Question 1

Shortly after the turn of the century, U.S. Steel owned most of the iron ore reserves in the country. This is an example of

Accepted Answer

A)  monopoly due to government restrictions. 
B)  a barrier to entry from owning an important resource. 
C)  a barrier to entry from scale economies. 
D)  monopoly due to governmental entry restrictions. 
A)  monopoly due to government restrictions. 
B)  a barrier to entry from owning an important resource. 
C)  a barrier to entry from scale economies. 
D)  monopoly due to governmental entry restrictions.

Question 2

The monopolist will choose the price and output combination at which

Accepted Answer

A)  MC equals AR. 
B)  MC equals MR. 
C)  MC equals price. 
D)  MR equals AR. 
A)  MC equals AR. 
B)  MC equals MR. 
C)  MC equals price. 
D)  MR equals AR.

Question 3

Some electrical utilities are monopolies because of

Accepted Answer

A)  government restrictions that prevent new firms from entering the market. 
B)  ownership of resources without close substitutes. 
C)  diseconomies of scale. 
D)  their inability to earn profits. 
A)  government restrictions that prevent new firms from entering the market. 
B)  ownership of resources without close substitutes. 
C)  diseconomies of scale. 
D)  their inability to earn profits.

Question 4

Which of the following is NOT a necessary condition for price discrimination?

Accepted Answer

A)  preventing resale of the product 
B)  downward sloping demand curve 
C)  separating markets for the good 
D)  having a constant marginal cost 
A)  preventing resale of the product 
B)  downward sloping demand curve 
C)  separating markets for the good 
D)  having a constant marginal cost

Question 5

A monopolist's marginal revenue curve is

Accepted Answer

A)  the same as a perfectly competitive firm's marginal revenue curve. 
B)  higher than the monopolist's demand curve. 
C)  below the firm's demand curve. 
D)  a horizontal line at the market price. 
A)  the same as a perfectly competitive firm's marginal revenue curve. 
B)  higher than the monopolist's demand curve. 
C)  below the firm's demand curve. 
D)  a horizontal line at the market price.

Question 6

If a monopolist can sell 20 units at price of $200 per unit and 30 units at a price of $180 per unit, its marginal revenue at an output of 30 is

Accepted Answer

A)  $-200. 
B)  $800. 
C)  $1400. 
D)  $1800. 
A)  $-200. 
B)  $800. 
C)  $1400. 
D)  $1800.

Question 7

-Refer to the above figure. The profit-maximizing price for this firm is

Accepted Answer

A)  P1. 
B)  P2. 
C)  P3. 
D)  P4. 
A)  P1. 
B)  P2. 
C)  P3. 
D)  P4.

Question 8

According to the text, government licensing frequently enables monopoly in

Accepted Answer

A)  agriculture. 
B)  electricity production. 
C)  mining. 
D)  retail sales. 
A)  agriculture. 
B)  electricity production. 
C)  mining. 
D)  retail sales.

Question 9

In principle, can a monopolist hold its monopoly power in the long run? Explain.

Accepted Answer

Yes. Monopoly power exists in the long r

Question 10

Suppose that a drug for treating cancer is cleared by the Food and Drug Administration and that the company is successful in obtaining a patent for its product. Which of the following is then TRUE?

Accepted Answer

A)  The patent holder now faces barriers to entry. 
B)  The method of producing the product would not be considered intellectual property. 
C)  The patent holder has a monopoly. 
D)  The drug would have many close substitutes. 
A)  The patent holder now faces barriers to entry. 
B)  The method of producing the product would not be considered intellectual property. 
C)  The patent holder has a monopoly. 
D)  The drug would have many close substitutes.

Question 11

Suppose that a perfect-maximizing monopolist operates with a horizontal marginal cost curve and no fixed costs. Which of the following would NOT be represented as part of the area between its demand curve and marginal cost curve?

Accepted Answer

A)  total costs 
B)  economic profits 
C)  consumer surplus 
D)  deadweight loss 
A)  total costs 
B)  economic profits 
C)  consumer surplus 
D)  deadweight loss

Question 12

A firm that can determine the price-output combination in order to maximize profit is known as a

Accepted Answer

A)  price searcher. 
B)  price taker. 
C)  demand searcher. 
D)  cost taker. 
A)  price searcher. 
B)  price taker. 
C)  demand searcher. 
D)  cost taker.

Question 13

Price discrimination exists when

Accepted Answer

A)  a firm charges different buyers different prices for its product but the costs are the same. 
B)  each buyer is treated equally. 
C)  sales are made below cost. 
D)  a firm charges each buyer a price of the product in proportion to its costs. 
A)  a firm charges different buyers different prices for its product but the costs are the same. 
B)  each buyer is treated equally. 
C)  sales are made below cost. 
D)  a firm charges each buyer a price of the product in proportion to its costs.

Question 14

Which of the following is NOT a condition for price discrimination to exist?

Accepted Answer

A)  downward sloping demand curve faced by the firm 
B)  identification of buyers with differing elasticities 
C)  unpatented product or the service 
D)  ability to prevent the resale of the product or service 
A)  downward sloping demand curve faced by the firm 
B)  identification of buyers with differing elasticities 
C)  unpatented product or the service 
D)  ability to prevent the resale of the product or service

Question 15

An important difference between a perfectly competitive firm and a monopolist is

Accepted Answer

A)  the size of the industry. 
B)  the primary objective of the firms. 
C)  a monopolist only produces in the long run, while a perfect competitor only produces in the short run. 
D)  the price it charges to sell additional units of a good. 
A)  the size of the industry. 
B)  the primary objective of the firms. 
C)  a monopolist only produces in the long run, while a perfect competitor only produces in the short run. 
D)  the price it charges to sell additional units of a good.

Question 16

The point of profit maximization for a monopolist is exemplified by

Accepted Answer

A)  TR = TC. 
B)  MR = MC. 
C)  ATCmin. 
D)  MR > MC. 
A)  TR = TC. 
B)  MR = MC. 
C)  ATCmin. 
D)  MR > MC.

Question 17

The demand curve a monopolist faces is

Accepted Answer

A)  horizontal. 
B)  the industry demand curve. 
C)  vertical. 
D)  inelastic at all points. 
A)  horizontal. 
B)  the industry demand curve. 
C)  vertical. 
D)  inelastic at all points.

Question 18

Why would economies of scale be a barrier to entry?

Accepted Answer

If significant economies of scale exist

Question 19

In maximizing economic profit, the monopolist will

Accepted Answer

A)  choose the highest price that still permits some output sales. 
B)  equate marginal cost to minimum average total cost. 
C)  equate price to marginal cost. 
D)  equate marginal revenue to marginal cost. 
A)  choose the highest price that still permits some output sales. 
B)  equate marginal cost to minimum average total cost. 
C)  equate price to marginal cost. 
D)  equate marginal revenue to marginal cost.

Question 20

If it is NOT profitable for more than one firm to be in an industry, we have an example of

Accepted Answer

A)  monopoly due to ownership of key resources. 
B)  monopoly due to governmental entry restrictions. 
C)  monopoly due to economies of scale. 
D)  pure competition. 
A)  monopoly due to ownership of key resources. 
B)  monopoly due to governmental entry restrictions. 
C)  monopoly due to economies of scale. 
D)  pure competition.

Exam 24: Monopoly

Shortly after the turn of the century, U.S. Steel owned most of the iron ore reserves in the country. This is an example of

The monopolist will choose the price and output combination at which

Some electrical utilities are monopolies because of

Which of the following is NOT a necessary condition for price discrimination?

A monopolist's marginal revenue curve is

If a monopolist can sell 20 units at price of $200 per unit and 30 units at a price of $180 per unit, its marginal revenue at an output of 30 is

-Refer to the above figure. The profit-maximizing price for this firm is

According to the text, government licensing frequently enables monopoly in

In principle, can a monopolist hold its monopoly power in the long run? Explain.

Suppose that a drug for treating cancer is cleared by the Food and Drug Administration and that the company is successful in obtaining a patent for its product. Which of the following is then TRUE?

Suppose that a perfect-maximizing monopolist operates with a horizontal marginal cost curve and no fixed costs. Which of the following would NOT be represented as part of the area between its demand curve and marginal cost curve?

A firm that can determine the price-output combination in order to maximize profit is known as a

Price discrimination exists when

Which of the following is NOT a condition for price discrimination to exist?

An important difference between a perfectly competitive firm and a monopolist is

The point of profit maximization for a monopolist is exemplified by

The demand curve a monopolist faces is

Why would economies of scale be a barrier to entry?

In maximizing economic profit, the monopolist will

If it is NOT profitable for more than one firm to be in an industry, we have an example of

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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