Question 1

A monopolist is producing at an output level at which MR = $6 and MC = $9. 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 2

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

Accepted Answer

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

Question 3

Monopolies are inefficient because

Accepted Answer

A)  they price discriminate. 
B)  they maximize profits. 
C)  they always make above-normal profits. 
D)  they charge a price above marginal cost. 
A)  they price discriminate. 
B)  they maximize profits. 
C)  they always make above-normal profits. 
D)  they charge a price above marginal cost.

Question 4

Monopolies that price discriminate do so because

Accepted Answer

A)  they are able to do so and no one else can. 
B)  they can increase their profits. 
C)  it keeps them out of trouble with the government. 
D)  it is more efficient. 
A)  they are able to do so and no one else can. 
B)  they can increase their profits. 
C)  it keeps them out of trouble with the government. 
D)  it is more efficient.

Question 5

-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.

Question 6

-According to the above figure, the profit-maximizing output for this monopolist is found directly below the letter

Accepted Answer

A)  R. 
B)  M. 
C)  P. 
D)  N. 
A)  R. 
B)  M. 
C)  P. 
D)  N.

Question 7

What does the demand curve facing a monopoly look like? Why?

Accepted Answer

The demand curve facing a monopoly is do

Question 8

If a monopolist is producing the quantity at which marginal revenue equals marginal cost, it should

Accepted Answer

A)  continue to produce this amount if it wants to maximize profits. 
B)  reduce output if it wants to maximize profits. 
C)  increase price and keep output unchanged if it wants to maximize profits. 
D)  increase output if it wants to maximize profits. 
A)  continue to produce this amount if it wants to maximize profits. 
B)  reduce output if it wants to maximize profits. 
C)  increase price and keep output unchanged if it wants to maximize profits. 
D)  increase output if it wants to maximize profits.

Question 9

What is TRUE of the price elasticity of demand faced by a monopoly firm?

Accepted Answer

A)  Demand is inelastic. 
B)  Demand is more elastic at lower prices and more inelastic at higher prices. 
C)  Demand is perfectly elastic because the monopolist has no competition. 
D)  Demand becomes more elastic as the range of imperfect substitutes expands. 
A)  Demand is inelastic. 
B)  Demand is more elastic at lower prices and more inelastic at higher prices. 
C)  Demand is perfectly elastic because the monopolist has no competition. 
D)  Demand becomes more elastic as the range of imperfect substitutes expands.

Question 10

Considering the spectrum of market structures and moving from pure competition to pure monopoly we can say that

Accepted Answer

A)  entry barriers get lower but exit gets more difficult. 
B)  entry becomes harder but exit becomes easier. 
C)  entry gets harder and the number of firms dwindles. 
D)  none of the above. 
A)  entry barriers get lower but exit gets more difficult. 
B)  entry becomes harder but exit becomes easier. 
C)  entry gets harder and the number of firms dwindles. 
D)  none of the above.

Question 11

The social cost attached to monopolies is reflected by the fact that

Accepted Answer

A)  monopolies produce more output than consumers desire to buy. 
B)  consumers pay prices that exceed the marginal cost of production. 
C)  the demand for a monopolist's product is always lower than the demand for the products of perfectly competitive firms. 
D)  consumers are always willing to pay lower prices for a monopolist's product than for the products of perfectly competitive firms. 
A)  monopolies produce more output than consumers desire to buy. 
B)  consumers pay prices that exceed the marginal cost of production. 
C)  the demand for a monopolist's product is always lower than the demand for the products of perfectly competitive firms. 
D)  consumers are always willing to pay lower prices for a monopolist's product than for the products of perfectly competitive firms.

Question 12

Suppose a monopolist's costs and revenues are as follows: ATC = $50; MC = $40; MR = $45; P = $55. The firm should

Accepted Answer

A)  increase output and decrease price. 
B)  decrease output and increase price. 
C)  not change output or price. 
D)  shut down. 
A)  increase output and decrease price. 
B)  decrease output and increase price. 
C)  not change output or price. 
D)  shut down.

Question 13

-Refer to the above table. Given the demand and cost schedules, what is the profit-maximizing price for this monopolist?

Accepted Answer

A)  $3 
B)  $4 
C)  $6 
D)  $7 
A)  $3 
B)  $4 
C)  $6 
D)  $7

Question 14

A natural monopoly exists when

Accepted Answer

A)  the firm holds a patent. 
B)  there are governmental entry restrictions. 
C)  the firm owns all of the raw materials needed to produce the product. 
D)  economies of scale occur. 
A)  the firm holds a patent. 
B)  there are governmental entry restrictions. 
C)  the firm owns all of the raw materials needed to produce the product. 
D)  economies of scale occur.

Question 15

-Which of the following is a TRUE statement about a monopoly?

Accepted Answer

A)  A monopoly does not necessarily earn positive economic profits. 
B)  A monopoly must earn an above-normal profit to stay in business. 
C)  As long as there are barriers to entry, a monopoly can always find some price-output combination that generates positive economic profits. 
D)  As long as the demand curve slopes down, a monopoly can always find some price-output combination that generates positive economic profits. 
A)  A monopoly does not necessarily earn positive economic profits. 
B)  A monopoly must earn an above-normal profit to stay in business. 
C)  As long as there are barriers to entry, a monopoly can always find some price-output combination that generates positive economic profits. 
D)  As long as the demand curve slopes down, a monopoly can always find some price-output combination that generates positive economic profits.

Question 16

A monopolist faces a demand curve that

Accepted Answer

A)  is perfectly horizontal at the market price. 
B)  is below the marginal revenue curve. 
C)  is downward sloping. 
D)  coincides with the industry supply. 
A)  is perfectly horizontal at the market price. 
B)  is below the marginal revenue curve. 
C)  is downward sloping. 
D)  coincides with the industry supply.

Question 17

If a monopolist is producing the quantity at which price equals marginal cost, it should

Accepted Answer

A)  continue to produce this amount if it wants to maximize profits. 
B)  reduce output if it wants to maximize profits. 
C)  reduce price and keep output unchanged if it wants to maximize profits. 
D)  increase output if it wants to maximize profits. 
A)  continue to produce this amount if it wants to maximize profits. 
B)  reduce output if it wants to maximize profits. 
C)  reduce price and keep output unchanged if it wants to maximize profits. 
D)  increase output if it wants to maximize profits.

Question 18

Deadweight loss is

Accepted Answer

A)  the amount of taxes that consumers and monopolists pay. 
B)  the loss of output when a perfectly competitive firm becomes a monopolist. 
C)  a loss of benefit to consumers in a monopoly that no one else in society can obtain. 
D)  the price that consumers pay for a product in excess of the average cost of producing it. 
A)  the amount of taxes that consumers and monopolists pay. 
B)  the loss of output when a perfectly competitive firm becomes a monopolist. 
C)  a loss of benefit to consumers in a monopoly that no one else in society can obtain. 
D)  the price that consumers pay for a product in excess of the average cost of producing it.

Question 19

A price-discriminating monopolist with two markets will equate

Accepted Answer

A)  the prices of two markets. 
B)  price and marginal revenue in each of the two markets. 
C)  marginal revenue and marginal cost in each of the two markets. 
D)  average revenue and marginal revenue between the two markets. 
A)  the prices of two markets. 
B)  price and marginal revenue in each of the two markets. 
C)  marginal revenue and marginal cost in each of the two markets. 
D)  average revenue and marginal revenue between the two markets.

Question 20

If a monopolist wishes to increase its output and quantity sold

Accepted Answer

A)  it must reduce its price, so its marginal revenue is greater than its price. 
B)  it must reduce its price, so its marginal revenue is less than its price. 
C)  it must raise its price, so its marginal revenue is greater than its price. 
D)  it must raise its price, so its marginal revenue is less than its price. 
A)  it must reduce its price, so its marginal revenue is greater than its price. 
B)  it must reduce its price, so its marginal revenue is less than its price. 
C)  it must raise its price, so its marginal revenue is greater than its price. 
D)  it must raise its price, so its marginal revenue is less than its price.

Exam 24: Monopoly

A monopolist is producing at an output level at which MR = $6 and MC = $9. It could increase profits

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

Monopolies are inefficient because

Monopolies that price discriminate do so because

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

-According to the above figure, the profit-maximizing output for this monopolist is found directly below the letter

What does the demand curve facing a monopoly look like? Why?

If a monopolist is producing the quantity at which marginal revenue equals marginal cost, it should

What is TRUE of the price elasticity of demand faced by a monopoly firm?

Considering the spectrum of market structures and moving from pure competition to pure monopoly we can say that

The social cost attached to monopolies is reflected by the fact that

Suppose a monopolist's costs and revenues are as follows: ATC = $50; MC = $40; MR = $45; P = $55. The firm should

-Refer to the above table. Given the demand and cost schedules, what is the profit-maximizing price for this monopolist?

A natural monopoly exists when

-Which of the following is a TRUE statement about a monopoly?

A monopolist faces a demand curve that

If a monopolist is producing the quantity at which price equals marginal cost, it should

Deadweight loss is

A price-discriminating monopolist with two markets will equate

If a monopolist wishes to increase its output and quantity sold

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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