Question 1

When a monopolist is able to price-discriminate:

Accepted Answer

A) its profits tend to increase and its output tends to fall. 
B) both its profits and output tend to increase. 
C) both its profits and output tend to decrease. 
D) its profits tend to fall and its output tends to increase. 
A) its profits tend to increase and its output tends to fall. 
B) both its profits and output tend to increase. 
C) both its profits and output tend to decrease. 
D) its profits tend to fall and its output tends to increase.

Question 2

Figure 8-A  
-Refer to Figure 8-A.The welfare loss due to monopoly is indicated in the diagram as area:

Accepted Answer

A) DGE. 
B) DFH. 
C) DFQ2Q1. 
D) EGQ3Q1. 
E) EFG. 
A) DGE. 
B) DFH. 
C) DFQ2Q1. 
D) EGQ3Q1. 
E) EFG.

Question 3

If marginal revenue on the tenth unit of output equals $4 for a non-discriminating, profit-maximizing monopolist, then price:

Accepted Answer

A) equals $4. 
B) is less than $4. 
C) is greater than $4. 
D) must be equal to average total cost. 
E) can be equal to, less than, or greater than $4. 
A) equals $4. 
B) is less than $4. 
C) is greater than $4. 
D) must be equal to average total cost. 
E) can be equal to, less than, or greater than $4.

Question 4

Average cost regulation of a natural monopoly:

Accepted Answer

A) generates economic losses for the seller. 
B) necessitates a subsidy payment to the firm. 
C) creates incentives that tend to shift ATC curves in an upward direction. 
D) imposes a price that is less than marginal cost. 
E) is characterized by all of the above. 
A) generates economic losses for the seller. 
B) necessitates a subsidy payment to the firm. 
C) creates incentives that tend to shift ATC curves in an upward direction. 
D) imposes a price that is less than marginal cost. 
E) is characterized by all of the above.

Question 5

Figure 9-I
  
-Control of a scarce resource or input can serve as an entry barrier.

Accepted Answer

A) True 
 B)False

Question 6

Graphically which of the following is true for a monopoly?

Accepted Answer

A) The marginal revenue curve lies below the demand curve and is steeper than the demand curve. 
B) The marginal revenue curve lies above the demand curve and is steeper than the demand curve. 
C) The marginal revenue curve lies below the demand curve and is flatter than the demand curve. 
D) The marginal revenue curve lies above the demand curve and is flatter than the demand curve. 
E) none of the above 
A) The marginal revenue curve lies below the demand curve and is steeper than the demand curve. 
B) The marginal revenue curve lies above the demand curve and is steeper than the demand curve. 
C) The marginal revenue curve lies below the demand curve and is flatter than the demand curve. 
D) The marginal revenue curve lies above the demand curve and is flatter than the demand curve. 
E) none of the above

Question 7

Figure 8-C
The following diagram contains information on cost and revenue curves facing a regulated monopoly.  
-Refer to Figure 8-C.If the government is able to regulate the monopolist using marginal-cost pricing, what price and output combinations are expected to result?

Accepted Answer

A) P5 and Q2 
B) P2 and Q2 
C) P3 and Q1 
D) P4 and Q3 
E) P6 and Q4 
A) P5 and Q2 
B) P2 and Q2 
C) P3 and Q1 
D) P4 and Q3 
E) P6 and Q4

Question 8

If a regulatory board wanted to make sure that a natural monopoly chose a price resulting in the efficient level of output, it should set a price equal to:

Accepted Answer

A) marginal cost. 
B) average fixed cost. 
C) average variable cost. 
D) average total cost. 
E) average total cost, plus a ten percent normal return on investment. 
A) marginal cost. 
B) average fixed cost. 
C) average variable cost. 
D) average total cost. 
E) average total cost, plus a ten percent normal return on investment.

Question 9

Which of the following is false?

Accepted Answer

A) A true or pure monopoly exists where there is only one seller of a product for which no close substitute is available. 
B) The situation in which one large firm can provide the output of the market at a lower cost than two or more smaller firms is called a natural monopoly. 
C) In monopoly, the market demand curve may be regarded as the demand curve for the firm because it is the market for that particular product. 
D) A monopoly firm is a price maker, and it will pick a price that is the highest point on its demand curve. 
E) None of the above are false. 
A) A true or pure monopoly exists where there is only one seller of a product for which no close substitute is available. 
B) The situation in which one large firm can provide the output of the market at a lower cost than two or more smaller firms is called a natural monopoly. 
C) In monopoly, the market demand curve may be regarded as the demand curve for the firm because it is the market for that particular product. 
D) A monopoly firm is a price maker, and it will pick a price that is the highest point on its demand curve. 
E) None of the above are false.

Question 10

A monopolist can sell 20 units a week at a price of $10 per unit.To sell 21 units a week, it would have to lower its price to $9 per unit.The marginal revenue of the 21st unit would be:

Accepted Answer

A) $9. 
B) -$11 
C) -$12 
D) -$20 
E) -$21 
A) $9. 
B) -$11 
C) -$12 
D) -$20 
E) -$21

Question 11

Which of the following is inconsistent with a monopoly?

Accepted Answer

A) a single seller 
B) a downward-sloping demand curve 
C) marginal revenue exceeds price 
D) a U-shaped average total cost curve 
E) barriers to entry 
A) a single seller 
B) a downward-sloping demand curve 
C) marginal revenue exceeds price 
D) a U-shaped average total cost curve 
E) barriers to entry

Question 12

Which of the following is not potentially a barrier to entry into a product market?

Accepted Answer

A) patent protection on the design of the product 
B) the absence of economies of scale in the product market 
C) government licensing of the product's producers 
D) the control of a crucial input necessary to produce the product 
E) All of the above are potentially barriers to entry into a product market. 
A) patent protection on the design of the product 
B) the absence of economies of scale in the product market 
C) government licensing of the product's producers 
D) the control of a crucial input necessary to produce the product 
E) All of the above are potentially barriers to entry into a product market.

Question 13

Which of the following can serve as a barrier to entry?

Accepted Answer

A) legal restrictions 
B) patents 
C) control of scarce inputs or resources 
D) all of the above 
A) legal restrictions 
B) patents 
C) control of scarce inputs or resources 
D) all of the above

Question 14

A patent gives a firm a monopoly in the production of the patented good.While monopoly profits provide an incentive for firms to innovate, the monopoly power imposes a cost on consumers.Why do consumers bear a cost from that monopoly? Is the cost to consumers greater than the profits earned by the monopolist?

Accepted Answer

Consumers bear a cost because monopolist

Question 15

Marginal cost regulation of a natural monopoly:

Accepted Answer

A) generates economic losses for the seller. 
B) necessitates a subsidy payment to the firm. 
C) creates incentives that tend to shift average total cost curves in an upward direction. 
D) imposes a price that is less than average total cost. 
E) is characterized by all of the above. 
A) generates economic losses for the seller. 
B) necessitates a subsidy payment to the firm. 
C) creates incentives that tend to shift average total cost curves in an upward direction. 
D) imposes a price that is less than average total cost. 
E) is characterized by all of the above.

Question 16

Profit-maximizing monopolists choose a level of output such that:

Accepted Answer

A) average total cost is minimized. 
B) price equals marginal revenue but exceeds average variable cost. 
C) price equals marginal cost but exceeds average variable cost. 
D) marginal revenue equals marginal cost. 
A) average total cost is minimized. 
B) price equals marginal revenue but exceeds average variable cost. 
C) price equals marginal cost but exceeds average variable cost. 
D) marginal revenue equals marginal cost.

Question 17

If a regulatory board wanted to make sure that a natural monopoly earned a normal rate of return, it should set price which is equal to:

Accepted Answer

A) marginal cost. 
B) average fixed cost. 
C) average variable cost. 
D) average total cost. 
E) average total cost, plus a ten percent normal return on investment. 
A) marginal cost. 
B) average fixed cost. 
C) average variable cost. 
D) average total cost. 
E) average total cost, plus a ten percent normal return on investment.

Question 18

A monopoly firm is charging the maximum price the market will bear at a level of output where MC equals $10 and is increasing, MR equals $10, and average variable cost equals $9.To maximize profits, the firm should:

Accepted Answer

A) increase both output and price. 
B) increase output but decrease the price. 
C) decrease output and increase the price. 
D) decrease both output and price. 
E) not change either the output or the price. 
A) increase both output and price. 
B) increase output but decrease the price. 
C) decrease output and increase the price. 
D) decrease both output and price. 
E) not change either the output or the price.

Question 19

For any monopolist with a positive marginal cost of production, its demand curve at its profit maximizing level:

Accepted Answer

A) would be elastic. 
B) would be unit elastic. 
C) would be inelastic. 
D) could be either elastic or inelastic. 
A) would be elastic. 
B) would be unit elastic. 
C) would be inelastic. 
D) could be either elastic or inelastic.

Question 20

Which of the following is true about price discrimination?

Accepted Answer

A) When there are a number of competing firms, price discrimination is less likely because competitors tend to undercut the high prices charged those discriminated against. 
B) A profit-maximizing seller will charge a higher price for those with a greater willingness to pay, and a lower price for demanders with a lower willingness to pay. 
C) Price differentials between groups will erode if reselling is easy. 
D) Quantity discounts are a form of price discrimination which allow a seller to charge a higher price for the first unit than for later units. 
E) All of the above are true of price discrimination. 
A) When there are a number of competing firms, price discrimination is less likely because competitors tend to undercut the high prices charged those discriminated against. 
B) A profit-maximizing seller will charge a higher price for those with a greater willingness to pay, and a lower price for demanders with a lower willingness to pay. 
C) Price differentials between groups will erode if reselling is easy. 
D) Quantity discounts are a form of price discrimination which allow a seller to charge a higher price for the first unit than for later units. 
E) All of the above are true of price discrimination.

When a monopolist is able to price-discriminate:

Figure 8-A -Refer to Figure 8-A.The welfare loss due to monopoly is indicated in the diagram as area:

If marginal revenue on the tenth unit of output equals $4 for a non-discriminating, profit-maximizing monopolist, then price:

Average cost regulation of a natural monopoly:

Figure 9-I -Control of a scarce resource or input can serve as an entry barrier.

Graphically which of the following is true for a monopoly?

Figure 8-C The following diagram contains information on cost and revenue curves facing a regulated monopoly. -Refer to Figure 8-C.If the government is able to regulate the monopolist using marginal-cost pricing, what price and output combinations are expected to result?

If a regulatory board wanted to make sure that a natural monopoly chose a price resulting in the efficient level of output, it should set a price equal to:

Which of the following is false?

A monopolist can sell 20 units a week at a price of $10 per unit.To sell 21 units a week, it would have to lower its price to $9 per unit.The marginal revenue of the 21^st unit would be:

Which of the following is inconsistent with a monopoly?

Which of the following is not potentially a barrier to entry into a product market?

Which of the following can serve as a barrier to entry?

Marginal cost regulation of a natural monopoly:

Profit-maximizing monopolists choose a level of output such that:

If a regulatory board wanted to make sure that a natural monopoly earned a normal rate of return, it should set price which is equal to:

A monopoly firm is charging the maximum price the market will bear at a level of output where MC equals $10 and is increasing, MR equals $10, and average variable cost equals $9.To maximize profits, the firm should:

For any monopolist with a positive marginal cost of production, its demand curve at its profit maximizing level:

Which of the following is true about price discrimination?

The Role and Method of Economics

The Economic Way of Thinking

Supply and Demand

Using Supply and Demand

Market Failure and Public Choice

Production and Costs

Firms in Competitive Markets

Monopolistic Competition and Oligopoly

Labor Markets, Income Distribution, and Poverty

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Economic Growth

Aggregate Demand and Aggregate Supply

Fiscal Policy

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Exam 8: Monopoly

When a monopolist is able to price-discriminate:

Figure 8-A -Refer to Figure 8-A.The welfare loss due to monopoly is indicated in the diagram as area:

If marginal revenue on the tenth unit of output equals $4 for a non-discriminating, profit-maximizing monopolist, then price:

Average cost regulation of a natural monopoly:

Figure 9-I -Control of a scarce resource or input can serve as an entry barrier.

Graphically which of the following is true for a monopoly?

Figure 8-C The following diagram contains information on cost and revenue curves facing a regulated monopoly. -Refer to Figure 8-C.If the government is able to regulate the monopolist using marginal-cost pricing, what price and output combinations are expected to result?

If a regulatory board wanted to make sure that a natural monopoly chose a price resulting in the efficient level of output, it should set a price equal to:

Which of the following is false?

A monopolist can sell 20 units a week at a price of $10 per unit.To sell 21 units a week, it would have to lower its price to $9 per unit.The marginal revenue of the 21st unit would be:

Which of the following is inconsistent with a monopoly?

Which of the following is not potentially a barrier to entry into a product market?

Which of the following can serve as a barrier to entry?

Marginal cost regulation of a natural monopoly:

Profit-maximizing monopolists choose a level of output such that:

If a regulatory board wanted to make sure that a natural monopoly earned a normal rate of return, it should set price which is equal to:

A monopoly firm is charging the maximum price the market will bear at a level of output where MC equals $10 and is increasing, MR equals $10, and average variable cost equals $9.To maximize profits, the firm should:

For any monopolist with a positive marginal cost of production, its demand curve at its profit maximizing level:

Which of the following is true about price discrimination?

The Role and Method of Economics

The Economic Way of Thinking

Supply and Demand

Using Supply and Demand

Market Failure and Public Choice

Production and Costs

Firms in Competitive Markets

Monopolistic Competition and Oligopoly

Labor Markets, Income Distribution, and Poverty

Introduction to Macroeconomics: Unemployment, Inflation, and Economic Fluctuations

Economic Growth

Aggregate Demand and Aggregate Supply

Fiscal Policy

Monetary Institutions

The Federal Reserve System and Monetary Policy

Issues in Macroeconomic Theory and Policy

International Economics

Filters

A monopolist can sell 20 units a week at a price of $10 per unit.To sell 21 units a week, it would have to lower its price to $9 per unit.The marginal revenue of the 21^st unit would be: