Question 1

If the price elasticity of demand for U.S. automobiles is higher in Europe than it is in China, and transport costs are zero, a price-discriminating monopolist would charge

Accepted Answer

A)  the same price for autos in China as in Europe. 
B)  a lower price for autos in China than in Europe. 
C)  a higher price for autos in China than in Europe. 
D)  a less profitable price for autos in China than in Europe. 
A)  the same price for autos in China as in Europe. 
B)  a lower price for autos in China than in Europe. 
C)  a higher price for autos in China than in Europe. 
D)  a less profitable price for autos in China than in Europe.

Question 2

A firm will practice price discrimination when it believes that by doing so it will be able to increase total

Accepted Answer

A)  sales. 
B)  revenue. 
C)  profits. 
D)  production. 
A)  sales. 
B)  revenue. 
C)  profits. 
D)  production.

Question 3

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

Accepted Answer

A)  zero. 
B)  Q1. 
C)  Q2. 
D)  Q3. 
A)  zero. 
B)  Q1. 
C)  Q2. 
D)  Q3.

Question 4

When grocery stores issue special discount membership cards for shoppers effectively offering different prices based on quantities consumed, this is an example of

Accepted Answer

A)  price discrimination. 
B)  price differentiation. 
C)  product differentiation. 
D)  patent protection. 
A)  price discrimination. 
B)  price differentiation. 
C)  product differentiation. 
D)  patent protection.

Question 5

The conclusion that a monopoly results in lower output and higher prices than perfect competition relies on the assumption that

Accepted Answer

A)  the demand curve for a monopoly is horizontal. 
B)  consumers are ignorant of the effects of monopoly. 
C)  the costs of production are the same whether the industry is perfectly competitive or a monopoly. 
D)  elasticity of demand varies along the market demand curve. 
A)  the demand curve for a monopoly is horizontal. 
B)  consumers are ignorant of the effects of monopoly. 
C)  the costs of production are the same whether the industry is perfectly competitive or a monopoly. 
D)  elasticity of demand varies along the market demand curve.

Question 6

For the monopolist, marginal revenue is

Accepted Answer

A)  equal to price. 
B)  less than average revenue since price must be lowered to sell additional units. 
C)  greater than price. 
D)  not a consideration in the firm's pricing. 
A)  equal to price. 
B)  less than average revenue since price must be lowered to sell additional units. 
C)  greater than price. 
D)  not a consideration in the firm's pricing.

Question 7

If a firm sells 10 units of output at $100 per unit and 11 units of output when price is reduced to $99, its marginal revenue for the last unit sold is

Accepted Answer

A)  $1. 
B)  $10. 
C)  $109. 
D)  $89. 
A)  $1. 
B)  $10. 
C)  $109. 
D)  $89.

Question 8

Compared to a monopolist, the demand curve for a perfectly competitive firm will be

Accepted Answer

A)  as elastic. 
B)  more elastic. 
C)  less elastic. 
D)  perfectly elastic. 
A)  as elastic. 
B)  more elastic. 
C)  less elastic. 
D)  perfectly elastic.

Question 9

A barrier to entry is

Accepted Answer

A)  a term used to explain why monopolies always make economic profits. 
B)  a restriction on the profits that a monopoly can make. 
C)  the situation when the government produces a good instead of relying on private firms to produce the good. 
D)  a restriction on starting a business. 
A)  a term used to explain why monopolies always make economic profits. 
B)  a restriction on the profits that a monopoly can make. 
C)  the situation when the government produces a good instead of relying on private firms to produce the good. 
D)  a restriction on starting a business.

Question 10

A patent protects an inventor's creation from being copied or stolen for a period of

Accepted Answer

A)  10 years. 
B)  20 years. 
C)  30 years. 
D)  50 years. 
A)  10 years. 
B)  20 years. 
C)  30 years. 
D)  50 years.

Question 11

-Use the above figure. Total cost at the profit-maximizing output is closet to

Accepted Answer

A)  $6,600. 
B)  $9,600. 
C)  $4,800. 
D)  $8,000. 
A)  $6,600. 
B)  $9,600. 
C)  $4,800. 
D)  $8,000.

Question 12

Governments and legislatures can erect barriers to entry. Which of the following would NOT be one of them?

Accepted Answer

A)  licenses 
B)  tariffs 
C)  patents 
D)  laws that ensure property rights 
A)  licenses 
B)  tariffs 
C)  patents 
D)  laws that ensure property rights

Question 13

From the date a U.S. patent is granted to a firm, it ceases to be a potential source of monopoly profits after

Accepted Answer

A)  20 years. 
B)  14 years. 
C)  10 years. 
D)  7 years. 
A)  20 years. 
B)  14 years. 
C)  10 years. 
D)  7 years.

Question 14

Which of the following is NOT necessary for price discrimination to occur?

Accepted Answer

A)  The firm must be able to separate the market into identifiable groups. 
B)  The firm must be selling a durable good. 
C)  The firm must have a downward sloping demand curve. 
D)  The firm has to be able to prevent resale of the product or service. 
A)  The firm must be able to separate the market into identifiable groups. 
B)  The firm must be selling a durable good. 
C)  The firm must have a downward sloping demand curve. 
D)  The firm has to be able to prevent resale of the product or service.

Question 15

Which of the following statements is FALSE?

Accepted Answer

A)  An unregulated, profit-maximizing monopolist will not operate in the inelastic portion of the demand curve. 
B)  The marginal revenue earned by a monopolist will always be less than the product's price. 
C)  Typically there are numerous very close substitutes for the product of a monopolist. 
D)  For a profit-maximizing monopolist, marginal revenue equals marginal cost. 
A)  An unregulated, profit-maximizing monopolist will not operate in the inelastic portion of the demand curve. 
B)  The marginal revenue earned by a monopolist will always be less than the product's price. 
C)  Typically there are numerous very close substitutes for the product of a monopolist. 
D)  For a profit-maximizing monopolist, marginal revenue equals marginal cost.

Question 16

If the price elasticity of demand for airline tickets is 1.4 for a leisure traveler and 0.7 for a business traveler, then a price-discriminating monopolist would charge

Accepted Answer

A)  a higher price for the business traveler than the leisure traveler. 
B)  the same price for both travelers. 
C)  a lower price for the business traveler than the leisure traveler. 
D)  a less profitable price for the business traveler than the leisure traveler. 
A)  a higher price for the business traveler than the leisure traveler. 
B)  the same price for both travelers. 
C)  a lower price for the business traveler than the leisure traveler. 
D)  a less profitable price for the business traveler than the leisure traveler.

Question 17

A monopoly which arises from significant economies of scale is referred to as a

Accepted Answer

A)  monopolistic competitor. 
B)  strategic resource monopoly. 
C)  natural monopoly. 
D)  patent monopoly. 
A)  monopolistic competitor. 
B)  strategic resource monopoly. 
C)  natural monopoly. 
D)  patent monopoly.

Question 18

When a monopolist sells the same product at different prices and the prices are related to cost differences, we have

Accepted Answer

A)  monopoly pricing. 
B)  marginal cost pricing. 
C)  price discrimination. 
D)  price differentiation. 
A)  monopoly pricing. 
B)  marginal cost pricing. 
C)  price discrimination. 
D)  price differentiation.

Question 19

An upscale fusion bistro in a small town charges higher prices for the same menu items at dinner time than at lunch time. Does the bistro necessarily practice price discrimination? Explain your answer.

Accepted Answer

The bistro practices price discriminatio

Question 20

-Refer to the above figure. Profits for this firm are

Accepted Answer

A)  negative. 
B)  zero. 
C)  positive. 
D)  undetermined without more information. 
A)  negative. 
B)  zero. 
C)  positive. 
D)  undetermined without more information.

Exam 24: Monopoly

If the price elasticity of demand for U.S. automobiles is higher in Europe than it is in China, and transport costs are zero, a price-discriminating monopolist would charge

A firm will practice price discrimination when it believes that by doing so it will be able to increase total

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

When grocery stores issue special discount membership cards for shoppers effectively offering different prices based on quantities consumed, this is an example of

The conclusion that a monopoly results in lower output and higher prices than perfect competition relies on the assumption that

For the monopolist, marginal revenue is

If a firm sells 10 units of output at $100 per unit and 11 units of output when price is reduced to $99, its marginal revenue for the last unit sold is

Compared to a monopolist, the demand curve for a perfectly competitive firm will be

A barrier to entry is

A patent protects an inventor's creation from being copied or stolen for a period of

-Use the above figure. Total cost at the profit-maximizing output is closet to

Governments and legislatures can erect barriers to entry. Which of the following would NOT be one of them?

From the date a U.S. patent is granted to a firm, it ceases to be a potential source of monopoly profits after

Which of the following is NOT necessary for price discrimination to occur?

Which of the following statements is FALSE?

If the price elasticity of demand for airline tickets is 1.4 for a leisure traveler and 0.7 for a business traveler, then a price-discriminating monopolist would charge

A monopoly which arises from significant economies of scale is referred to as a

When a monopolist sells the same product at different prices and the prices are related to cost differences, we have

An upscale fusion bistro in a small town charges higher prices for the same menu items at dinner time than at lunch time. Does the bistro necessarily practice price discrimination? Explain your answer.

-Refer to the above figure. Profits for this firm are

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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