Question 1

The price effect describes the situation when a monopolist lowers the price of output and, all else equal, total revenue

Accepted Answer

A)  increases. 
B)  decreases. 
C)  is unchanged. 
D)  is maximized. 
A)  increases. 
B)  decreases. 
C)  is unchanged. 
D)  is maximized.

Question 2

Which of the following statements is correct?

Accepted Answer

A)  Public ownership is preferred to regulation in order to minimize the deadweight losses associated with natural monopolies. 
B)  Antitrust laws are always the best way to limit monopoly power. 
C)  It is possible that the best approach to monopolies is for the government to do nothing. 
D)  Marginal-cost pricing requires a natural monopoly to earn zero economic profits. 
A)  Public ownership is preferred to regulation in order to minimize the deadweight losses associated with natural monopolies. 
B)  Antitrust laws are always the best way to limit monopoly power. 
C)  It is possible that the best approach to monopolies is for the government to do nothing. 
D)  Marginal-cost pricing requires a natural monopoly to earn zero economic profits.

Question 3

Comparing firms in perfectly competitive markets to monopoly firms, which produces more output?

Accepted Answer

perfectly

Question 4

Which of the following statements comparing monopoly with competition is correct?

Accepted Answer

A)  A monopolist produces a higher level of output and charges a lower price than a competitive firm would. 
B)  With perfect price discrimination, the total surplus under monopoly can be the same as under competition. 
C)  With or without price discrimination, the consumer surplus under monopoly is at least as large as it would be under competition. 
D)  The deadweight loss associated with monopoly is caused by the positive economic profits of the monopolist; competitive firms do not earn a positive economic profit so there is no deadweight loss under competition. 
A)  A monopolist produces a higher level of output and charges a lower price than a competitive firm would. 
B)  With perfect price discrimination, the total surplus under monopoly can be the same as under competition. 
C)  With or without price discrimination, the consumer surplus under monopoly is at least as large as it would be under competition. 
D)  The deadweight loss associated with monopoly is caused by the positive economic profits of the monopolist; competitive firms do not earn a positive economic profit so there is no deadweight loss under competition.

Question 5

Scenario 15-4
Suppose a monopolist has a demand curve that can be expressed as P=90-Q. The monopolist's marginal revenue curve can be expressed as MR=90-2Q. The monopolist has constant marginal costs and average total costs of $10.
-Refer to Scenario 15-4. The profit-maximizing monopolist will earn profits of

Accepted Answer

A)  $6,400. 
B)  $3,200. 
C)  $1,600. 
D)  $800. 
A)  $6,400. 
B)  $3,200. 
C)  $1,600. 
D)  $800.

Question 6

Table 15-4
A monopolist faces the following demand curve:
  
-Refer to Table 15-4. In order to maximize total revenues, the monopolist should produce

Accepted Answer

A)  5 units. 
B)  7.5 units. 
C)  10 units. 
D)  12.5 units. 
A)  5 units. 
B)  7.5 units. 
C)  10 units. 
D)  12.5 units.

Question 7

University financial aid can be viewed as a type of price discrimination.

Accepted Answer

A) True 
 B)False

Question 8

Table 15-7
Sally owns the only shoe store in town. She has the following cost and revenue information.
  
-Refer to Table 15-7. What is the total revenue from selling 6 pairs of shoes?

Accepted Answer

A)  $100 
B)  $600 
C)  $625 
D)  $660 
A)  $100 
B)  $600 
C)  $625 
D)  $660

Question 9

A monopolist produces an output level where marginal revenue equals marginal cost and charges a price where marginal cost equals average total cost.

Accepted Answer

A) True 
 B)False

Question 10

The DeBeers Company faces very little competition from other firms in the wholesale diamond market. Why isn't the price of the wholesale diamonds $10,000 per carat?

Accepted Answer

A)  because the government would not allow such a high price 
B)  because stockholders would not allow such a high price 
C)  because the company would sell so few copies that they would earn higher profits by selling at a lower price 
D)  All of the above are correct. 
A)  because the government would not allow such a high price 
B)  because stockholders would not allow such a high price 
C)  because the company would sell so few copies that they would earn higher profits by selling at a lower price 
D)  All of the above are correct.

Question 11

During the life of a drug patent, the monopoly pharmaceutical firm maximizes profit by producing the quantity at which marginal revenue equals marginal cost.

Accepted Answer

A) True 
 B)False

Question 12

When a local grocery store offers discount coupons in the Sunday paper it is most likely trying to

Accepted Answer

A)  reduce prices for all customers. 
B)  encourage literacy. 
C)  encourage arbitrage. 
D)  price discriminate. 
A)  reduce prices for all customers. 
B)  encourage literacy. 
C)  encourage arbitrage. 
D)  price discriminate.

Question 13

Customers who purchase an audio CD from Sally's Sounds are charged 20% more than customers who purchase the audio CD from the Sally's Sounds website. This is an example of

Accepted Answer

A)  perfect price discrimination. 
B)  price discrimination. 
C)  deadweight loss. 
D)  socially inefficient output. 
A)  perfect price discrimination. 
B)  price discrimination. 
C)  deadweight loss. 
D)  socially inefficient output.

Question 14

Graphically depict the deadweight loss caused by a monopoly. How is this similar to the deadweight loss from taxation?

Accepted Answer

A profit-maximizing monopolist will choo

Question 15

Table 15-5
A monopolist faces the following demand curve:
  
-Refer to Table 15-5. The monopolist has total fixed costs of $60 and has a constant marginal cost of $15. What is the profit-maximizing level of production?

Accepted Answer

A)  2 units 
B)  3 units 
C)  4 units 
D)  5 units 
A)  2 units 
B)  3 units 
C)  4 units 
D)  5 units

Question 16

A competitive firm

Accepted Answer

A)  and a monopolist are price takers. 
B)  and a monopolist are price makers. 
C)  is a price taker, whereas a monopolist is a price maker. 
D)  is a price maker, whereas a monopolist is a price taker. 
A)  and a monopolist are price takers. 
B)  and a monopolist are price makers. 
C)  is a price taker, whereas a monopolist is a price maker. 
D)  is a price maker, whereas a monopolist is a price taker.

Question 17

Marginal revenue for a monopolist is computed as

Accepted Answer

A)  average revenue divided by quantity sold. 
B)  average revenue times quantity divided by price. 
C)  total revenue divided by quantity sold. 
D)  change in total revenue per one unit increase in quantity sold. 
A)  average revenue divided by quantity sold. 
B)  average revenue times quantity divided by price. 
C)  total revenue divided by quantity sold. 
D)  change in total revenue per one unit increase in quantity sold.

Question 18

Like competitive firms, monopolies charge a price equal to marginal cost.

Accepted Answer

A) True 
 B)False

Question 19

Figure 15-19  
-Refer to Figure 15-19. If there are no fixed costs of production, monopoly profit without price discrimination equals

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 20

Scenario 15-3
A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $30, its average revenue is $60, and its average total cost is $34.
-Refer to Scenario 15-3. At Q = 500, the firm's marginal cost is

Accepted Answer

A)  less than $30. 
B)  $30. 
C)  $34. 
D)  greater than $34. 
A)  less than $30. 
B)  $30. 
C)  $34. 
D)  greater than $34.

Exam 14: Monopoly

The price effect describes the situation when a monopolist lowers the price of output and, all else equal, total revenue

Which of the following statements is correct?

Comparing firms in perfectly competitive markets to monopoly firms, which produces more output?

Which of the following statements comparing monopoly with competition is correct?

Table 15-4 A monopolist faces the following demand curve: -Refer to Table 15-4. In order to maximize total revenues, the monopolist should produce

University financial aid can be viewed as a type of price discrimination.

Table 15-7 Sally owns the only shoe store in town. She has the following cost and revenue information. -Refer to Table 15-7. What is the total revenue from selling 6 pairs of shoes?

A monopolist produces an output level where marginal revenue equals marginal cost and charges a price where marginal cost equals average total cost.

The DeBeers Company faces very little competition from other firms in the wholesale diamond market. Why isn't the price of the wholesale diamonds $10,000 per carat?

During the life of a drug patent, the monopoly pharmaceutical firm maximizes profit by producing the quantity at which marginal revenue equals marginal cost.

When a local grocery store offers discount coupons in the Sunday paper it is most likely trying to

Customers who purchase an audio CD from Sally's Sounds are charged 20% more than customers who purchase the audio CD from the Sally's Sounds website. This is an example of

Graphically depict the deadweight loss caused by a monopoly. How is this similar to the deadweight loss from taxation?

Table 15-5 A monopolist faces the following demand curve: -Refer to Table 15-5. The monopolist has total fixed costs of $60 and has a constant marginal cost of $15. What is the profit-maximizing level of production?

A competitive firm

Marginal revenue for a monopolist is computed as

Like competitive firms, monopolies charge a price equal to marginal cost.

Figure 15-19 -Refer to Figure 15-19. If there are no fixed costs of production, monopoly profit without price discrimination equals

Scenario 15-3 A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $30, its average revenue is $60, and its average total cost is $34. -Refer to Scenario 15-3. At Q = 500, the firm's marginal cost is

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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