Question 1

Figure 8.4   Figure 8.4 shows the demand and cost curves for a monopolist.
-Refer to Figure 8.4.The amount of the monopoly's total revenue is -.

Accepted Answer

A)  $21 600 
B)  $20 400 
C)  $19 740 
D)  $7800 
A)  $21 600 
B)  $20 400 
C)  $19 740 
D)  $7800

Question 2

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 3

Figure 8.1  
-Refer to Figure 8.1.Which of the following statements about the firm depicted in the diagram is true?

Accepted Answer

A)  The fact that this firm is a natural monopoly is shown by the continually declining long-run average total cost as output rises. 
B)  The fact that this firm is a natural monopoly is shown by the continually declining market demand curve as output rises. 
C)  The fact that this firm is a natural monopoly is shown by the continually declining marginal revenue curve as output rises. 
D)  The fact that this firm is a natural monopoly is shown by the fact that marginal cost lies below the long-run average total cost where the firm maximises its profits. 
A)  The fact that this firm is a natural monopoly is shown by the continually declining long-run average total cost as output rises. 
B)  The fact that this firm is a natural monopoly is shown by the continually declining market demand curve as output rises. 
C)  The fact that this firm is a natural monopoly is shown by the continually declining marginal revenue curve as output rises. 
D)  The fact that this firm is a natural monopoly is shown by the fact that marginal cost lies below the long-run average total cost where the firm maximises its profits.

Question 4

For which of the following firms is patent protection of vital importance?

Accepted Answer

A)  Furniture producers 
B)  Software firms 
C)  Pharmaceutical firms 
D)  Auto makers 
A)  Furniture producers 
B)  Software firms 
C)  Pharmaceutical firms 
D)  Auto makers

Question 5

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 6

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 7

Why do governments grant patents?

Accepted Answer

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

Question 8

Figure 8.10  
-Refer to Figure 8.10.What is the area that represents the deadweight loss?

Accepted Answer

A)  FHE 
B)  FGE 
C)  GEH 
D)  FQ1Q2E 
A)  FHE 
B)  FGE 
C)  GEH 
D)  FQ1Q2E

Question 9

The ability of a firm to charge a price greater than marginal cost is called

Accepted Answer

A)  monopoly power. 
B)  price-making power. 
C)  cost-plus pricing. 
D)  market power. 
A)  monopoly power. 
B)  price-making power. 
C)  cost-plus pricing. 
D)  market power.

Question 10

What is the relationship between marginal revenue and average revenue for a monopolist and is it the same for a perfect competitor?
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

Average revenue is equal to price for an

Question 11

When the government wants to give an exclusive right to one firm to produce a product,it

Accepted Answer

A)  imposes a tariff on imports of the product. 
B)  imposes a quota on imports of the product. 
C)  grants a patent or copyright to an individual or firm. 
D)  uses antitrust laws to keep other firms from entering the market. 
A)  imposes a tariff on imports of the product. 
B)  imposes a quota on imports of the product. 
C)  grants a patent or copyright to an individual or firm. 
D)  uses antitrust laws to keep other firms from entering the market.

Question 12

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 13

a.What is the defining characteristic of a natural monopoly?
b.Should the government break up a natural monopoly into two or more firms to make the industry more competitive?
c.Suppose the government wants to ensure that some of the benefits of declining average total cost are passed on to consumers.To achieve this goal,it requires that the natural monopoly set its price equal to marginal cost.Is this a feasible goal? Explain.
d.What is an alternative to marginal cost pricing that ensures that consumers reap some of the benefits of declining average total cost?
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

a.The defining characteristic is the pre

Question 14

Figure 8.7  
-Refer to Figure 8.7.Use the figure above to answer the following questions.
a.What is the profit-maximising quantity and what price will the monopolist charge?
b.What is the total revenue at the profit-maximising output level?
c.What is the total cost at the profit-maximising output level?
d.What is the profit?
e.What is the profit per unit (average profit)at the profit-maximising output level?
f.If this industry was organised as a perfectly competitive industry,what would be the profit-maximising price and quantity?
__________________________________________________________________________________________________________________________________________________________________________________________

Accepted Answer

a.Quantity = 50; price = 32
b.Total reve

Question 15

Network externalities refer to the situation where the usefulness of a product increases with the number of consumers who use it.

Accepted Answer

A) True 
 B)False

Question 16

For a natural monopoly,the marginal cost of producing an additional unit of its product is relatively small.

Accepted Answer

A) True 
 B)False

Question 17

To what does market power refer?

Accepted Answer

A)  The ability of consumers to dictate what products should be produced 
B)  The ability of a firm to advertise its product and succeed in selling more output 
C)  The ability of a firm to sell at a lower price than rival sellers 
D)  The ability of a firm to charge a price higher than the marginal cost of production 
A)  The ability of consumers to dictate what products should be produced 
B)  The ability of a firm to advertise its product and succeed in selling more output 
C)  The ability of a firm to sell at a lower price than rival sellers 
D)  The ability of a firm to charge a price higher than the marginal cost of production

Question 18

A local electricity-generating company has a monopoly that is protected by an entry barrier that takes the form of

Accepted Answer

A)  control of a key raw material. 
B)  network externalities. 
C)  economies of scale. 
D)  perfectly inelastic demand curve. 
A)  control of a key raw material. 
B)  network externalities. 
C)  economies of scale. 
D)  perfectly inelastic demand curve.

Question 19

Figure 8.10  
-Refer to Figure 8.10.The area that represents consumer surplus under a monopoly is -.

Accepted Answer

A)  the triangle P0P1F 
B)  the triangle P0P2E 
C)  the trapezium P1P2EF 
D)  the rectangle P1P3HF 
A)  the triangle P0P1F 
B)  the triangle P0P2E 
C)  the trapezium P1P2EF 
D)  the rectangle P1P3HF

Question 20

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.

Figure 8.4 Figure 8.4 shows the demand and cost curves for a monopolist. -Refer to Figure 8.4.The amount of the monopoly's total revenue 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.

Figure 8.1 -Refer to Figure 8.1.Which of the following statements about the firm depicted in the diagram is true?

For which of the following firms is patent protection of vital importance?

To be a natural monopoly,a firm must

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.

Why do governments grant patents?

Figure 8.10 -Refer to Figure 8.10.What is the area that represents the deadweight loss?

The ability of a firm to charge a price greater than marginal cost is called

When the government wants to give an exclusive right to one firm to produce a product,it

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

Network externalities refer to the situation where the usefulness of a product increases with the number of consumers who use it.

For a natural monopoly,the marginal cost of producing an additional unit of its product is relatively small.

To what does market power refer?

A local electricity-generating company has a monopoly that is protected by an entry barrier that takes the form of

Figure 8.10 -Refer to Figure 8.10.The area that represents consumer surplus under a monopoly is -.

Economic efficiency in a free market occurs when

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

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Exam 8: Monopoly Markets

Figure 8.4 Figure 8.4 shows the demand and cost curves for a monopolist. -Refer to Figure 8.4.The amount of the monopoly's total revenue 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.

Figure 8.1 -Refer to Figure 8.1.Which of the following statements about the firm depicted in the diagram is true?

For which of the following firms is patent protection of vital importance?

To be a natural monopoly,a firm must

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.

Why do governments grant patents?

Figure 8.10 -Refer to Figure 8.10.What is the area that represents the deadweight loss?

The ability of a firm to charge a price greater than marginal cost is called

When the government wants to give an exclusive right to one firm to produce a product,it

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

Network externalities refer to the situation where the usefulness of a product increases with the number of consumers who use it.

For a natural monopoly,the marginal cost of producing an additional unit of its product is relatively small.

To what does market power refer?

A local electricity-generating company has a monopoly that is protected by an entry barrier that takes the form of

Figure 8.10 -Refer to Figure 8.10.The area that represents consumer surplus under a monopoly is -.

Economic efficiency in a free market occurs when

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