a hotel in a busy city has a monopoly on food sales if it is the only food vendor in the hotel that is open 24 hours a day.

Economic efficiency in a free market occurs when

In discussions of barriers to entry, what is meant by the term 'virtuous cycle'?

Insurance companies typically charge women lower prices than men for automobile insurance. Is this an example of price discrimination?

If a monopolist engages in first-degree price discrimination, it will produce the same output level as a perfectly competitive industry.

If a monopolist's marginal revenue is $25 a unit and its marginal cost is $25, then

Consider the following pricing strategies: a. perfect price discrimination B. charging different prices to different groups of customers C. optimal two-part tariff D. single-price monopoly pricing Which of the pricing strategies leads to the economically efficient output level?

The term 'early adopters' refers to

A monopoly is a firm that is the only seller of a good or service that does not have a close substitute.

Draw a graph that shows producer surplus, consumer surplus, and deadweight loss in a market where the seller practices perfect price discrimination. Be sure to identify the demand curve, the marginal revenue curve, the marginal cost curve, and the profit-maximising quantity on the graph.

To maximise profit, a monopolist will produce and sell a quantity such that for the last unit sold, marginal revenue equals marginal cost, and will charge a price given by the demand curve at that output level.

If a per-unit tax on output sold is imposed on a monopoly's product, the monopolist will increase its market price by the full amount of the tax.

To be a natural monopoly a firm must

Which of the following products allows the seller to identify different groups of consumers (segment the market) at virtually no cost?

If a firm's average total cost is less than price where MR = MC,

-Refer to Figure 9-4. What is the amount of the monopoly's profit?

What is perfect price discrimination and why do economists believe that no firm is able to practice perfect price discrimination?

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

How do the price and quantity of a monopoly compare to that of a perfectly competitive industry?

A narrow definition of monopoly is that a firm is a monopoly if it can ignore

Suppose an industry is made up of 25 firms, all with equal market share. The four-firm concentration ratio of this industry is

A snack shop inside a hotel in a busy city has a monopoly on food sales if it is the only food vendor in the hotel that is open 24 hours a day.

Economic efficiency in a free market occurs when

In discussions of barriers to entry, what is meant by the term 'virtuous cycle'?

Insurance companies typically charge women lower prices than men for automobile insurance. Is this an example of price discrimination?

If a monopolist engages in first-degree price discrimination, it will produce the same output level as a perfectly competitive industry.

If a monopolist's marginal revenue is $25 a unit and its marginal cost is $25, then

Consider the following pricing strategies: a. perfect price discrimination B. charging different prices to different groups of customers C. optimal two-part tariff D. single-price monopoly pricing Which of the pricing strategies leads to the economically efficient output level?

The term 'early adopters' refers to

A monopoly is a firm that is the only seller of a good or service that does not have a close substitute.

Draw a graph that shows producer surplus, consumer surplus, and deadweight loss in a market where the seller practices perfect price discrimination. Be sure to identify the demand curve, the marginal revenue curve, the marginal cost curve, and the profit-maximising quantity on the graph.

To maximise profit, a monopolist will produce and sell a quantity such that for the last unit sold, marginal revenue equals marginal cost, and will charge a price given by the demand curve at that output level.

If a per-unit tax on output sold is imposed on a monopoly's product, the monopolist will increase its market price by the full amount of the tax.

To be a natural monopoly a firm must

Which of the following products allows the seller to identify different groups of consumers (segment the market) at virtually no cost?

If a firm's average total cost is less than price where MR = MC,

-Refer to Figure 9-4. What is the amount of the monopoly's profit?

What is perfect price discrimination and why do economists believe that no firm is able to practice perfect price discrimination?

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