Question 1

A monopoly that is unregulated always causes deadweight loss.

Accepted Answer

A) True 
 B)False  True

Question 2

If a pharmaceutical company discovering a new drug is not granted a patent to retain its monopoly power on the drug,:

Accepted Answer

A)  innovation in the pharmaceutical industry will increase. 
B)  the number of new drugs is likely to increase. 
C)  more pharmaceutical companies will engage in discovering new drugs. 
D)  research and development in discovering new drugs will decrease. 
A)  innovation in the pharmaceutical industry will increase. 
B)  the number of new drugs is likely to increase. 
C)  more pharmaceutical companies will engage in discovering new drugs. 
D)  research and development in discovering new drugs will decrease. D

Question 3

A monopolist will charge a higher markup when demand is more elastic.

Accepted Answer

A) True 
 B)False  False

Question 4

Explain how a profit-maximizing monopolist chooses level of output and the price of goods.

Accepted Answer

The profit-maximizing monopoli

Question 5

To maximize profit a monopoly firm increases output until marginal revenue exceeds the marginal cost.

Accepted Answer

A) True 
 B)False

Question 6

When any firm charges a higher price, fewer of its goods are sold.

Accepted Answer

A) True 
 B)False

Question 7

Do monopolies always reduce social benefits?

Accepted Answer

A)  Yes, but only in the long run 
B)  Yes, because they create short-term deadweight loss which deters innovation 
C)  No, because monopolies can incentivize innovation 
D)  No, because monopolies deter wasteful competition 
A)  Yes, but only in the long run 
B)  Yes, because they create short-term deadweight loss which deters innovation 
C)  No, because monopolies can incentivize innovation 
D)  No, because monopolies deter wasteful competition

Question 8

A firm will attain more monopoly power as demand for its product becomes more elastic.

Accepted Answer

A) True 
 B)False

Question 9

How could a monopoly offer a lower price than a scenario of intense competition?

Accepted Answer

A)  only if the monopoly was natural 
B)  only if the monopoly had a hard to duplicate input 
C)  only if the monopoly had a patent 
D)  only if the monopoly was backed by government protection 
A)  only if the monopoly was natural 
B)  only if the monopoly had a hard to duplicate input 
C)  only if the monopoly had a patent 
D)  only if the monopoly was backed by government protection

Question 10

When a single firm can supply the entire market at lower cost than two or more firms, we say that the industry is:

Accepted Answer

A)  profit maximizing. 
B)  a natural monopoly. 
C)  a bilateral monopoly. 
D)  a natural competitor. 
A)  profit maximizing. 
B)  a natural monopoly. 
C)  a bilateral monopoly. 
D)  a natural competitor.

Question 11

A monopoly is able to increase the markup of price over marginal cost:

Accepted Answer

A)  when the demand is more price-elastic. 
B)  when the demand is less price-elastic. 
C)  when there is more marginal revenue per unit sold. 
D)  at will regardless of price-elasticity. 
A)  when the demand is more price-elastic. 
B)  when the demand is less price-elastic. 
C)  when there is more marginal revenue per unit sold. 
D)  at will regardless of price-elasticity.

Question 12

Graphically, a firm's marginal revenue curve is:

Accepted Answer

A)  perfectly elastic and equal to their marginal cost curve. 
B)  downward-sloping and equal to the market demand curve. 
C)  downward-sloping, but with twice the slope of the market demand curve. 
D)  perfectly elastic but lies underneath the market demand curve. 
A)  perfectly elastic and equal to their marginal cost curve. 
B)  downward-sloping and equal to the market demand curve. 
C)  downward-sloping, but with twice the slope of the market demand curve. 
D)  perfectly elastic but lies underneath the market demand curve.

Question 13

Use the following to answer questions:
Figure: Maximum Willingness to Pay  
-(Figure: Maximum Willingness to Pay) Refer to the figure. What is the maximum price that the consumer is willing to pay for 100 units?

Accepted Answer

A)  $100 
B)  $80 
C)  $75 
D)  $90 
A)  $100 
B)  $80 
C)  $75 
D)  $90

Question 14

For a monopoly, marginal revenue is always greater than the price it charges for its good.

Accepted Answer

A) True 
 B)False

Question 15

The more inelastic the demand curve is for the monopolist's product, the higher the price is that can be charged for the good.

Accepted Answer

A) True 
 B)False

Question 16

Deadweight loss is present in both competitive and monopoly markets.

Accepted Answer

A) True 
 B)False

Question 17

Which of the following is NOT a source of monopoly power?

Accepted Answer

A)  laws preventing entry of competitors 
B)  economies of scale 
C)  innovation 
D)  inelastic demand for the product 
A)  laws preventing entry of competitors 
B)  economies of scale 
C)  innovation 
D)  inelastic demand for the product

Question 18

A consumer is ________ likely to be sensitive to price if the purchase ________ covered by insurance.

Accepted Answer

A)  more; is 
B)  less; is 
C)  less; is not 
D)  None of the answers is correct. 
A)  more; is 
B)  less; is 
C)  less; is not 
D)  None of the answers is correct.

Question 19

The Private Express Statutes, passed in 1792 and (in amended form) still in effect today, contain federal civil and criminal laws relating to the delivery of mail. The Statutes grant monopoly powers to the U.S. Postal Service. Given the technology available today, the average effect of this monopoly on the price and quality of mail service in the populated parts of the United States is that the ______ because of the monopoly privilege of the USPS.

Accepted Answer

A)  price and quality of service are higher 
B)  price and quality of service are lower 
C)  price is higher and the quality of service is lower 
D)  price is lower and the quality of service is higher 
A)  price and quality of service are higher 
B)  price and quality of service are lower 
C)  price is higher and the quality of service is lower 
D)  price is lower and the quality of service is higher

Question 20

A profit-maximizing monopolist chooses the output level where MR = MC and chooses the corresponding price from the marginal revenue curve.

Accepted Answer

A) True 
 B)False

Exam 13: Monopoly

A monopoly that is unregulated always causes deadweight loss.

If a pharmaceutical company discovering a new drug is not granted a patent to retain its monopoly power on the drug,:

A monopolist will charge a higher markup when demand is more elastic.

Explain how a profit-maximizing monopolist chooses level of output and the price of goods.

To maximize profit a monopoly firm increases output until marginal revenue exceeds the marginal cost.

When any firm charges a higher price, fewer of its goods are sold.

Do monopolies always reduce social benefits?

A firm will attain more monopoly power as demand for its product becomes more elastic.

How could a monopoly offer a lower price than a scenario of intense competition?

When a single firm can supply the entire market at lower cost than two or more firms, we say that the industry is:

A monopoly is able to increase the markup of price over marginal cost:

Graphically, a firm's marginal revenue curve is:

Use the following to answer questions: Figure: Maximum Willingness to Pay -(Figure: Maximum Willingness to Pay) Refer to the figure. What is the maximum price that the consumer is willing to pay for 100 units?

For a monopoly, marginal revenue is always greater than the price it charges for its good.

The more inelastic the demand curve is for the monopolist's product, the higher the price is that can be charged for the good.

Deadweight loss is present in both competitive and monopoly markets.

Which of the following is NOT a source of monopoly power?

A consumer is ________ likely to be sensitive to price if the purchase ________ covered by insurance.

A profit-maximizing monopolist chooses the output level where MR = MC and chooses the corresponding price from the marginal revenue curve.

The Big Ideas

The Power of Trade and Comparative

Supply and Demand

Equilibrium

Elasticity and Its Applications

Taxes and Subsidies

The Price System

Price Ceilings and Floors

International Trade

Externalities- When the Price Is Not Right

Costs and Profit Maximization Under Competition

Competition and the Invisible Hand

Price Discrimination

Oligopoly and Game Theory

Competing for Monopoly

Monopolistic Competition and Advertising

Labor Markets

Public Goods and the Tragedy of the Commons

Political Economy and Public Choice

Economics, Ethics, and Public Policy

Managing Incentives

Stock Markets and Personal Finance

Price Discrimination

Consumer Choice

Filters

A consumer is likely to be sensitive to price if the purchase covered by insurance.