Question 1

A monopoly firm's demand curve

Accepted Answer

A)  is the same as the market demand curve. 
B)  is perfectly inelastic. 
C)  is more inelastic than the demand curve for the product. 
D)  is inelastic at high prices and elastic at lower prices. 
A)  is the same as the market demand curve. 
B)  is perfectly inelastic. 
C)  is more inelastic than the demand curve for the product. 
D)  is inelastic at high prices and elastic at lower prices.

Question 2

When a monopolist engages in perfect price discrimination,the quantity produced and sold

Accepted Answer

A)  is lower than the quantity produced and sold if it adopted a single price. 
B)  is higher than the quantity produced and sold if it adopted a single price. 
C)  is the same level as that produced and sold if it adopted a single price. 
D)  could be lower, higher or the same as that produced and sold if it adopted a single price. 
A)  is lower than the quantity produced and sold if it adopted a single price. 
B)  is higher than the quantity produced and sold if it adopted a single price. 
C)  is the same level as that produced and sold if it adopted a single price. 
D)  could be lower, higher or the same as that produced and sold if it adopted a single price.

Question 3

Why is it necessary for a firm that practices price discrimination be a price maker rather than a price taker?

Accepted Answer

A price taker has no market power and th

Question 4

In evaluating the degree of economic efficiency in a market,we can state that the size of the deadweight loss in a market will be smaller

Accepted Answer

A)  the greater the difference between marginal cost and price. 
B)  the smaller the difference between marginal cost and average total cost. 
C)  the smaller the difference between marginal cost and price. 
D)  the greater the difference between marginal cost and average revenue. 
A)  the greater the difference between marginal cost and price. 
B)  the smaller the difference between marginal cost and average total cost. 
C)  the smaller the difference between marginal cost and price. 
D)  the greater the difference between marginal cost and average revenue.

Question 5

A firm that can effectively price discriminate will charge a higher price to

Accepted Answer

A)  customers who have the more elastic demand for the product. 
B)  customers who have the more inelastic demand for the product. 
C)  buyers who belong to the largest market segment. 
D)  buyers who are members of the smallest market segment. 
A)  customers who have the more elastic demand for the product. 
B)  customers who have the more inelastic demand for the product. 
C)  buyers who belong to the largest market segment. 
D)  buyers who are members of the smallest market segment.

Question 6

Suppose that a perfectly competitive industry becomes a monopoly.What effect will this have on consumer surplus,producer surplus,and deadweight loss?

Accepted Answer

If a perfectly competitive ind

Question 7

Figure 8-11   Figure 8-11 shows the cost and demand curves for a monopolist.
-Refer to Figure 8-11.What is the amount of consumer surplus if,instead of a monopoly,the industry was organised as a perfectly competitive industry?

Accepted Answer

A)  $21 
B)  $124 
C)  $186 
D)  $332 
A)  $21 
B)  $124 
C)  $186 
D)  $332

Question 8

Which of the following pricing strategies allows a firm to earn economic profit?

Accepted Answer

A)  Price discrimination 
B)  Charging a price equal to marginal cost 
C)  Charging a price equal to the average total cost of production 
D)  Charging a price equal to the average variable cost of production 
A)  Price discrimination 
B)  Charging a price equal to marginal cost 
C)  Charging a price equal to the average total cost of production 
D)  Charging a price equal to the average variable cost of production

Question 9

If a monopolist's price is $50 at 63 units of output,and marginal revenue equals marginal cost,and average total cost equals $43,then the firm's total profit is

Accepted Answer

A)  $3150. 
B)  $2709. 
C)  $441. 
D)  $7. 
A)  $3150. 
B)  $2709. 
C)  $441. 
D)  $7.

Question 10

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 11

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 12

Firms that face downward-sloping demand curves for their output in the product market are called

Accepted Answer

A)  price takers. 
B)  price dictators. 
C)  monopolists. 
D)  price makers. 
A)  price takers. 
B)  price dictators. 
C)  monopolists. 
D)  price makers.

Question 13

Figure 8-12   Figure 8-12 shows the cost and demand curves for ETSA Power.
-Refer to Figure 8-12.Why won't regulators require that ETSA Power produce the economically efficient output level?

Accepted Answer

A)  Because there is insufficient demand at that output level. 
B)  Because at the economically efficient output level, the marginal cost of producing the last unit sold exceeds the consumers' marginal value for that last unit. 
C)  Because ETSA Power will earn zero profit. 
D)  Because ETSA Power will sustain persistent losses and will not continue in business in the long run. 
A)  Because there is insufficient demand at that output level. 
B)  Because at the economically efficient output level, the marginal cost of producing the last unit sold exceeds the consumers' marginal value for that last unit. 
C)  Because ETSA Power will earn zero profit. 
D)  Because ETSA Power will sustain persistent losses and will not continue in business in the long run.

Question 14

One requirement for a firm pursuing a price-discrimination strategy is the ability to segment the market for its product.This means that

Accepted Answer

A)  the firm must set different prices for different regions where the product is sold. 
B)  the firm must be willing to offer price discounts for senior citizens and children. 
C)  the firm must be able to divide the market in a way that makes arbitrage impossible. 
D)  the firm must choose a marketing strategy that appeals to different segments of the economy. 
A)  the firm must set different prices for different regions where the product is sold. 
B)  the firm must be willing to offer price discounts for senior citizens and children. 
C)  the firm must be able to divide the market in a way that makes arbitrage impossible. 
D)  the firm must choose a marketing strategy that appeals to different segments of the economy.

Question 15

Table 8-2
   The government of a small developing country has granted exclusive rights to Linden Enterprises for the production of plastic syringes. Table 8-2 shows the cost and demand data for this government protected monopolist.
-Refer to Table 8-2.What is the amount of profit that the firm earns?

Accepted Answer

A)  $34.50 
B)  $42 
C)  $47 
D)  $49 
A)  $34.50 
B)  $42 
C)  $47 
D)  $49

Question 16

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

Accepted Answer

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

Question 17

To successfully price discriminate,a firm must ensure that there are no opportunities for arbitrage.

Accepted Answer

A) True 
 B)False

Question 18

Table 8-3
   Julie plans to start a pet-sitting service. She surveyed her neighbourhood to determine the demand for this service. Assume that each person surveyed demands only one hour of pet sitting services per period. Table 8-3 above shows a portion of her survey results.
-Refer to Table 8-3.Suppose Julie's marginal cost of providing this service is constant at $7 and she decides to charge each customer according to his or her willingness to pay.What is the value of consumer surplus by her customers?

Accepted Answer

A)  $39 
B)  $28 
C)  $11 
D)  $0 
A)  $39 
B)  $28 
C)  $11 
D)  $0

Question 19

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 20

Consider an industry that is made up of nine firms,each with a market share (per cent of sales)as follows: 
a.Firm A: 30%
b.Firm B: 20%
c.Firms C,D and E: 10% each
d.Firms F,G,H and J: 5% each
What is the value of the four-firm concentration ratio and how is the industry categorised?

Accepted Answer

A)  50%; monopolistic competition 
B)  70%; oligopoly 
C)  75%; oligopoly 
D)  80%; strongly oligopolistic 
A)  50%; monopolistic competition 
B)  70%; oligopoly 
C)  75%; oligopoly 
D)  80%; strongly oligopolistic

A monopoly firm's demand curve

When a monopolist engages in perfect price discrimination,the quantity produced and sold

Why is it necessary for a firm that practices price discrimination be a price maker rather than a price taker?

In evaluating the degree of economic efficiency in a market,we can state that the size of the deadweight loss in a market will be smaller

A firm that can effectively price discriminate will charge a higher price to

Suppose that a perfectly competitive industry becomes a monopoly.What effect will this have on consumer surplus,producer surplus,and deadweight loss?

Figure 8-11 Figure 8-11 shows the cost and demand curves for a monopolist. -Refer to Figure 8-11.What is the amount of consumer surplus if,instead of a monopoly,the industry was organised as a perfectly competitive industry?

Which of the following pricing strategies allows a firm to earn economic profit?

If a monopolist's price is $50 at 63 units of output,and marginal revenue equals marginal cost,and average total cost equals $43,then the firm's total profit is

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

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

Firms that face downward-sloping demand curves for their output in the product market are called

Figure 8-12 Figure 8-12 shows the cost and demand curves for ETSA Power. -Refer to Figure 8-12.Why won't regulators require that ETSA Power produce the economically efficient output level?

One requirement for a firm pursuing a price-discrimination strategy is the ability to segment the market for its product.This means that

Table 8-2 The government of a small developing country has granted exclusive rights to Linden Enterprises for the production of plastic syringes. Table 8-2 shows the cost and demand data for this government protected monopolist. -Refer to Table 8-2.What is the amount of profit that the firm earns?

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

To successfully price discriminate,a firm must ensure that there are no opportunities for arbitrage.

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

Consider an industry that is made up of nine firms,each with a market share (per cent of sales)as follows: a.Firm A: 30% b.Firm B: 20% c.Firms C,D and E: 10% each d.Firms F,G,H and J: 5% each What is the value of the four-firm concentration ratio and how is the industry categorised?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Healthcare

Firms,the Stock Market,and Corporate Governance

Consumer Choice and Elasticity

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters

Exam 8: Technology, production, and Costs

A monopoly firm's demand curve

When a monopolist engages in perfect price discrimination,the quantity produced and sold

Why is it necessary for a firm that practices price discrimination be a price maker rather than a price taker?

In evaluating the degree of economic efficiency in a market,we can state that the size of the deadweight loss in a market will be smaller

A firm that can effectively price discriminate will charge a higher price to

Suppose that a perfectly competitive industry becomes a monopoly.What effect will this have on consumer surplus,producer surplus,and deadweight loss?

Figure 8-11 Figure 8-11 shows the cost and demand curves for a monopolist. -Refer to Figure 8-11.What is the amount of consumer surplus if,instead of a monopoly,the industry was organised as a perfectly competitive industry?

Which of the following pricing strategies allows a firm to earn economic profit?

If a monopolist's price is $50 at 63 units of output,and marginal revenue equals marginal cost,and average total cost equals $43,then the firm's total profit is

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

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

Firms that face downward-sloping demand curves for their output in the product market are called

Figure 8-12 Figure 8-12 shows the cost and demand curves for ETSA Power. -Refer to Figure 8-12.Why won't regulators require that ETSA Power produce the economically efficient output level?

One requirement for a firm pursuing a price-discrimination strategy is the ability to segment the market for its product.This means that

Table 8-2 The government of a small developing country has granted exclusive rights to Linden Enterprises for the production of plastic syringes. Table 8-2 shows the cost and demand data for this government protected monopolist. -Refer to Table 8-2.What is the amount of profit that the firm earns?

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

To successfully price discriminate,a firm must ensure that there are no opportunities for arbitrage.

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

Consider an industry that is made up of nine firms,each with a market share (per cent of sales)as follows: a.Firm A: 30% b.Firm B: 20% c.Firms C,D and E: 10% each d.Firms F,G,H and J: 5% each What is the value of the four-firm concentration ratio and how is the industry categorised?

Economics: Foundations and Models

Trade-Offs, comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Market Efficiency and Market Failure

The Economics of Healthcare

Firms,the Stock Market,and Corporate Governance

Consumer Choice and Elasticity

Firms in Perfectly Competitive Markets

Monopoly and Antitrust

Monopolistic Competition and Oligopoly

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System and Business Cycles

Aggregate Demand and Aggregate Supply Analysis

Money, banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Comparative Advantage, international Trade, and Exchange Rates

Filters