Question 1

A monopolist maximizes profits by finding

Accepted Answer

A)  the rate of output where marginal revenue equals marginal cost. 
B)  the rate of output where price equals marginal cost. 
C)  the price where price exceeds marginal revenue by that largest amount. 
D)  the price where average revenue and marginal cost are equal. 
A)  the rate of output where marginal revenue equals marginal cost. 
B)  the rate of output where price equals marginal cost. 
C)  the price where price exceeds marginal revenue by that largest amount. 
D)  the price where average revenue and marginal cost are equal.

Question 2

A single supplier of a good or service for which there is no close substitute is referred to as a(n)

Accepted Answer

A)  strategic competitor. 
B)  monopoly. 
C)  oligopoly. 
D)  monopolistic competitor. 
A)  strategic competitor. 
B)  monopoly. 
C)  oligopoly. 
D)  monopolistic competitor.

Question 3

When a firm practices price discrimination, for each separate set of consumers it will determine the rate of output at which

Accepted Answer

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

Question 4

The market structure in which there is a single supplier of a good or service for which there is no close substitute is

Accepted Answer

A)  oligopoly. 
B)  perfect competition. 
C)  monopoly. 
D)  monopolistic competition. 
A)  oligopoly. 
B)  perfect competition. 
C)  monopoly. 
D)  monopolistic competition.

Question 5

In a perfectly competitive market, if all firms face identical, constant marginal cost curves, then consumer surplus is

Accepted Answer

A)  the area beneath the market demand curve and above the market clearing price. 
B)  the area above the market demand curve and above the market clearing price. 
C)  the total area beneath the market demand curve. 
D)  definitely zero. 
A)  the area beneath the market demand curve and above the market clearing price. 
B)  the area above the market demand curve and above the market clearing price. 
C)  the total area beneath the market demand curve. 
D)  definitely zero.

Question 6

"Price discrimination is the same as price differentiation." Do you agree or disagree? Why?

Accepted Answer

Disagree. Price discrimination is the ac

Question 7

Which is NOT a necessary condition for price discrimination to exist?

Accepted Answer

A)  The firm must face a downward sloping demand curve. 
B)  The firm must identify buyers with different elasticities of demand. 
C)  The firm must be able to prevent resale of the product or service. 
D)  The firm must establish different prices to reflect marginal cost. 
A)  The firm must face a downward sloping demand curve. 
B)  The firm must identify buyers with different elasticities of demand. 
C)  The firm must be able to prevent resale of the product or service. 
D)  The firm must establish different prices to reflect marginal cost.

Question 8

The monopolist faces a downward sloping demand curve, and maximizing profits requires the monopolist to

Accepted Answer

A)  accept the market price for its product. 
B)  will produce where the demand curve is inelastic. 
C)  search for the price consistent with producing to the point at which marginal revenue equals marginal cost. 
D)  search for the highest possible price consistent with maximizing its revenues, irrespective of its explicit and implicit opportunity costs. 
A)  accept the market price for its product. 
B)  will produce where the demand curve is inelastic. 
C)  search for the price consistent with producing to the point at which marginal revenue equals marginal cost. 
D)  search for the highest possible price consistent with maximizing its revenues, irrespective of its explicit and implicit opportunity costs.

Question 9

For a monopoly earning positive economic profits at the profit-maximizing output level, all of the following are true EXCEPT

Accepted Answer

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

Question 10

-In the above figure, the break-even output and price is

Accepted Answer

A)  $9 and 14. 
B)  $13 and 14. 
C)  $11 and 16. 
D)  $10 and 17. 
A)  $9 and 14. 
B)  $13 and 14. 
C)  $11 and 16. 
D)  $10 and 17.

Question 11

In order to sell more output units, what must a monopoly do?

Accepted Answer

A)  reduce output price 
B)  reduce input price 
C)  increase output price 
D)  increase input price 
A)  reduce output price 
B)  reduce input price 
C)  increase output price 
D)  increase input price

Question 12

If it is NOT possible for a pharmaceutical drug maker to sell its generic cholesterol reducing drug along with some name brand cholesterol reducing drugs, we have an example of monopoly due to

Accepted Answer

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

Question 13

"All monopolies operate with positive economic profits." Do you agree or disagree? Why?

Accepted Answer

Disagree. Monopolies can receive negativ

Question 14

Using a graph, show why marginal revenue is always less than price.

Accepted Answer

@#IMG-DLM& The demand curve slopes down so the fir

Question 15

"The deadweight loss of a monopoly equals the monopoly firm's profits." Do you agree or disagree? Why?

Accepted Answer

Disagree. The deadweight loss from a mon

Question 16

Monopolies misallocate resources because

Accepted Answer

A)  price does not equal marginal cost. 
B)  price does not equal average variable cost. 
C)  marginal cost does not equal average total cost. 
D)  profits are usually positive. 
A)  price does not equal marginal cost. 
B)  price does not equal average variable cost. 
C)  marginal cost does not equal average total cost. 
D)  profits are usually positive.

Question 17

A monopolist produces in the elastic segment of its demand curve because when it lowers the price

Accepted Answer

A)  the percentage change increase in quantity demanded is greater than the percentage change decrease in price and total revenue increases. 
B)  the percentage change increase in quantity demanded is less than the percentage change decrease in price and total revenue increases. 
C)  the percentage change increase in quantity demanded is greater than the percentage change decrease in price and total revenue decreases. 
D)  the percentage change decrease in quantity demanded is less than the percentage change decrease in price and total revenue increases. 
A)  the percentage change increase in quantity demanded is greater than the percentage change decrease in price and total revenue increases. 
B)  the percentage change increase in quantity demanded is less than the percentage change decrease in price and total revenue increases. 
C)  the percentage change increase in quantity demanded is greater than the percentage change decrease in price and total revenue decreases. 
D)  the percentage change decrease in quantity demanded is less than the percentage change decrease in price and total revenue increases.

Question 18

Which of the following statements about a monopolist is FALSE?

Accepted Answer

A)  A pure monopolist is the sole supplier of one product, good, or service. 
B)  The monopolist faces a demand curve for the entire market for that good. 
C)  A pure monopolist is not the same as a perfect competitor. 
D)  The monopolist faces the industry demand curve, which is upward sloping. 
A)  A pure monopolist is the sole supplier of one product, good, or service. 
B)  The monopolist faces a demand curve for the entire market for that good. 
C)  A pure monopolist is not the same as a perfect competitor. 
D)  The monopolist faces the industry demand curve, which is upward sloping.

Question 19

-Refer to the above figure. Which of the following statements is TRUE?

Accepted Answer

A)  Under perfect competition, the efficient price is charged, which is the lowest price possible (P1) while under monopoly output is too large (Q4) and price is too high (P4). 
B)  Under perfect competition price equals marginal cost (P3) while under monopoly price (P4) is greater than marginal cost (P1). 
C)  The rate of output is the same under both monopoly and perfect competition (Q1), but price is higher under monopoly (P4 rather than P1). 
D)  Price equals marginal cost under both monopoly and perfect competition, but output is too low under monopoly (Q1 instead of Q2). 
A)  Under perfect competition, the efficient price is charged, which is the lowest price possible (P1) while under monopoly output is too large (Q4) and price is too high (P4). 
B)  Under perfect competition price equals marginal cost (P3) while under monopoly price (P4) is greater than marginal cost (P1). 
C)  The rate of output is the same under both monopoly and perfect competition (Q1), but price is higher under monopoly (P4 rather than P1). 
D)  Price equals marginal cost under both monopoly and perfect competition, but output is too low under monopoly (Q1 instead of Q2).

Question 20

A tax that is imposed on an imported good is called a

Accepted Answer

A)  tariff. 
B)  quota. 
C)  government license. 
D)  patent. 
A)  tariff. 
B)  quota. 
C)  government license. 
D)  patent.

Exam 24: Monopoly

A monopolist maximizes profits by finding

A single supplier of a good or service for which there is no close substitute is referred to as a(n)

When a firm practices price discrimination, for each separate set of consumers it will determine the rate of output at which

The market structure in which there is a single supplier of a good or service for which there is no close substitute is

In a perfectly competitive market, if all firms face identical, constant marginal cost curves, then consumer surplus is

"Price discrimination is the same as price differentiation." Do you agree or disagree? Why?

Which is NOT a necessary condition for price discrimination to exist?

The monopolist faces a downward sloping demand curve, and maximizing profits requires the monopolist to

For a monopoly earning positive economic profits at the profit-maximizing output level, all of the following are true EXCEPT

-In the above figure, the break-even output and price is

In order to sell more output units, what must a monopoly do?

If it is NOT possible for a pharmaceutical drug maker to sell its generic cholesterol reducing drug along with some name brand cholesterol reducing drugs, we have an example of monopoly due to

"All monopolies operate with positive economic profits." Do you agree or disagree? Why?

Using a graph, show why marginal revenue is always less than price.

"The deadweight loss of a monopoly equals the monopoly firm's profits." Do you agree or disagree? Why?

Monopolies misallocate resources because

A monopolist produces in the elastic segment of its demand curve because when it lowers the price

Which of the following statements about a monopolist is FALSE?

-Refer to the above figure. Which of the following statements is TRUE?

A tax that is imposed on an imported good is called a

The Nature of Economics

Scarcity and the World of Trade-Offs

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