Question 1

-In the above figure, the area of rectangle ABHG represents the monopolist's

Accepted Answer

A)  maximized economic profits. 
B)  maximized total revenue. 
C)  average total profits. 
D)  total costs. 
A)  maximized economic profits. 
B)  maximized total revenue. 
C)  average total profits. 
D)  total costs.

Question 2

What affects the price elasticity of demand for a monopolist's product?

Accepted Answer

A monopolist may have imperfect substitu

Question 3

-Refer to the above figure. Which of the following statements is TRUE about the demand curves for an individual firm in a perfectly competitive industry and a monopoly?

Accepted Answer

A)  Panel A is the demand curve for a perfectly competitive firm and panel B is the demand curve for a monopoly. 
B)  Panel C is the demand curve for a perfectly competitive firm and panel A is the demand curve for a monopoly. 
C)  Panel C is the demand curve for a perfectly competitive firm and panel B is the demand curve for a monopoly. 
D)  Panel B is the demand curve for a perfectly competitive firm and panel A is the demand curve for a monopoly. 
A)  Panel A is the demand curve for a perfectly competitive firm and panel B is the demand curve for a monopoly. 
B)  Panel C is the demand curve for a perfectly competitive firm and panel A is the demand curve for a monopoly. 
C)  Panel C is the demand curve for a perfectly competitive firm and panel B is the demand curve for a monopoly. 
D)  Panel B is the demand curve for a perfectly competitive firm and panel A is the demand curve for a monopoly.

Question 4

In equilibrium, which of the following conditions is common to both unregulated monopoly and pure competition?

Accepted Answer

A)  P = MR 
B)  AR = ATC 
C)  MR = MC 
D)  MC = P 
A)  P = MR 
B)  AR = ATC 
C)  MR = MC 
D)  MC = P

Question 5

-In the above figure, a monopolist will set its level of output and price at

Accepted Answer

A)  Q2 and C, respectively. 
B)  Q3 and F, respectively. 
C)  Q1 and A, respectively. 
D)  Q1 and B, respectively. 
A)  Q2 and C, respectively. 
B)  Q3 and F, respectively. 
C)  Q1 and A, respectively. 
D)  Q1 and B, respectively.

Question 6

Economies of scale may be a barrier to entry in a situation in which

Accepted Answer

A)  only small-scale production can lower the per-unit cost of production. 
B)  only small-scale production can meet the constantly changing market demand. 
C)  only large-scale production can lower the per-unit cost of production. 
D)  large-scale production is inefficient. 
A)  only small-scale production can lower the per-unit cost of production. 
B)  only small-scale production can meet the constantly changing market demand. 
C)  only large-scale production can lower the per-unit cost of production. 
D)  large-scale production is inefficient.

Question 7

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

Accepted Answer

A)  profits are being maximized. 
B)  profits will always be negative. 
C)  the incremental cost of producing the last unit exceeds the incremental revenue. 
D)  the incremental cost of producing the last unit is less than the incremental revenue. 
A)  profits are being maximized. 
B)  profits will always be negative. 
C)  the incremental cost of producing the last unit exceeds the incremental revenue. 
D)  the incremental cost of producing the last unit is less than the incremental revenue.

Question 8

Which of the following is NOT true about the demand curve faced by a monopolist?

Accepted Answer

A)  The demand curve is downward sloping. 
B)  The firm's demand curve is the same as the market demand curve. 
C)  The marginal revenue curve is below the market demand curve. 
D)  The demand curve is perfectly elastic. 
A)  The demand curve is downward sloping. 
B)  The firm's demand curve is the same as the market demand curve. 
C)  The marginal revenue curve is below the market demand curve. 
D)  The demand curve is perfectly elastic.

Question 9

-In the above figure, suppose the monopolist is producing at Q3. The firm 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 10

A monopolist engages in price discrimination

Accepted Answer

A)  by charging a higher price to consumers whose demand is more elastic. 
B)  by charging a higher price when marginal cost is lower. 
C)  by charging a lower price to consumers whose demand is more elastic. 
D)  by charging the same price to all consumers. 
A)  by charging a higher price to consumers whose demand is more elastic. 
B)  by charging a higher price when marginal cost is lower. 
C)  by charging a lower price to consumers whose demand is more elastic. 
D)  by charging the same price to all consumers.

Question 11

Which of the following statements about the elasticity of demand for a monopolist is TRUE?

Accepted Answer

A)  Since a monopolist produces a good with no close substitutes, the price elasticity of demand for the good is zero. 
B)  A monopolist produces a good with demand that is perfectly inelastic because people can not do without the good. 
C)  Since every good has some substitute, even if imperfect, the demand for a good produced by a monopolist will not have zero price elasticity. 
D)  Since the demand curve of a monopolist is downward sloping, the demand for the good must be inelastic. 
A)  Since a monopolist produces a good with no close substitutes, the price elasticity of demand for the good is zero. 
B)  A monopolist produces a good with demand that is perfectly inelastic because people can not do without the good. 
C)  Since every good has some substitute, even if imperfect, the demand for a good produced by a monopolist will not have zero price elasticity. 
D)  Since the demand curve of a monopolist is downward sloping, the demand for the good must be inelastic.

Question 12

One problem associated with a monopoly firm is that it

Accepted Answer

A)  produces too little output but also charges a low price. 
B)  produces too much output and charges too low a price. 
C)  restricts output and charges a relatively higher price than a purely competitive firm. 
D)  is just as good as a purely competitive firm in terms of output and price. 
A)  produces too little output but also charges a low price. 
B)  produces too much output and charges too low a price. 
C)  restricts output and charges a relatively higher price than a purely competitive firm. 
D)  is just as good as a purely competitive firm in terms of output and price.

Question 13

-Given the data in the above table, what is the marginal revenue when the 14th unit is sold?

Accepted Answer

A)  $7.00 
B)  $5.00 
C)  $3.00 
D)  $1.00 
A)  $7.00 
B)  $5.00 
C)  $3.00 
D)  $1.00

Question 14

All of the following are considered a barrier to entry into a market EXCEPT

Accepted Answer

A)  ownership of resources without close substitutes. 
B)  when firms can only earn a normal rate of return in a market. 
C)  economies of scale. 
D)  governmental restrictions on a firm's ability enter a market. 
A)  ownership of resources without close substitutes. 
B)  when firms can only earn a normal rate of return in a market. 
C)  economies of scale. 
D)  governmental restrictions on a firm's ability enter a market.

Question 15

-In the above figure, if the firm is producing Q2 units at a price P2, 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 16

"The social cost of a monopoly comes from the fact that it charges a price higher than what consumers are willing to pay." Do you agree or disagree? Why?

Accepted Answer

Disagree. The social cost of a monopoly

Question 17

For a profit-maximizing monopolist

Accepted Answer

A)  P > MC. 
B)  P = MC. 
C)  P = MR. 
D)  P = ATC. 
A)  P > MC. 
B)  P = MC. 
C)  P = MR. 
D)  P = ATC.

Question 18

Which of the following is a TRUE statement about monopoly and perfect competition?

Accepted Answer

A)  Price is always higher and output higher under monopoly than under perfect competition. 
B)  Because costs do not depend on market structure, price is usually higher and output is always lower under monopoly than perfect competition. 
C)  If there are substantial economies of scale, price may be lower and output greater under monopoly than under perfect competition. 
D)  If there are substantial economies of scale, price may be lower and output greater under monopoly than under perfect competition, and price may be below marginal cost instead of equal to marginal cost. 
A)  Price is always higher and output higher under monopoly than under perfect competition. 
B)  Because costs do not depend on market structure, price is usually higher and output is always lower under monopoly than perfect competition. 
C)  If there are substantial economies of scale, price may be lower and output greater under monopoly than under perfect competition. 
D)  If there are substantial economies of scale, price may be lower and output greater under monopoly than under perfect competition, and price may be below marginal cost instead of equal to marginal cost.

Question 19

To sell more units, a monopolist must

Accepted Answer

A)  merely produce more units. 
B)  advertise more. 
C)  raise product quality. 
D)  lower price. 
A)  merely produce more units. 
B)  advertise more. 
C)  raise product quality. 
D)  lower price.

Question 20

A monopolist's demand curve is

Accepted Answer

A)  perfectly elastic. 
B)  perfectly inelastic. 
C)  of unit elasticity throughout. 
D)  the industry demand curve. 
A)  perfectly elastic. 
B)  perfectly inelastic. 
C)  of unit elasticity throughout. 
D)  the industry demand curve.

Exam 24: Monopoly

-In the above figure, the area of rectangle ABHG represents the monopolist's

What affects the price elasticity of demand for a monopolist's product?

-Refer to the above figure. Which of the following statements is TRUE about the demand curves for an individual firm in a perfectly competitive industry and a monopoly?

In equilibrium, which of the following conditions is common to both unregulated monopoly and pure competition?

-In the above figure, a monopolist will set its level of output and price at

Economies of scale may be a barrier to entry in a situation in which

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

Which of the following is NOT true about the demand curve faced by a monopolist?

-In the above figure, suppose the monopolist is producing at Q3. The firm should

A monopolist engages in price discrimination

Which of the following statements about the elasticity of demand for a monopolist is TRUE?

One problem associated with a monopoly firm is that it

-Given the data in the above table, what is the marginal revenue when the 14th unit is sold?

All of the following are considered a barrier to entry into a market EXCEPT

-In the above figure, if the firm is producing Q2 units at a price P2, it should

"The social cost of a monopoly comes from the fact that it charges a price higher than what consumers are willing to pay." Do you agree or disagree? Why?

For a profit-maximizing monopolist

Which of the following is a TRUE statement about monopoly and perfect competition?

To sell more units, a monopolist must

A monopolist's demand curve is

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