Question 1

Which of the following is an example of public ownership of a monopoly?

Accepted Answer

A)  DeBeers 
B)  Microsoft 
C)  U.S. Postal Service 
D)  AT&T 
A)  DeBeers 
B)  Microsoft 
C)  U.S. Postal Service 
D)  AT&T

Question 2

Table 15-6
A monopolist faces the following demand curve:
  
-Refer to Table 15-6. If the monopolist has a constant marginal cost for her product equal to $7, what is her profit- maximizing price?

Accepted Answer

A)  $6 
B)  $9 
C)  $12 
D)  $15 
A)  $6 
B)  $9 
C)  $12 
D)  $15

Question 3

Figure 15-16  
-Refer to Figure 15-16. Which triangle represents the monopoly deadweight loss?

Accepted Answer

A)  the triangle with vertical lines that is bordered by ACT 
B)  the triangle with vertical lines and light grey shading that is bordered by ABH 
C)  the triangle with vertical lines and dark grey shading that is bordered by HIT 
D)  the triangle with dark grey shading that is bordered by HKT 
A)  the triangle with vertical lines that is bordered by ACT 
B)  the triangle with vertical lines and light grey shading that is bordered by ABH 
C)  the triangle with vertical lines and dark grey shading that is bordered by HIT 
D)  the triangle with dark grey shading that is bordered by HKT

Question 4

Marginal revenue can become negative for

Accepted Answer

A)  both competitive and monopoly firms. 
B)  competitive firms but not for monopoly firms. 
C)  monopoly firms but not for competitive firms. 
D)  neither competitive nor monopoly firms. 
A)  both competitive and monopoly firms. 
B)  competitive firms but not for monopoly firms. 
C)  monopoly firms but not for competitive firms. 
D)  neither competitive nor monopoly firms.

Question 5

What is the defining characteristic of a natural monopoly? Give an example of a natural monopoly.

Accepted Answer

The defining characteristic of

Question 6

When a monopolist increases the number of units it sells, there are two effects on revenue. They are the

Accepted Answer

A)  demand effect and the supply effect. 
B)  competition effect and the cost effect. 
C)  competitive effect and the monopoly effect. 
D)  output effect and the price effect. 
A)  demand effect and the supply effect. 
B)  competition effect and the cost effect. 
C)  competitive effect and the monopoly effect. 
D)  output effect and the price effect.

Question 7

The deadweight loss for a monopolist equals one-half of its profits for any given level of output.

Accepted Answer

A) True 
 B)False

Question 8

Scenario 15-7
Black Box Cable TV is able to purchase an exclusive right to sell a premium movie channel PMC) in its market area. Let's assume that Black Box Cable pays $150,000 a year for the exclusive marketing rights to PMC. Since Black Box has already installed cable to all of the homes in its market area, the marginal cost of delivering PMC to subscribers is zero. The manager of Black Box needs to know what price to charge for the PMC service to maximize her profit. Before setting price, she hires an economist to estimate demand for the PMC service. The economist discovers that there are two types of subscribers who value premium movie channels. First are the 4,000 die-hard TV viewers who will pay as much as $150 a year for the new PMC premium channel. Second, the PMC channel will appeal to 20,000 occasional TV viewers who will pay as much as $20 a year for a subscription to PMC.
-Refer to Scenario 15-7. What is the deadweight loss associated with the nondiscriminating pricing policy compared to the price discriminating policy?

Accepted Answer

A)  $375,000 
B)  $400,000 
C)  $475,000 
D)  It cannot be determined from the information provided. 
A)  $375,000 
B)  $400,000 
C)  $475,000 
D)  It cannot be determined from the information provided.

Question 9

Table 15-22
  
-Refer to Table 15-22. The marginal revenue, when the quantity changes from 30 to 40 units, is

Accepted Answer

The answer of Table 15-22
  
-Refer to Table 15-22....

Question 10

Table 15-21
Tommy's Tie Company, a monopolist, has the following cost and revenue information. Assume that Tommy's is
able to engage in perfect price discrimination.
  
-Refer to Table 15-21. If the monopolist can engage in perfect price discrimination, what is total profit at the profit-maximizing quantity?

Accepted Answer

A)  $325 
B)  $435 
C)  $565 
D)  $1000 
A)  $325 
B)  $435 
C)  $565 
D)  $1000

Question 11

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

Accepted Answer

A)  must lie entirely above the average total cost curve. 
B)  must lie entirely below the average total cost curve. 
C)  must be upward sloping. 
D)  does not exist. 
A)  must lie entirely above the average total cost curve. 
B)  must lie entirely below the average total cost curve. 
C)  must be upward sloping. 
D)  does not exist.

Question 12

When a monopoly increases its output and sales,

Accepted Answer

A)  both the output effect and the price effect work to increase total revenue. 
B)  the output effect works to increase total revenue, and the price effect works to decrease total revenue. 
C)  the output effect works to decrease total revenue, and the price effect works to increase total revenue. 
D)  both the output effect and the price effect work to decrease total revenue. 
A)  both the output effect and the price effect work to increase total revenue. 
B)  the output effect works to increase total revenue, and the price effect works to decrease total revenue. 
C)  the output effect works to decrease total revenue, and the price effect works to increase total revenue. 
D)  both the output effect and the price effect work to decrease total revenue.

Question 13

Figure 15-23  
-Refer to Figure 15-23. If a regulator requires the firm to charge a marginal cost price, what price will the firm charge?

Accepted Answer

The answer of Figure 15-23  
-Refer to Figure 15-23....

Question 14

Table 15-2
Tanya has the following demand curve for selling taffy. Assume that Tanya has a marginal cost of $3 per unit.
  
-Refer to Table 15-2. What is Tanya's profit-maximizing level of output?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 15

For a monopolist, when the price effect is greater than the output effect, marginal revenue is

Accepted Answer

A)  positive. 
B)  negative. 
C)  zero. 
D)  maximized. 
A)  positive. 
B)  negative. 
C)  zero. 
D)  maximized.

Question 16

Suppose most people regard emeralds, rubies, and sapphires as close substitutes for diamonds. Then DeBeers, a large diamond company, has

Accepted Answer

A)  less incentive to advertise than it would otherwise have. 
B)  less market power than it would otherwise have. 
C)  more control over the price of diamonds than it would otherwise have. 
D)  higher profits than it would otherwise have. 
A)  less incentive to advertise than it would otherwise have. 
B)  less market power than it would otherwise have. 
C)  more control over the price of diamonds than it would otherwise have. 
D)  higher profits than it would otherwise have.

Question 17

Table 15-3
Consider the following demand and cost information for a monopoly.
  
-Refer to Table 15-3. To maximize profit, the monopolist sets price at

Accepted Answer

A)  $10. 
B)  $15. 
C)  $20. 
D)  $25. 
A)  $10. 
B)  $15. 
C)  $20. 
D)  $25.

Question 18

Which of the following would be most likely to have monopoly power?

Accepted Answer

A)  a long-distance telephone service provider 
B)  a local cable TV provider 
C)  a large department store 
D)  a gas station 
A)  a long-distance telephone service provider 
B)  a local cable TV provider 
C)  a large department store 
D)  a gas station

Question 19

Patent and copyright laws

Accepted Answer

A)  encourage creative activity. 
B)  promote competition among firms. 
C)  discourage creative activity. 
D)  Both a and b are correct. 
A)  encourage creative activity. 
B)  promote competition among firms. 
C)  discourage creative activity. 
D)  Both a and b are correct.

Question 20

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 price?

Accepted Answer

A)  $4 
B)  $39 
C)  $36 
D)  $42 
A)  $4 
B)  $39 
C)  $36 
D)  $42

Exam 14: Monopoly

Which of the following is an example of public ownership of a monopoly?

Table 15-6 A monopolist faces the following demand curve: -Refer to Table 15-6. If the monopolist has a constant marginal cost for her product equal to $7, what is her profit- maximizing price?

Figure 15-16 -Refer to Figure 15-16. Which triangle represents the monopoly deadweight loss?

Marginal revenue can become negative for

What is the defining characteristic of a natural monopoly? Give an example of a natural monopoly.

When a monopolist increases the number of units it sells, there are two effects on revenue. They are the

The deadweight loss for a monopolist equals one-half of its profits for any given level of output.

Table 15-22 -Refer to Table 15-22. The marginal revenue, when the quantity changes from 30 to 40 units, is

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

When a monopoly increases its output and sales,

Figure 15-23 -Refer to Figure 15-23. If a regulator requires the firm to charge a marginal cost price, what price will the firm charge?

Table 15-2 Tanya has the following demand curve for selling taffy. Assume that Tanya has a marginal cost of $3 per unit. -Refer to Table 15-2. What is Tanya's profit-maximizing level of output?

For a monopolist, when the price effect is greater than the output effect, marginal revenue is

Suppose most people regard emeralds, rubies, and sapphires as close substitutes for diamonds. Then DeBeers, a large diamond company, has

Table 15-3 Consider the following demand and cost information for a monopoly. -Refer to Table 15-3. To maximize profit, the monopolist sets price at

Which of the following would be most likely to have monopoly power?

Patent and copyright laws

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 price?

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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