Question 1

Figure 15-18  
-Refer to Figure 15-18. If the monopoly firm is not allowed to price discriminate, then consumer surplus amounts to

Accepted Answer

A)  $1,000. 
B)  $2,000. 
C)  $3,000. 
D)  $4,000. 
A)  $1,000. 
B)  $2,000. 
C)  $3,000. 
D)  $4,000. A

Question 2

One problem with government operation of monopolies is that

Accepted Answer

A)  a benevolent government is likely to be interested in generating profits for political gain. 
B)  monopolies typically have rising average costs. 
C)  the government typically has little incentive to reduce costs. 
D)  a government-regulated outcome will increase the profitability of the monopoly. 
A)  a benevolent government is likely to be interested in generating profits for political gain. 
B)  monopolies typically have rising average costs. 
C)  the government typically has little incentive to reduce costs. 
D)  a government-regulated outcome will increase the profitability of the monopoly. C

Question 3

Scenario 15-2
Consider a local, privately-owned electrical cooperative named Poweshiek Power Company PPCo). PPCo has just completed a clean-coal-burning electrical power plant in Iowa. Currently, PPCo can meet the electricity needs of all residents in the county. In fact, its capacity far exceeds the needs of the county. After just a few years of operation, the shareholders of PPCo experienced incredibly high rates of return on their investment due to the profitability of the corporation.
-Refer to Scenario 15-2. Which of the following statements is most likely to be true? i) New entrants to the market know they will have a smaller market share than PPCo currently has.
Ii) PPCo is most likely experiencing rising marginal cost.
Iii) PPCo is a natural monopoly.
Iv) PPCo is most likely experiencing declining average total cost.

Accepted Answer

A)  i) and ii) only 
B)  i), ii), and iii) only 
C)  i), iii) and iv) only 
D)  i), ii), iii), and iv) 
A)  i) and ii) only 
B)  i), ii), and iii) only 
C)  i), iii) and iv) only 
D)  i), ii), iii), and iv) C

Question 4

When a monopolist increases the amount of output that it produces and sells, average revenue

Accepted Answer

A)  increases, and marginal revenue increases. 
B)  increases, and marginal revenue decreases. 
C)  decreases, and marginal revenue increases. 
D)  decreases, and marginal revenue decreases. 
A)  increases, and marginal revenue increases. 
B)  increases, and marginal revenue decreases. 
C)  decreases, and marginal revenue increases. 
D)  decreases, and marginal revenue decreases.

Question 5

Figure 15-19  
-Refer to Figure 15-19. If the monopoly firm perfectly price discriminates, then consumer surplus amounts to

Accepted Answer

A)  $0. 
B)  $1,562.50. 
C)  $3,125. 
D)  $6,250. 
A)  $0. 
B)  $1,562.50. 
C)  $3,125. 
D)  $6,250.

Question 6

The defining characteristic of a natural monopoly is

Accepted Answer

A)  constant marginal cost over the relevant range of output. 
B)  economies of scale over the relevant range of output. 
C)  constant returns to scale over the relevant range of output. 
D)  diseconomies of scale over the relevant range of output. 
A)  constant marginal cost over the relevant range of output. 
B)  economies of scale over the relevant range of output. 
C)  constant returns to scale over the relevant range of output. 
D)  diseconomies of scale over the relevant range of output.

Question 7

Private ownership of a monopoly may benefit society because the monopoly will have an incentive to

Accepted Answer

A)  charge a price that is consistent with that of a benevolent social planner. 
B)  charge a price that prevents some people from buying. 
C)  price its good according to the intersection of marginal cost and average revenue. 
D)  lower its costs to earn a higher profit. 
A)  charge a price that is consistent with that of a benevolent social planner. 
B)  charge a price that prevents some people from buying. 
C)  price its good according to the intersection of marginal cost and average revenue. 
D)  lower its costs to earn a higher profit.

Question 8

Table 15-13
The following table gives information on the price, quantity, and total cost of production for a monopolist.
  
-Refer to Table 15-13. How much profit will the firm earn at the profit-maximizing price?

Accepted Answer

A)  $9 
B)  $12 
C)  $15 
D)  $18 
A)  $9 
B)  $12 
C)  $15 
D)  $18

Question 9

In many countries, the government chooses to "internalize" the monopoly by owning monopoly providers of goods and services. In some cases these firms are "nationalized," and the government actually buys or confiscates firms that operate in monopoly markets). What would be the advantages and disadvantages of such an approach to ensure that the "best interest of society" is promoted in these markets? Explain your answer.

Accepted Answer

As long as the government "owner" pursue

Question 10

Table 15-18
A monopolist faces the following demand curve:
   Suppose marginal cost is constant at $8 per unit.
-Refer to Table 15-18. The monopolist's total revenue from selling 4 units of output is

Accepted Answer

A)  $4. 
B)  $16. 
C)  $32. 
D)  $48. 
A)  $4. 
B)  $16. 
C)  $32. 
D)  $48.

Question 11

In both perfectly competitive and monopoly markets, the price per unit of a good is equal to the _______

Accepted Answer

The answer of In both perfectly competitive and monopoly markets,...

Question 12

Figure 15-9  
-Refer to Figure 15-9. To maximize total surplus, a benevolent social planner would choose which of the following outcomes?

Accepted Answer

A)  100 units of output and a price of $20 per unit 
B)  150 units of output and a price of $20 per unit 
C)  150 units of output and a price of $30 per unit 
D)  200 units of output and a price of $20 per unit 
A)  100 units of output and a price of $20 per unit 
B)  150 units of output and a price of $20 per unit 
C)  150 units of output and a price of $30 per unit 
D)  200 units of output and a price of $20 per unit

Question 13

Comparing firms in perfectly competitive markets to monopoly firms, which charges a price equal to marginal cost?

Accepted Answer

perfectly

Question 14

Figure 15-17  
-Refer to Figure 15-17. Which of the following areas represents the deadweight loss from this profit-maximizing monopolist?

Accepted Answer

A)  ABE 
B)  BCFE 
C)  EFG 
D)  ACG 
A)  ABE 
B)  BCFE 
C)  EFG 
D)  ACG

Question 15

Figure 15-1  
-Refer to Figure 15-1. Considering the relationship between average total cost and marginal cost, the marginal cost curve for this firm must

Accepted Answer

A)  lie entirely above the average total cost curve. 
B)  lie entirely below the average total cost curve. 
C)  be U-shaped. 
D)  be horizontal. 
A)  lie entirely above the average total cost curve. 
B)  lie entirely below the average total cost curve. 
C)  be U-shaped. 
D)  be horizontal.

Question 16

An industry is a natural monopoly when i) the government assists the firm in maintaining the monopoly.
Ii) a single firm owns a key resource.
Iii) a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms.

Accepted Answer

A)  ii) only 
B)  iii) only 
C)  i) and ii) only 
D)  ii) and iii) only 
A)  ii) only 
B)  iii) only 
C)  i) and ii) only 
D)  ii) and iii) only

Question 17

If a monopolist has zero marginal costs, it will produce

Accepted Answer

A)  the output at which total revenue is maximized. 
B)  in the range in which marginal revenue is still increasing. 
C)  at the point at which marginal revenue is at a maximum. 
D)  in the range in which marginal revenue is negative. 
A)  the output at which total revenue is maximized. 
B)  in the range in which marginal revenue is still increasing. 
C)  at the point at which marginal revenue is at a maximum. 
D)  in the range in which marginal revenue is negative.

Question 18

Which of the following statements is correct? Monopolies are socially inefficient because they i) charge a price above marginal cost.
Ii) produce too little output.
Iii) earn profits at the expense of consumers.
Iv) maximize the market's total surplus.

Accepted Answer

A)  iii) only 
B)  iii) and iv) only 
C)  i) and ii) only 
D)  i), ii), iii), and iv) 
A)  iii) only 
B)  iii) and iv) only 
C)  i) and ii) only 
D)  i), ii), iii), and iv)

Question 19

Because monopoly firms do not have to compete with other firms, the outcome in a market with a monopoly is often

Accepted Answer

A)  not in the best interest of society. 
B)  one that fails to maximize total economic well-being. 
C)  inefficient. 
D)  All of the above are correct. 
A)  not in the best interest of society. 
B)  one that fails to maximize total economic well-being. 
C)  inefficient. 
D)  All of the above are correct.

Question 20

Table 15-6
A monopolist faces the following demand curve:
  
-Refer to Table 15-6. What is the marginal revenue from the sale of the 2nd unit?

Accepted Answer

A)  $3 
B) $2 
C) $9 
D) $24 
A)  $3 
B) $2 
C) $9 
D) $24

Exam 14: Monopoly

Figure 15-18 -Refer to Figure 15-18. If the monopoly firm is not allowed to price discriminate, then consumer surplus amounts to

One problem with government operation of monopolies is that

When a monopolist increases the amount of output that it produces and sells, average revenue

Figure 15-19 -Refer to Figure 15-19. If the monopoly firm perfectly price discriminates, then consumer surplus amounts to

The defining characteristic of a natural monopoly is

Private ownership of a monopoly may benefit society because the monopoly will have an incentive to

Table 15-13 The following table gives information on the price, quantity, and total cost of production for a monopolist. -Refer to Table 15-13. How much profit will the firm earn at the profit-maximizing price?

Table 15-18 A monopolist faces the following demand curve: Suppose marginal cost is constant at $8 per unit. -Refer to Table 15-18. The monopolist's total revenue from selling 4 units of output is

In both perfectly competitive and monopoly markets, the price per unit of a good is equal to the _______

Figure 15-9 -Refer to Figure 15-9. To maximize total surplus, a benevolent social planner would choose which of the following outcomes?

Comparing firms in perfectly competitive markets to monopoly firms, which charges a price equal to marginal cost?

Figure 15-17 -Refer to Figure 15-17. Which of the following areas represents the deadweight loss from this profit-maximizing monopolist?

Figure 15-1 -Refer to Figure 15-1. Considering the relationship between average total cost and marginal cost, the marginal cost curve for this firm must

An industry is a natural monopoly when i) the government assists the firm in maintaining the monopoly. Ii) a single firm owns a key resource. Iii) a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms.

If a monopolist has zero marginal costs, it will produce

Which of the following statements is correct? Monopolies are socially inefficient because they i) charge a price above marginal cost. Ii) produce too little output. Iii) earn profits at the expense of consumers. Iv) maximize the market's total surplus.

Because monopoly firms do not have to compete with other firms, the outcome in a market with a monopoly is often

Table 15-6 A monopolist faces the following demand curve: -Refer to Table 15-6. What is the marginal revenue from the sale of the 2nd unit?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Costs of Production

Firms in Competitive Markets

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

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