Question 1

Which of the following statements is FALSE?

Accepted Answer

A)  Other things being equal, society's overall well-being is reduced when a perfectly competitive industry is monopolized. 
B)  When both a perfectly competitive industry and a monopolist face the same production costs and the same market demand curve,the monopolist offers a lower level of output for sale. 
C)  The profit-maximizing monopolist will always produce only along the inelastic portion of the demand curve, whereas equilibrium in a perfectly competitive industry always occurs along the elastic portion of the demand curve. 
D)  When both a perfectly competitive industry and a monopolist face the same production costs and the same market demand curve, the monopolist charges a higher price for its product than what would be charged in a perfectly competitive situation. 
A)  Other things being equal, society's overall well-being is reduced when a perfectly competitive industry is monopolized. 
B)  When both a perfectly competitive industry and a monopolist face the same production costs and the same market demand curve,the monopolist offers a lower level of output for sale. 
C)  The profit-maximizing monopolist will always produce only along the inelastic portion of the demand curve, whereas equilibrium in a perfectly competitive industry always occurs along the elastic portion of the demand curve. 
D)  When both a perfectly competitive industry and a monopolist face the same production costs and the same market demand curve, the monopolist charges a higher price for its product than what would be charged in a perfectly competitive situation.

Question 2

Assume that a monopoly is producing at a profit-maximizing output level. If the firm's total fixed costs decrease, the firm

Accepted Answer

A)  should lower its price. 
B)  should increase its price. 
C)  should continue to produce at the same level. 
D)  increase its output level. 
A)  should lower its price. 
B)  should increase its price. 
C)  should continue to produce at the same level. 
D)  increase its output level.

Question 3

A monopolist is producing at an output level at which MR = $9 and MC = $8. It could increase profits

Accepted Answer

A)  by increasing both output and price. 
B)  by reducing output and by increasing price. 
C)  by reducing both output and price. 
D)  by increasing output and by reducing price. 
A)  by increasing both output and price. 
B)  by reducing output and by increasing price. 
C)  by reducing both output and price. 
D)  by increasing output and by reducing price.

Question 4

Suppose that the profit maximizing level of output for the monopolist is 100 units, and ATC = $45.00; MC = $35.00; MR = $35.00; P = $60.00. What is the monopoly's profit?

Accepted Answer

A)  -$1000 
B)  $4500 
C)  $5000 
D)  $1500 
A)  -$1000 
B)  $4500 
C)  $5000 
D)  $1500

Question 5

All of the following are true about a monopolist EXCEPT

Accepted Answer

A)  the demand curve for its product is perfectly elastic. 
B)  it produces a product with no close substitutes. 
C)  its demand curve is the same as the market demand for the industry. 
D)  it is a single seller of a good or service. 
A)  the demand curve for its product is perfectly elastic. 
B)  it produces a product with no close substitutes. 
C)  its demand curve is the same as the market demand for the industry. 
D)  it is a single seller of a good or service.

Question 6

Legal or governmental restrictions that give monopolistic advantages to a firm include all of the following EXCEPT

Accepted Answer

A)  franchises. 
B)  environmental protection. 
C)  exclusive ownership of an unimportant resource. 
D)  patents. 
A)  franchises. 
B)  environmental protection. 
C)  exclusive ownership of an unimportant resource. 
D)  patents.

Question 7

For a firm to become a monopoly in an industry

Accepted Answer

A)  barriers to entry must exist. 
B)  the firm must charge higher prices than its competitors. 
C)  the firm must produce a product with the best quality. 
D)  the firm will engage in unfair practices to drive all competitors out of the market. 
A)  barriers to entry must exist. 
B)  the firm must charge higher prices than its competitors. 
C)  the firm must produce a product with the best quality. 
D)  the firm will engage in unfair practices to drive all competitors out of the market.

Question 8

The loss of economic benefits in society as a result of monopoly arises from

Accepted Answer

A)  the loss in consumer surplus. 
B)  the gain in consumer surplus. 
C)  the loss in producer surplus. 
D)  the gain in producer surplus. 
A)  the loss in consumer surplus. 
B)  the gain in consumer surplus. 
C)  the loss in producer surplus. 
D)  the gain in producer surplus.

Question 9

Barriers to entry might include all of the following EXCEPT

Accepted Answer

A)  patents and copyrights. 
B)  ownership of essential resources. 
C)  government franchise. 
D)  positive economic profits. 
A)  patents and copyrights. 
B)  ownership of essential resources. 
C)  government franchise. 
D)  positive economic profits.

Question 10

Which of the barriers to entry can last indefinitely and which are more likely to eventually erode such that a new entry can take place?

Accepted Answer

Barriers such as economies of scale and

Question 11

-In the above figure, what is total profit at the profit-maximizing point?

Accepted Answer

A)  $14 
B)  $56 
C)  $42 
D)  $70 
A)  $14 
B)  $56 
C)  $42 
D)  $70

Question 12

Economic inefficiency of a monopoly occurs because

Accepted Answer

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

Question 13

If a monopoly situation arises from a perfectly competitive market, the portion of producer surplus that increases in a monopoly is transferred from the perfectly competitive market's

Accepted Answer

A)  fixed cost. 
B)  long-run positive economic profit. 
C)  deadweight loss. 
D)  consumer surplus. 
A)  fixed cost. 
B)  long-run positive economic profit. 
C)  deadweight loss. 
D)  consumer surplus.

Question 14

The effect of a tariff

Accepted Answer

A)  is negligible since it applies to firms outside the nation. 
B)  can lead to economies of scale for firms inside the nation. 
C)  can lead to a monopoly when domestic firms become the sole suppliers inside the nation. 
D)  will be more beneficial to large firms than to small firms. 
A)  is negligible since it applies to firms outside the nation. 
B)  can lead to economies of scale for firms inside the nation. 
C)  can lead to a monopoly when domestic firms become the sole suppliers inside the nation. 
D)  will be more beneficial to large firms than to small firms.

Question 15

Explain how a monopolist can increase profits by price discriminating. What are the conditions necessary for price discrimination?

Accepted Answer

A monopolist can increase profits by pri

Question 16

Which of the following is LEAST likely to be able to regularly engage in price discrimination?

Accepted Answer

A)  a farmer 
B)  an airline 
C)  a university 
D)  a producer of copyrighted computer software 
A)  a farmer 
B)  an airline 
C)  a university 
D)  a producer of copyrighted computer software

Question 17

When a firm sells a given product at more than one price and the price difference is NOT caused by differences in cost then there is

Accepted Answer

A)  price discrimination. 
B)  price differentiation. 
C)  price demarcation. 
D)  price delineation. 
A)  price discrimination. 
B)  price differentiation. 
C)  price demarcation. 
D)  price delineation.

Question 18

A monopolist finds the price-output combination that maximizes its profits by

Accepted Answer

A)  equating total revenue and total cost. 
B)  equating marginal revenue and marginal cost. 
C)  finding the combination for which the difference between marginal revenue and marginal cost is the greatest. 
D)  equating price and marginal cost. 
A)  equating total revenue and total cost. 
B)  equating marginal revenue and marginal cost. 
C)  finding the combination for which the difference between marginal revenue and marginal cost is the greatest. 
D)  equating price and marginal cost.

Question 19

Which of the following conditions is TRUE for both the perfectly competitive firm and the monopoly at the profit-maximizing output level?

Accepted Answer

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

Question 20

Suppose that the profit maximizing level of output for the monopolist is 10 units, and price = $50, ATC = $35, and AVC = $25. What is the monopoly's profit?

Accepted Answer

A)  $50 
B)  $150 
C)  $250 
D)  $500 
A)  $50 
B)  $150 
C)  $250 
D)  $500

Exam 24: Monopoly

Which of the following statements is FALSE?

Assume that a monopoly is producing at a profit-maximizing output level. If the firm's total fixed costs decrease, the firm

A monopolist is producing at an output level at which MR = $9 and MC = $8. It could increase profits

Suppose that the profit maximizing level of output for the monopolist is 100 units, and ATC = $45.00; MC = $35.00; MR = $35.00; P = $60.00. What is the monopoly's profit?

All of the following are true about a monopolist EXCEPT

Legal or governmental restrictions that give monopolistic advantages to a firm include all of the following EXCEPT

For a firm to become a monopoly in an industry

The loss of economic benefits in society as a result of monopoly arises from

Barriers to entry might include all of the following EXCEPT

Which of the barriers to entry can last indefinitely and which are more likely to eventually erode such that a new entry can take place?

-In the above figure, what is total profit at the profit-maximizing point?

Economic inefficiency of a monopoly occurs because

If a monopoly situation arises from a perfectly competitive market, the portion of producer surplus that increases in a monopoly is transferred from the perfectly competitive market's

The effect of a tariff

Explain how a monopolist can increase profits by price discriminating. What are the conditions necessary for price discrimination?

Which of the following is LEAST likely to be able to regularly engage in price discrimination?

When a firm sells a given product at more than one price and the price difference is NOT caused by differences in cost then there is

A monopolist finds the price-output combination that maximizes its profits by

Which of the following conditions is TRUE for both the perfectly competitive firm and the monopoly at the profit-maximizing output level?

Suppose that the profit maximizing level of output for the monopolist is 10 units, and price = $50, ATC = $35, and AVC = $25. What is the monopoly's profit?

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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