Question 1

How does a monopoly differ from monopolistic competition?

Accepted Answer

A)  A monopoly has market power while a firm in monopolistic competition does not have any market power. 
B)  A monopoly can never incur a loss, but a firm in monopolistic competition can. 
C)  In a monopoly there are significant entry barriers, but there are low barriers to entry in a monopolistically competitive market structure. 
D)  A monopoly faces a perfectly inelastic demand curve while a monopolistic competitor faces an elastic demand curve. 
A)  A monopoly has market power while a firm in monopolistic competition does not have any market power. 
B)  A monopoly can never incur a loss, but a firm in monopolistic competition can. 
C)  In a monopoly there are significant entry barriers, but there are low barriers to entry in a monopolistically competitive market structure. 
D)  A monopoly faces a perfectly inelastic demand curve while a monopolistic competitor faces an elastic demand curve.

Question 2

Figure 8.13   Figure 8.13 shows the market demand and cost curves facing a natural monopoly.
-Refer to Figure 8.13.If the regulators of the natural monopoly allow the owners of the firm to break even on their investment,the firm will produce an output of ________ and charge a price of ________.

Accepted Answer

A)  Q1 units; P4 
B)  Q1 units; P1 
C)  Q5 units; P3 
D)  Q3 units; P3 
A)  Q1 units; P4 
B)  Q1 units; P1 
C)  Q5 units; P3 
D)  Q3 units; P3

Question 3

Figure 8.13   Figure 8.13 shows the market demand and cost curves facing a natural monopoly.
-Refer to Figure 8.13.Suppose the government regulates this industry in order to remove the inefficiency implied by the behaviour of the profit-maximising owners.If regulators require that the firm produce the economically efficient output level,what is this level and what price will be charged?

Accepted Answer

A)  Q4 units; P4 
B)  Q1 units; P4 
C)  Q1 units; P1 
D)  Q3 units; P3 
A)  Q4 units; P4 
B)  Q1 units; P4 
C)  Q1 units; P1 
D)  Q3 units; P3

Question 4

A monopoly firm is the only seller of a good or service that

Accepted Answer

A)  has a perfectly elastic demand. 
B)  has no close complements. 
C)  does not need to be advertised. 
D)  does not have a close substitute. 
A)  has a perfectly elastic demand. 
B)  has no close complements. 
C)  does not need to be advertised. 
D)  does not have a close substitute.

Question 5

Figure 8.14  
-Refer to Figure 8.14 to answer the following questions:
a.What quantity will this monopoly produce and what price will it charge?
b.Suppose the monopoly is regulated.If the regulatory agency wants to achieve economic efficiency,what price should it require the monopoly to charge?
c.To achieve economic efficiency,what quantity will the regulated monopoly produce?
d.Will the regulated monopoly make a profit if it charges the price that will achieve economic efficiency?
e.Suppose the government decides to regulate the monopoly by imposing a price ceiling of $35.What quantity will the monopoly produce and what price will the monopoly charge?
f.With the price ceiling of $35,what profit will the monopoly earn?
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

a.Quantity = 835 units and Price = $59.

Question 6

Refer to Table 8.1.The amount of the firm's profit is -.

Accepted Answer

A)  $335 
B)  $350 
C)  $880 
D)  $910 
A)  $335 
B)  $350 
C)  $880 
D)  $910

Question 7

What are the only firms that do not have market power?

Accepted Answer

A)  Firms in industries with low barriers to entry 
B)  Firms that do not advertise their products 
C)  Firms in perfectly competitive markets 
D)  Firms that sell identical products 
A)  Firms in industries with low barriers to entry 
B)  Firms that do not advertise their products 
C)  Firms in perfectly competitive markets 
D)  Firms that sell identical products

Question 8

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 9

If we use a narrow definition of monopoly,then a monopoly is defined as a firm

Accepted Answer

A)  that has been granted special production rights by the government. 
B)  that can ignore the actions of all other firms because it produces a superior product compared to its rivals' products. 
C)  that can ignore the actions of all other firms because it produces a product for which there are no close substitutes. 
D)  that has the largest market share in an industry. 
A)  that has been granted special production rights by the government. 
B)  that can ignore the actions of all other firms because it produces a superior product compared to its rivals' products. 
C)  that can ignore the actions of all other firms because it produces a product for which there are no close substitutes. 
D)  that has the largest market share in an industry.

Question 10

Which of the following is not a characteristic of a monopoly?

Accepted Answer

A)  There are only a few sellers each selling a unique product. 
B)  Entry barriers are high. 
C)  There are no close substitutes to the firm's product. 
D)  The firm has market power. 
A)  There are only a few sellers each selling a unique product. 
B)  Entry barriers are high. 
C)  There are no close substitutes to the firm's product. 
D)  The firm has market power.

Question 11

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 12

A vertical merger is one that takes place between two companies producing different goods or services for one specific finished product.

Accepted Answer

A) True 
 B)False

Question 13

Firms do not have market power in which of the following market structures?

Accepted Answer

A)  Perfect competition only 
B)  Perfect competition and monopolistic competition 
C)  Oligopoly 
D)  Monopoly 
A)  Perfect competition only 
B)  Perfect competition and monopolistic competition 
C)  Oligopoly 
D)  Monopoly

Question 14

Figure 8.12   Figure 8.12 shows the cost and demand curves for the ETSA.
-Refer to Figure 8.12.ETSA Power is a natural monopoly because

Accepted Answer

A)  it is a power company and all power companies are natural monopolies. 
B)  average total cost is still declining when it intersects demand. 
C)  of its continually declining marginal revenue curve as output rises. 
D)  its marginal cost lies entirely below its long-run average cost. 
A)  it is a power company and all power companies are natural monopolies. 
B)  average total cost is still declining when it intersects demand. 
C)  of its continually declining marginal revenue curve as output rises. 
D)  its marginal cost lies entirely below its long-run average cost.

Question 15

Figure 8.13   Figure 8.13 shows the market demand and cost curves facing a natural monopoly.
-Refer to figure 8.13.In the absence of any government regulation,the profit-maximising owners of this firm will produce ________ units and charge a price of ________.

Accepted Answer

A)  Q0; P0 
B)  Q1; P1 
C)  Q1; P4 
D)  Q3; P3 
A)  Q0; P0 
B)  Q1; P1 
C)  Q1; P4 
D)  Q3; P3

Question 16

Which of the following is true for a monopolist?

Accepted Answer

A)  Being the only seller in the market, the monopolist faces a perfectly inelastic demand curve. 
B)  Being the only seller in the market, the monopolist faces a perfectly elastic demand curve. 
C)  Being the only seller in the market, the monopolist faces the market demand curve. 
D)  Being the only seller in the market, the monopolist faces a downward-sloping demand curve that lies below the marginal revenue curve. 
A)  Being the only seller in the market, the monopolist faces a perfectly inelastic demand curve. 
B)  Being the only seller in the market, the monopolist faces a perfectly elastic demand curve. 
C)  Being the only seller in the market, the monopolist faces the market demand curve. 
D)  Being the only seller in the market, the monopolist faces a downward-sloping demand curve that lies below the marginal revenue curve.

Question 17

Figure 8.4   Figure 8.4 shows the demand and cost curves for a monopolist.
-Refer to Figure 8.4.What is likely to happen to this monopoly in the long run?

Accepted Answer

A)  New firms will enter the market to eliminate its profits. 
B)  It will expand its output to take advantage of economies of scale so as to further increase its profit. 
C)  As long as there are entry barriers, this firm will continue to enjoy economic profits. 
D)  It will be regulated by the government because of its excess profits. 
A)  New firms will enter the market to eliminate its profits. 
B)  It will expand its output to take advantage of economies of scale so as to further increase its profit. 
C)  As long as there are entry barriers, this firm will continue to enjoy economic profits. 
D)  It will be regulated by the government because of its excess profits.

Question 18

Economic efficiency requires that a natural monopoly's price be

Accepted Answer

A)  equal to average total cost where it intersects the demand curve. 
B)  equal to marginal cost where it intersects the demand curve. 
C)  equal to average variable cost where it intersects the demand curve. 
D)  equal to the lowest price the firm can charge and still make a normal profit. 
A)  equal to average total cost where it intersects the demand curve. 
B)  equal to marginal cost where it intersects the demand curve. 
C)  equal to average variable cost where it intersects the demand curve. 
D)  equal to the lowest price the firm can charge and still make a normal profit.

Question 19

Whenever a firm can charge a price greater than marginal cost

Accepted Answer

A)  the firm must be a monopolist. 
B)  there is some loss of economic efficiency. 
C)  consumers have the ability to choose a close substitute. 
D)  the firm will earn economic profits. 
A)  the firm must be a monopolist. 
B)  there is some loss of economic efficiency. 
C)  consumers have the ability to choose a close substitute. 
D)  the firm will earn economic profits.

Question 20

In a natural monopoly,throughout the range of market demand

Accepted Answer

A)  marginal cost is above average total cost and pulls average total cost upward. 
B)  average total cost is above marginal cost and pulls marginal cost upward. 
C)  marginal cost is below average total cost and pulls average total cost downward. 
D)  there are diseconomies of scale. 
A)  marginal cost is above average total cost and pulls average total cost upward. 
B)  average total cost is above marginal cost and pulls marginal cost upward. 
C)  marginal cost is below average total cost and pulls average total cost downward. 
D)  there are diseconomies of scale.

How does a monopoly differ from monopolistic competition?

Figure 8.13 Figure 8.13 shows the market demand and cost curves facing a natural monopoly. -Refer to Figure 8.13.If the regulators of the natural monopoly allow the owners of the firm to break even on their investment,the firm will produce an output of and charge a price of .

A monopoly firm is the only seller of a good or service that

Refer to Table 8.1.The amount of the firm's profit is -.

What are the only firms that do not have market power?

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

If we use a narrow definition of monopoly,then a monopoly is defined as a firm

Which of the following is not a characteristic of a monopoly?

A market economy benefits from market power

A vertical merger is one that takes place between two companies producing different goods or services for one specific finished product.

Firms do not have market power in which of the following market structures?

Figure 8.12 Figure 8.12 shows the cost and demand curves for the ETSA. -Refer to Figure 8.12.ETSA Power is a natural monopoly because

Figure 8.13 Figure 8.13 shows the market demand and cost curves facing a natural monopoly. -Refer to figure 8.13.In the absence of any government regulation,the profit-maximising owners of this firm will produce units and charge a price of .

Which of the following is true for a monopolist?

Figure 8.4 Figure 8.4 shows the demand and cost curves for a monopolist. -Refer to Figure 8.4.What is likely to happen to this monopoly in the long run?

Economic efficiency requires that a natural monopoly's price be

Whenever a firm can charge a price greater than marginal cost

In a natural monopoly,throughout the range of market demand

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency,government Price Setting and Taxes

Technology,production and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition and Oligopoly

The Markets for Labour and Other Factors of Production

Government Intervention in the Market

Social Policy and Inequality

Gdp: Measuring Total Production, income and Economic Growth

Unemployment and Inflation

Aggregate Demand and Aggregate Supply Analysis

Money,banks and the Reserve Bank of Australia

Monetary Policy

Fiscal Policy

Comparative Advantage and the Gains From International Trade

Macroeconomics in an Open Economy

Filters

Exam 8: Monopoly Markets

How does a monopoly differ from monopolistic competition?

Figure 8.13 Figure 8.13 shows the market demand and cost curves facing a natural monopoly. -Refer to Figure 8.13.If the regulators of the natural monopoly allow the owners of the firm to break even on their investment,the firm will produce an output of ________ and charge a price of ________.

A monopoly firm is the only seller of a good or service that

Refer to Table 8.1.The amount of the firm's profit is -.

What are the only firms that do not have market power?

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

If we use a narrow definition of monopoly,then a monopoly is defined as a firm

Which of the following is not a characteristic of a monopoly?

A market economy benefits from market power

A vertical merger is one that takes place between two companies producing different goods or services for one specific finished product.

Firms do not have market power in which of the following market structures?

Figure 8.12 Figure 8.12 shows the cost and demand curves for the ETSA. -Refer to Figure 8.12.ETSA Power is a natural monopoly because

Figure 8.13 Figure 8.13 shows the market demand and cost curves facing a natural monopoly. -Refer to figure 8.13.In the absence of any government regulation,the profit-maximising owners of this firm will produce ________ units and charge a price of ________.

Which of the following is true for a monopolist?

Figure 8.4 Figure 8.4 shows the demand and cost curves for a monopolist. -Refer to Figure 8.4.What is likely to happen to this monopoly in the long run?

Economic efficiency requires that a natural monopoly's price be

Whenever a firm can charge a price greater than marginal cost

In a natural monopoly,throughout the range of market demand

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: The Responsiveness of Demand and Supply

Economic Efficiency,government Price Setting and Taxes

Technology,production and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition and Oligopoly

The Markets for Labour and Other Factors of Production

Government Intervention in the Market

Social Policy and Inequality

Gdp: Measuring Total Production, income and Economic Growth

Unemployment and Inflation

Aggregate Demand and Aggregate Supply Analysis

Money,banks and the Reserve Bank of Australia

Monetary Policy

Fiscal Policy

Comparative Advantage and the Gains From International Trade

Macroeconomics in an Open Economy

Filters

Figure 8.13 Figure 8.13 shows the market demand and cost curves facing a natural monopoly. -Refer to Figure 8.13.If the regulators of the natural monopoly allow the owners of the firm to break even on their investment,the firm will produce an output of and charge a price of .

Figure 8.13 Figure 8.13 shows the market demand and cost curves facing a natural monopoly. -Refer to figure 8.13.In the absence of any government regulation,the profit-maximising owners of this firm will produce units and charge a price of .