Question 1

In a monopoly

Accepted Answer

A)  the firm is large in an absolute sense. 
B)  the market is small in an absolute sense. 
C)  the firm and the industry are the same thing. 
D)  the monopolist determines how much each firm will produce. 
A)  the firm is large in an absolute sense. 
B)  the market is small in an absolute sense. 
C)  the firm and the industry are the same thing. 
D)  the monopolist determines how much each firm will produce.

Question 2

Which of the following is most likely to be a monopoly?

Accepted Answer

A)  Ford, an auto manufacturer 
B)  Verizon, a wireless service provider 
C)  The Washington Post newspaper 
D)  a public water utility 
A)  Ford, an auto manufacturer 
B)  Verizon, a wireless service provider 
C)  The Washington Post newspaper 
D)  a public water utility

Question 3

-In the above figure, if the firm is producing at Q3 and charging a price of P3, it should

Accepted Answer

A)  increase output and decrease price. 
B)  decrease output and increase price. 
C)  not change output or price. 
D)  shut down. 
A)  increase output and decrease price. 
B)  decrease output and increase price. 
C)  not change output or price. 
D)  shut down.

Question 4

A monopolist is defined as

Accepted Answer

A)  a firm with annual sales over $10 million. 
B)  a large firm, making substantial profits, that is able to make other firms do what it wants. 
C)  a single supplier of a good or service for which there is no close substitute. 
D)  a producer of a good or service that is expensive to produce, requiring large amounts of capital equipment. 
A)  a firm with annual sales over $10 million. 
B)  a large firm, making substantial profits, that is able to make other firms do what it wants. 
C)  a single supplier of a good or service for which there is no close substitute. 
D)  a producer of a good or service that is expensive to produce, requiring large amounts of capital equipment.

Question 5

Monopoly producers face

Accepted Answer

A)  many competitors producing the same product. 
B)  only a few competitors producing the same product. 
C)  at least one competitive producer of the same product. 
D)  no competitive producers of the same product. 
A)  many competitors producing the same product. 
B)  only a few competitors producing the same product. 
C)  at least one competitive producer of the same product. 
D)  no competitive producers of the same product.

Question 6

Under a monopoly, resources are misallocated such that

Accepted Answer

A)  too few resources are used in other industries, and too many are used by the monopoly. 
B)  too few resources are used by the monopoly, and too many are used elsewhere. 
C)  resources are being used as efficiently as possible only by the monopoly. 
D)  consumers are being forced to pay a price below the MC of the monopolist. 
A)  too few resources are used in other industries, and too many are used by the monopoly. 
B)  too few resources are used by the monopoly, and too many are used elsewhere. 
C)  resources are being used as efficiently as possible only by the monopoly. 
D)  consumers are being forced to pay a price below the MC of the monopolist.

Question 7

Which of the following is NOT necessary in order for a monopolist to practice effective price discrimination?

Accepted Answer

A)  The marginal cost of providing the same good to different groups of buyers must be different. 
B)  The monopolist must be able to segregate its market into different submarkets. 
C)  The buyers in various markets must face different price elasticities of demand. 
D)  The monopolist must have a downward sloping demand curve. 
A)  The marginal cost of providing the same good to different groups of buyers must be different. 
B)  The monopolist must be able to segregate its market into different submarkets. 
C)  The buyers in various markets must face different price elasticities of demand. 
D)  The monopolist must have a downward sloping demand curve.

Question 8

For a monopolist, the reason that marginal revenue is less than price is

Accepted Answer

A)  because of the perfectly elastic demand curve that the monopolist faces. 
B)  because the monopolist must lower the price of the good in order to sell an additional unit. 
C)  because of the U-shaped average revenue curve. 
D)  because of the lack of competition in the market. 
A)  because of the perfectly elastic demand curve that the monopolist faces. 
B)  because the monopolist must lower the price of the good in order to sell an additional unit. 
C)  because of the U-shaped average revenue curve. 
D)  because of the lack of competition in the market.

Question 9

-Refer to the above figure. What price-output combination would apply under perfect competition?

Accepted Answer

A)  P4 and Q1 
B)  P3 and Q2 
C)  P2 and Q3 
D)  P1 and Q1 
A)  P4 and Q1 
B)  P3 and Q2 
C)  P2 and Q3 
D)  P1 and Q1

Question 10

A major difference between a monopolist and a perfectly competitive firm is that

Accepted Answer

A)  the monopolist is certain to earn economic profits. 
B)  the monopolist's marginal revenue curve lies below its demand curve. 
C)  the monopolist engages in marginal cost pricing. 
D)  the monopolist charges the highest possible price that he can. 
A)  the monopolist is certain to earn economic profits. 
B)  the monopolist's marginal revenue curve lies below its demand curve. 
C)  the monopolist engages in marginal cost pricing. 
D)  the monopolist charges the highest possible price that he can.

Question 11

A monopolist wishing to increase its profit has just discovered that lowering its price and selling more output yielded the desired result. Profit increased. Based on this, we can conclude that the cost of the additional production is

Accepted Answer

A)  greater than the revenue from the additional production. 
B)  precisely equal to the revenue from the additional production. 
C)  less than the revenue from the additional production. 
D)  there is no way to answer this because you have not given us the marginal revenue and marginal cost data. 
A)  greater than the revenue from the additional production. 
B)  precisely equal to the revenue from the additional production. 
C)  less than the revenue from the additional production. 
D)  there is no way to answer this because you have not given us the marginal revenue and marginal cost data.

Question 12

A monopolist

Accepted Answer

A)  can charge whatever price it wants because it is the only firm producing the good. 
B)  can usually keep price equal to marginal revenue by lowering the price on the last unit sold only. 
C)  faces a demand curve that is more elastic than the demand curve for the industry. 
D)  is constrained in its pricing decisions by the demand curve it faces. 
A)  can charge whatever price it wants because it is the only firm producing the good. 
B)  can usually keep price equal to marginal revenue by lowering the price on the last unit sold only. 
C)  faces a demand curve that is more elastic than the demand curve for the industry. 
D)  is constrained in its pricing decisions by the demand curve it faces.

Question 13

If a monopolist produces to a point at which marginal revenue is more than marginal cost then

Accepted Answer

A)  the firm should increase output. 
B)  the firm should reduce output. 
C)  the firm is maximizing profits. 
D)  we do not know if the firm should increase or reduce without more information. 
A)  the firm should increase output. 
B)  the firm should reduce output. 
C)  the firm is maximizing profits. 
D)  we do not know if the firm should increase or reduce without more information.

Question 14

-In the above figure, the monopolist's profit-maximizing price is

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  D. 
A)  A. 
B)  B. 
C)  C. 
D)  D.

Question 15

A monopolist who is maximizing profits produces to the point at which

Accepted Answer

A)  marginal cost and average total cost are equal. 
B)  price, marginal cost and average variable cost are equal. 
C)  price is greater than marginal cost. 
D)  price is greater than average total cost. 
A)  marginal cost and average total cost are equal. 
B)  price, marginal cost and average variable cost are equal. 
C)  price is greater than marginal cost. 
D)  price is greater than average total cost.

Question 16

What is the social cost of a monopoly? Explain.

Accepted Answer

The social cost of a monopoly comes from

Question 17

The price elasticity of demand for a monopolist

Accepted Answer

A)  is infinite since the monopolist is the only firm in the market. 
B)  decreases as more competition occurs in the market. 
C)  increases as similar products enter the market. 
D)  is undefined due to the lack of competition. 
A)  is infinite since the monopolist is the only firm in the market. 
B)  decreases as more competition occurs in the market. 
C)  increases as similar products enter the market. 
D)  is undefined due to the lack of competition.

Question 18

In order for a firm to receive monopoly profits, there must be

Accepted Answer

A)  homogeneous products. 
B)  barriers to market entry. 
C)  mutual interdependence among firms. 
D)  free entry and exit to the market. 
A)  homogeneous products. 
B)  barriers to market entry. 
C)  mutual interdependence among firms. 
D)  free entry and exit to the market.

Question 19

A monopolist is producing at an output level at which ATC = $5, P = $6, MC = $3, and MR = $4. We can conclude that

Accepted Answer

A)  economic profit could be increased by producing more. 
B)  economic profit could be increased by producing less. 
C)  economic profit cannot be increased. 
D)  the firm is earning $10 in economic profits. 
A)  economic profit could be increased by producing more. 
B)  economic profit could be increased by producing less. 
C)  economic profit cannot be increased. 
D)  the firm is earning $10 in economic profits.

Question 20

A firm that faces a downward sloping demand curve is

Accepted Answer

A)  a price taker. 
B)  a price provider. 
C)  a price searcher. 
D)  a price creator. 
A)  a price taker. 
B)  a price provider. 
C)  a price searcher. 
D)  a price creator.

Exam 24: Monopoly

In a monopoly

Which of the following is most likely to be a monopoly?

-In the above figure, if the firm is producing at Q3 and charging a price of P3, it should

A monopolist is defined as

Monopoly producers face

Under a monopoly, resources are misallocated such that

Which of the following is NOT necessary in order for a monopolist to practice effective price discrimination?

For a monopolist, the reason that marginal revenue is less than price is

-Refer to the above figure. What price-output combination would apply under perfect competition?

A major difference between a monopolist and a perfectly competitive firm is that

A monopolist wishing to increase its profit has just discovered that lowering its price and selling more output yielded the desired result. Profit increased. Based on this, we can conclude that the cost of the additional production is

A monopolist

If a monopolist produces to a point at which marginal revenue is more than marginal cost then

-In the above figure, the monopolist's profit-maximizing price is

A monopolist who is maximizing profits produces to the point at which

What is the social cost of a monopoly? Explain.

The price elasticity of demand for a monopolist

In order for a firm to receive monopoly profits, there must be

A monopolist is producing at an output level at which ATC = $5, P = $6, MC = $3, and MR = $4. We can conclude that

A firm that faces a downward sloping demand curve is

The Nature of Economics

Scarcity and the World of Trade-Offs

Demand and Supply

Extensions of Demand and Supply Analysis

Public Spending and Public Choice

Funding the Public Sector

The Macroeconomy: Unemployment, Inflation, and Deflation

Measuring the Economys Performance

Global Economic Growth and Development

Real GDP and the Price Level in the Long Run

Classical and Keynesian Macro Analyses

Consumption, Real GDP, and the Multiplier

Fiscal Policy

Deficit Spending and the Public Debt

Money, Banking, and Central Banking

Domestic and International Dimensions of Monetary Policy

Stabilization in an Integrated World Economy

Policies and Prospects for Global Economic Growth

Demand and Supply Elasticity

Consumer Choice

Rents, Profits, and the Financial Environment of Business

The Firm: Cost and Output Determination

Perfect Competition

Monopolistic Competition

Oligopoly and Strategic Behavior

Regulation and Antitrust Policy in a Globalized Economy

The Labor Market: Demand, Supply and Outsourcing

Unions and Labor Market Monopoly Power

Income, Poverty, and Health Care

Environmental Economics

Comparative Advantage and the Open Economy

Exchange Rates and the Balance of Payments

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