Question 1

"A monopolist refers to any firm that is large in size." Do you agree or disagree? Why?

Accepted Answer

Disagree. A monopolist does no

Question 2

-According to the above figure, what are the profits of the firm if it produces 50,000 units?

Accepted Answer

A)  -$5,000 per day 
B)  -$10,000 per day 
C)  -$7,500 per day 
D)  -$17,500 per day 
A)  -$5,000 per day 
B)  -$10,000 per day 
C)  -$7,500 per day 
D)  -$17,500 per day

Question 3

Price discrimination is the

Accepted Answer

A)  refusal by a firm to sell to all customers. 
B)  selling of a given product at more than one price when the price differences reflect cost differences. 
C)  pricing of a product so that not everyone can afford it. 
D)  selling of a given product at more than one price when the price difference is unrelated to cost differences. 
A)  refusal by a firm to sell to all customers. 
B)  selling of a given product at more than one price when the price differences reflect cost differences. 
C)  pricing of a product so that not everyone can afford it. 
D)  selling of a given product at more than one price when the price difference is unrelated to cost differences.

Question 4

Which of the following will make price discrimination difficult for a monopolist?

Accepted Answer

A)  the possibility of resale of the product 
B)  a constant marginal cost curve 
C)  an increasing marginal cost 
D)  a downward sloping demand curve 
A)  the possibility of resale of the product 
B)  a constant marginal cost curve 
C)  an increasing marginal cost 
D)  a downward sloping demand curve

Question 5

Compared to an efficient perfectly competitive industry, the monopolist will

Accepted Answer

A)  produce less output at a higher total cost. 
B)  produce less output and charge a higher price. 
C)  produce more output at a higher price and higher profit. 
D)  produce more output at a lower price. 
A)  produce less output at a higher total cost. 
B)  produce less output and charge a higher price. 
C)  produce more output at a higher price and higher profit. 
D)  produce more output at a lower price.

Question 6

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

Accepted Answer

A)  government licenses. 
B)  persistent declining long-run average costs as output increases. 
C)  lowering tariffs. 
D)  governmental regulations of business conduct relating to workplace conditions. 
A)  government licenses. 
B)  persistent declining long-run average costs as output increases. 
C)  lowering tariffs. 
D)  governmental regulations of business conduct relating to workplace conditions.

Question 7

Which of the following is NOT true when there are large economies of scale such that one firm can produce at a lower average cost than can be achieved by multiple firms?

Accepted Answer

A)  This situation produces a natural monopoly. 
B)  Proportional increases in output yield proportionally small increases in total cost. 
C)  The long-run average cost curve of the firm will increase at a low level of output. 
D)  There will only be one firm in this industry. 
A)  This situation produces a natural monopoly. 
B)  Proportional increases in output yield proportionally small increases in total cost. 
C)  The long-run average cost curve of the firm will increase at a low level of output. 
D)  There will only be one firm in this industry.

Question 8

If a monopolist were to produce in the inelastic segment of its demand curve

Accepted Answer

A)  total revenue would be at a maximum. 
B)  total revenue would be at a minimum. 
C)  the firm would maximize profits. 
D)  a further drop in the price will change quantity demanded less than proportionately. 
A)  total revenue would be at a maximum. 
B)  total revenue would be at a minimum. 
C)  the firm would maximize profits. 
D)  a further drop in the price will change quantity demanded less than proportionately.

Question 9

Which of the following would most likely be classified as a natural monopoly?

Accepted Answer

A)  a city water district 
B)  Microsoft 
C)  Disneyland 
D)  Exxon-Mobil 
A)  a city water district 
B)  Microsoft 
C)  Disneyland 
D)  Exxon-Mobil

Question 10

If government regulations significantly increase the cost of operating within a particular market, one result is that

Accepted Answer

A)  new firms are discouraged from entering the market. 
B)  barriers to entry are nullified. 
C)  a perfectly competitive market environment is encouraged. 
D)  new firms are encouraged to enter the market. 
A)  new firms are discouraged from entering the market. 
B)  barriers to entry are nullified. 
C)  a perfectly competitive market environment is encouraged. 
D)  new firms are encouraged to enter the market.

Question 11

When the marginal cost curve of the monopolist shifts upward, there will be

Accepted Answer

A)  an increase in both price and quantity. 
B)  an increase in price but a decrease in quantity. 
C)  a decrease in price and in marginal revenue. 
D)  a decrease in quantity and a decrease in marginal revenue. 
A)  an increase in both price and quantity. 
B)  an increase in price but a decrease in quantity. 
C)  a decrease in price and in marginal revenue. 
D)  a decrease in quantity and a decrease in marginal revenue.

Question 12

If the marginal cost curve of all identical firms in a perfectly competitive industry are horizontal at the same per-unit cost, then the market's consumer surplus equals the area

Accepted Answer

A)  beneath the demand curve and above the marginal cost curve. 
B)  above the demand curve and beneath the marginal cost curve. 
C)  below the marginal cost curve. 
D)  above the demand curve. 
A)  beneath the demand curve and above the marginal cost curve. 
B)  above the demand curve and beneath the marginal cost curve. 
C)  below the marginal cost curve. 
D)  above the demand curve.

Question 13

The monopolist's marginal revenue is less than price since

Accepted Answer

A)  additional units can only be sold if the price is lowered on all units sold. 
B)  the demand function is horizontal. 
C)  average revenue is also less than price. 
D)  average total cost is declining. 
A)  additional units can only be sold if the price is lowered on all units sold. 
B)  the demand function is horizontal. 
C)  average revenue is also less than price. 
D)  average total cost is declining.

Question 14

To sell more units, a monopolist

Accepted Answer

A)  simply moves across its horizontal demand curve to a larger quantity. 
B)  moves down its demand curve to a lower price that will increase quantity demand. 
C)  can continue to receive the same price it always has as long as it has its customers' goodwill. 
D)  must be willing to lower the barriers to entry that have protected it. 
A)  simply moves across its horizontal demand curve to a larger quantity. 
B)  moves down its demand curve to a lower price that will increase quantity demand. 
C)  can continue to receive the same price it always has as long as it has its customers' goodwill. 
D)  must be willing to lower the barriers to entry that have protected it.

Question 15

In what ways is government involved with the creation of barriers to entry?

Accepted Answer

The government often erects barriers to

Question 16

Which of the following is NOT a barrier to entry?

Accepted Answer

A)  patents 
B)  licenses 
C)  economies of scale 
D)  U.S. antitrust legislation 
A)  patents 
B)  licenses 
C)  economies of scale 
D)  U.S. antitrust legislation

Question 17

A firm typically achieves its position as a monopolist as a result of

Accepted Answer

A)  a small market and a constant average cost. 
B)  a downward sloping demand for the product. 
C)  barriers to entry. 
D)  the absence of long-run profits in an industry. 
A)  a small market and a constant average cost. 
B)  a downward sloping demand for the product. 
C)  barriers to entry. 
D)  the absence of long-run profits in an industry.

Question 18

-Refer to the above figure. The long-run average cost curve and the long-run marginal cost curves represent

Accepted Answer

A)  the cost curves for a competitive firm. 
B)  the cost curves for a natural monopoly. 
C)  a situation where a firm has control over the raw materials. 
D)  a situation where a firm has a patent. 
A)  the cost curves for a competitive firm. 
B)  the cost curves for a natural monopoly. 
C)  a situation where a firm has control over the raw materials. 
D)  a situation where a firm has a patent.

Question 19

Economic inefficiency exists when

Accepted Answer

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

Question 20

How does a monopoly maximize profits? What price does it charge?

Accepted Answer

A monopoly finds the rate of output at w

Exam 24: Monopoly

"A monopolist refers to any firm that is large in size." Do you agree or disagree? Why?

-According to the above figure, what are the profits of the firm if it produces 50,000 units?

Price discrimination is the

Which of the following will make price discrimination difficult for a monopolist?

Compared to an efficient perfectly competitive industry, the monopolist will

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

Which of the following is NOT true when there are large economies of scale such that one firm can produce at a lower average cost than can be achieved by multiple firms?

If a monopolist were to produce in the inelastic segment of its demand curve

Which of the following would most likely be classified as a natural monopoly?

If government regulations significantly increase the cost of operating within a particular market, one result is that

When the marginal cost curve of the monopolist shifts upward, there will be

If the marginal cost curve of all identical firms in a perfectly competitive industry are horizontal at the same per-unit cost, then the market's consumer surplus equals the area

The monopolist's marginal revenue is less than price since

To sell more units, a monopolist

In what ways is government involved with the creation of barriers to entry?

Which of the following is NOT a barrier to entry?

A firm typically achieves its position as a monopolist as a result of

-Refer to the above figure. The long-run average cost curve and the long-run marginal cost curves represent

Economic inefficiency exists when

How does a monopoly maximize profits? What price does it charge?

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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