Question 1

What portion of the demand curve will profit-maximizing monopolists choose to operate on: the inelastic portion or elastic portion? Why?

Accepted Answer

When demand is inelastic, quantity deman

Question 2

If a regulatory commission wishes to allow a firm to earn a normal rate of return, it should set price equal to:

Accepted Answer

A) marginal revenue. 
B) marginal cost. 
C) average total cost. 
D) average variable cost. 
A) marginal revenue. 
B) marginal cost. 
C) average total cost. 
D) average variable cost.

Question 3

Which of the following best explains why marginal revenue for a monopolist is less than the sales price?

Accepted Answer

A) To sell more units, the monopolist must reduce price on all units sold. 
B) As the monopolist expands output, the average total cost of production declines. 
C) The monopolist charges each consumer the highest possible price. 
D) When a firm has a monopoly, consumers have no choice other than to pay the price set by the monopolist. 
A) To sell more units, the monopolist must reduce price on all units sold. 
B) As the monopolist expands output, the average total cost of production declines. 
C) The monopolist charges each consumer the highest possible price. 
D) When a firm has a monopoly, consumers have no choice other than to pay the price set by the monopolist.

Question 4

The demand curve facing a monopolist:

Accepted Answer

A) is the same as its marginal revenue curve. 
B) is perfectly elastic. 
C) is perfectly inelastic. 
D) is less elastic than a perfectly competitive firm's demand curve. 
A) is the same as its marginal revenue curve. 
B) is perfectly elastic. 
C) is perfectly inelastic. 
D) is less elastic than a perfectly competitive firm's demand curve.

Question 5

Which of the following is not true?

Accepted Answer

A) The monopolist, like the perfect competitor, will maximize profits at that output where MR = MC. 
B) The monopolist, unlike the perfect competitor, will not maximize profits at that output where P = MC. 
C) If a monopoly is earning economic profits, they will not be eliminated by entry into the industry. 
D) A monopolist produces an output where the value to society from the last unit produced is greater than its marginal cost. 
E) All of the above are true. 
A) The monopolist, like the perfect competitor, will maximize profits at that output where MR = MC. 
B) The monopolist, unlike the perfect competitor, will not maximize profits at that output where P = MC. 
C) If a monopoly is earning economic profits, they will not be eliminated by entry into the industry. 
D) A monopolist produces an output where the value to society from the last unit produced is greater than its marginal cost. 
E) All of the above are true.

Question 6

A monopoly firm is charging the price the market will bear at a level of output where MC equals $22 and is increasing, MR equals $20, and average variable cost equals $17.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 7

If a profit-maximizing monopolist finds that marginal cost is increasing and exceeds marginal revenue, it should:

Accepted Answer

A) increase output and decrease price. 
B) increase price and decrease output. 
C) decrease both price and output. 
D) increase both price and output. 
A) increase output and decrease price. 
B) increase price and decrease output. 
C) decrease both price and output. 
D) increase both price and output.

Question 8

Figure 9-I
  
-A monopolistic firm is a:

Accepted Answer

A) price taker that faces the market supply curve. 
B) price taker that faces the market demand curve. 
C) price maker that faces the market supply curve. 
D) price maker that faces the market demand curve. 
A) price taker that faces the market supply curve. 
B) price taker that faces the market demand curve. 
C) price maker that faces the market supply curve. 
D) price maker that faces the market demand curve.

Question 9

Price ____ occurs when producers charge different customers different prices for the same good or service.

Accepted Answer

A) maximization 
B) discrimination 
C) regulation 
D) management 
A) maximization 
B) discrimination 
C) regulation 
D) management

Question 10

Show Stoppers is a monopoly provider of ticket services for the concerts and sporting events and their current service charge is $10.00.In order to attract one more customer, they have to lower their service charge to $9.50.Show Stoppers' marginal revenue of this additional customer is:

Accepted Answer

A) $9.50. 
B) greater than $9.50. 
C) less than $9.50. 
D) between $10.00 and $9.50. 
A) $9.50. 
B) greater than $9.50. 
C) less than $9.50. 
D) between $10.00 and $9.50.

Question 11

Say that a monopolist is currently operating on the inelastic region of its demand curve.To maximize its profits, it should:

Accepted Answer

A) raise its prices. 
B) lower its prices. 
C) maintain its current price. 
D) either raise or lower its prices, depending on how high its marginal cost curve is. 
A) raise its prices. 
B) lower its prices. 
C) maintain its current price. 
D) either raise or lower its prices, depending on how high its marginal cost curve is.

Question 12

If a public utility is subject to average-cost pricing regulation, it will:

Accepted Answer

A) earn a normal rate of return. 
B) produce the socially efficient level of output. 
C) suffer economic losses without a subsidy. 
D) earn an above-normal rate of return. 
A) earn a normal rate of return. 
B) produce the socially efficient level of output. 
C) suffer economic losses without a subsidy. 
D) earn an above-normal rate of return.

Question 13

Necessary conditions for price discrimination include:

Accepted Answer

A) identical tastes among buyers. 
B) differences in willingness to pay among customers. 
C) b and c 
D) no resale 
A) identical tastes among buyers. 
B) differences in willingness to pay among customers. 
C) b and c 
D) no resale

Question 14

Based on the table below, what is the profit maximizing quantity of output? $$\begin{array} { c c c } 
\mathrm { Q } & \mathrm { P } & \mathrm { TC } \
\hline 40 & \$ 80 & \$ 2,500 \
41 & \$ 79 & \$ 2,510 \
42 & \$ 78 & \$ 2,530 \
43 & \$ 77 & \$ 2,560 \
44 & \$ 76 & \$ 2,600
\end{array}$$

Accepted Answer

A) 40 
B) 41 
C) 42 
D) 43 
E) 44 
A) 40 
B) 41 
C) 42 
D) 43 
E) 44

Question 15

A price-taking firm and a monopoly firm are alike in that:

Accepted Answer

A) price equals marginal revenue for both. 
B) both maximize profits by choosing an output where marginal revenue equals marginal cost. 
C) price exceeds marginal cost at the profit-maximizing level of output for both. 
D) in the long run, both earn zero economic profits. 
A) price equals marginal revenue for both. 
B) both maximize profits by choosing an output where marginal revenue equals marginal cost. 
C) price exceeds marginal cost at the profit-maximizing level of output for both. 
D) in the long run, both earn zero economic profits.

Question 16

Figure 8-B  
-Refer to Figure 8-B.The region bounded by P*ABC represents:

Accepted Answer

A) total costs. 
B) total losses. 
C) total profits. 
D) total consumer surplus. 
E) total producer surplus. 
A) total costs. 
B) total losses. 
C) total profits. 
D) total consumer surplus. 
E) total producer surplus.

Question 17

Which of these contributes to the existence of monopoly power?

Accepted Answer

A) the control of critical resources 
B) legal barriers 
C) patents 
D) All of the above contribute to the existence of monopoly power. 
A) the control of critical resources 
B) legal barriers 
C) patents 
D) All of the above contribute to the existence of monopoly power.

Question 18

Which of the following is true?

Accepted Answer

A) Average cost pricing reduces the incentives for a monopolist to find ways to reduce its costs. 
B) With natural monopoly, at the efficient level of output, losses will be incurred. 
C) With natural monopoly, if regulators allow the firm to earn profits, there will be a welfare cost from producing too little of the good. 
D) Government regulation of monopolies aims to achieve the efficiency of large-scale production, without permitting the producers to charge monopoly prices. 
E) All of the above are true. 
A) Average cost pricing reduces the incentives for a monopolist to find ways to reduce its costs. 
B) With natural monopoly, at the efficient level of output, losses will be incurred. 
C) With natural monopoly, if regulators allow the firm to earn profits, there will be a welfare cost from producing too little of the good. 
D) Government regulation of monopolies aims to achieve the efficiency of large-scale production, without permitting the producers to charge monopoly prices. 
E) All of the above are true.

Question 19

Which of the following is not generally true about a profit-maximizing monopolist?

Accepted Answer

A) The monopolist faces a perfectly elastic demand curve. 
B) The monopolist can potentially continue to earn economic profits in the long run. 
C) The monopolist charges a price that exceeds marginal cost. 
D) The monopolist chooses output where marginal revenue equals marginal cost. 
E) All of the above are true. 
A) The monopolist faces a perfectly elastic demand curve. 
B) The monopolist can potentially continue to earn economic profits in the long run. 
C) The monopolist charges a price that exceeds marginal cost. 
D) The monopolist chooses output where marginal revenue equals marginal cost. 
E) All of the above are true.

Question 20

Figure 9-I
  
-Pure monopoly:

Accepted Answer

A) is characterized by a single supplier. 
B) is a market structure in which no close substitute products are available. 
C) exists when entry and survival of potential competitors is extremely unlikely. 
D) is characterized by all of the above. 
A) is characterized by a single supplier. 
B) is a market structure in which no close substitute products are available. 
C) exists when entry and survival of potential competitors is extremely unlikely. 
D) is characterized by all of the above.

What portion of the demand curve will profit-maximizing monopolists choose to operate on: the inelastic portion or elastic portion? Why?

If a regulatory commission wishes to allow a firm to earn a normal rate of return, it should set price equal to:

Which of the following best explains why marginal revenue for a monopolist is less than the sales price?

The demand curve facing a monopolist:

Which of the following is not true?

A monopoly firm is charging the price the market will bear at a level of output where MC equals $22 and is increasing, MR equals $20, and average variable cost equals $17.To maximize profits, the firm should:

If a profit-maximizing monopolist finds that marginal cost is increasing and exceeds marginal revenue, it should:

Figure 9-I -A monopolistic firm is a:

Price ____ occurs when producers charge different customers different prices for the same good or service.

Show Stoppers is a monopoly provider of ticket services for the concerts and sporting events and their current service charge is $10.00.In order to attract one more customer, they have to lower their service charge to $9.50.Show Stoppers' marginal revenue of this additional customer is:

Say that a monopolist is currently operating on the inelastic region of its demand curve.To maximize its profits, it should:

If a public utility is subject to average-cost pricing regulation, it will:

Necessary conditions for price discrimination include:

Based on the table below, what is the profit maximizing quantity of output? 40 \ 80 \ 2,500 41 \ 79 \ 2,510 42 \ 78 \ 2,530 43 \ 77 \ 2,560 44 \ 76 \ 2,600

A price-taking firm and a monopoly firm are alike in that:

Figure 8-B -Refer to Figure 8-B.The region bounded by P*ABC represents:

Which of these contributes to the existence of monopoly power?

Which of the following is true?

Which of the following is not generally true about a profit-maximizing monopolist?

Figure 9-I -Pure monopoly:

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

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Exam 8: Monopoly

What portion of the demand curve will profit-maximizing monopolists choose to operate on: the inelastic portion or elastic portion? Why?

If a regulatory commission wishes to allow a firm to earn a normal rate of return, it should set price equal to:

Which of the following best explains why marginal revenue for a monopolist is less than the sales price?

The demand curve facing a monopolist:

Which of the following is not true?

A monopoly firm is charging the price the market will bear at a level of output where MC equals $22 and is increasing, MR equals $20, and average variable cost equals $17.To maximize profits, the firm should:

If a profit-maximizing monopolist finds that marginal cost is increasing and exceeds marginal revenue, it should:

Figure 9-I -A monopolistic firm is a:

Price ____ occurs when producers charge different customers different prices for the same good or service.

Show Stoppers is a monopoly provider of ticket services for the concerts and sporting events and their current service charge is $10.00.In order to attract one more customer, they have to lower their service charge to $9.50.Show Stoppers' marginal revenue of this additional customer is:

Say that a monopolist is currently operating on the inelastic region of its demand curve.To maximize its profits, it should:

If a public utility is subject to average-cost pricing regulation, it will:

Necessary conditions for price discrimination include:

Based on the table below, what is the profit maximizing quantity of output? 40 \ 80 \ 2,500 41 \ 79 \ 2,510 42 \ 78 \ 2,530 43 \ 77 \ 2,560 44 \ 76 \ 2,600

A price-taking firm and a monopoly firm are alike in that:

Figure 8-B -Refer to Figure 8-B.The region bounded by P*ABC represents:

Which of these contributes to the existence of monopoly power?

Which of the following is true?

Which of the following is not generally true about a profit-maximizing monopolist?

Figure 9-I -Pure monopoly:

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

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