Question 1

For a monopolist, marginal revenue is

Accepted Answer

A)  positive when the demand effect is greater than the supply effect. 
B)  positive when the monopoly effect is greater than the competitive effect. 
C)  negative when the price effect is greater than the output effect. 
D)  negative when the output effect is greater than the price effect. 
A)  positive when the demand effect is greater than the supply effect. 
B)  positive when the monopoly effect is greater than the competitive effect. 
C)  negative when the price effect is greater than the output effect. 
D)  negative when the output effect is greater than the price effect.

Question 2

A monopolist maximizes profits by

Accepted Answer

A)  producing an output level where marginal revenue equals marginal cost. 
B)  charging a price equal to marginal revenue and marginal cost. 
C)  charging a price where marginal cost equals average total cost. 
D)  Both a and b are correct. 
A)  producing an output level where marginal revenue equals marginal cost. 
B)  charging a price equal to marginal revenue and marginal cost. 
C)  charging a price where marginal cost equals average total cost. 
D)  Both a and b are correct.

Question 3

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 marginal revenue from selling the 2nd pair of shoes?

Accepted Answer

A)  $140 
B)  $150 
C)  $160 
D)  $170 
A)  $140 
B)  $150 
C)  $160 
D)  $170

Question 4

Figure 15-21  
-Refer to Figure 15-21. What is the price and quantity for this natural monopolist under fair return pricing?

Accepted Answer

A)  A and J 
B)  E and J 
C)  F and K 
D)  H and L 
A)  A and J 
B)  E and J 
C)  F and K 
D)  H and L

Question 5

The social cost of a monopoly is equal to its

Accepted Answer

A)  economic profit. 
B)  fixed cost. 
C)  dead weight loss. 
D)  variable cost. 
A)  economic profit. 
B)  fixed cost. 
C)  dead weight loss. 
D)  variable cost.

Question 6

When deciding what price to charge consumers, the monopolist may choose to charge them different prices based on the customers'

Accepted Answer

A)  geographical location. 
B)  age. 
C)  income. 
D)  All of the above are correct. 
A)  geographical location. 
B)  age. 
C)  income. 
D)  All of the above are correct.

Question 7

Figure 15-24  
-Refer to Figure 15-24. Use the letters in the figure to identify the profit area for the single price monopolist.

Accepted Answer

The answer of Figure 15-24  
-Refer to Figure 15-24....

Question 8

Figure 15-21  
-Refer to Figure 15-21. What is the price and quantity for this natural monopolist under socially optimal pricing?

Accepted Answer

A)  A and J 
B)  E and J 
C)  F and K 
D)  H and L 
A)  A and J 
B)  E and J 
C)  F and K 
D)  H and L

Question 9

Monopoly pricing prevents some mutually beneficial trades from taking place. These unrealized, mutually beneficial trades are

Accepted Answer

A)  less of a concern for a monopoly than competitive market. 
B)  offset by the higher profits earned by a monopolist. 
C)  a function of the reduction in the quantity produced by a monopolist in comparison to a competitive market. 
D)  All of the above are correct. 
A)  less of a concern for a monopoly than competitive market. 
B)  offset by the higher profits earned by a monopolist. 
C)  a function of the reduction in the quantity produced by a monopolist in comparison to a competitive market. 
D)  All of the above are correct.

Question 10

If a monopolist's marginal costs increase by $1 for all levels of output, then the monopoly price will

Accepted Answer

A)  rise by $1. 
B)  rise by more than $1. 
C)  rise by less than $1. 
D)  not change, but profits will decrease. 
A)  rise by $1. 
B)  rise by more than $1. 
C)  rise by less than $1. 
D)  not change, but profits will decrease.

Question 11

The fundamental source of monopoly power is

Accepted Answer

A)  many buyers and sellers. 
B)  low fixed costs. 
C)  rising average total costs. 
D)  barriers to entry. 
A)  many buyers and sellers. 
B)  low fixed costs. 
C)  rising average total costs. 
D)  barriers to entry.

Question 12

Table 15-1
  
-Refer to Table 15-1. If the monopolist sells 8 units of its product, how much total revenue will it receive from the sale?

Accepted Answer

A)  $14 
B)  $40 
C)  $112 
D)  $164 
A)  $14 
B)  $40 
C)  $112 
D)  $164

Question 13

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 a natural monopoly.
Iii) PPCo would experience higher profits if it were government-run.

Accepted Answer

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

Question 14

Which of the following can defeat the profit-maximizing strategy of price discrimination?

Accepted Answer

A)  consumer surplus 
B)  deadweight loss 
C)  market power 
D)  arbitrage 
A)  consumer surplus 
B)  deadweight loss 
C)  market power 
D)  arbitrage

Question 15

When regulators use a marginal-cost pricing strategy to regulate a natural monopoly, the regulated monopoly

Accepted Answer

A)  will experience a loss. 
B)  will experience a price below average total cost. 
C)  may rely on a government subsidy to remain in business. 
D)  All of the above are correct. 
A)  will experience a loss. 
B)  will experience a price below average total cost. 
C)  may rely on a government subsidy to remain in business. 
D)  All of the above are correct.

Question 16

Figure 15-5  
-Refer to Figure 15-5. At the profit-maximizing level of output,

Accepted Answer

A)  marginal revenue is equal to P3. 
B)  marginal cost is equal to P3. 
C)  average revenue is equal to P2. 
D)  average total cost is equal to P6. 
A)  marginal revenue is equal to P3. 
B)  marginal cost is equal to P3. 
C)  average revenue is equal to P2. 
D)  average total cost is equal to P6.

Question 17

A benefit of a monopoly is

Accepted Answer

A)  efficient production. 
B)  decreasing long-run marginal costs. 
C)  profit that can be invested in research and development. 
D)  All of the above are correct. 
A)  efficient production. 
B)  decreasing long-run marginal costs. 
C)  profit that can be invested in research and development. 
D)  All of the above are correct.

Question 18

With perfect price discrimination the monopoly

Accepted Answer

A)  eliminates all price discrimination by charging each customer the same price. 
B)  charges each customer an amount equal to the monopolist's marginal cost of production. 
C)  eliminates deadweight loss. 
D)  eliminates profits and increases consumer surplus. 
A)  eliminates all price discrimination by charging each customer the same price. 
B)  charges each customer an amount equal to the monopolist's marginal cost of production. 
C)  eliminates deadweight loss. 
D)  eliminates profits and increases consumer surplus.

Question 19

Which of the following statements is true about patents and copyrights? i) They have benefits and costs.
Ii) They lead to higher prices.
Iii) They enhance the ability of monopolists to earn above-average profits.

Accepted Answer

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

Question 20

In theory, perfect price discrimination

Accepted Answer

A)  decreases the monopolist's profits. 
B)  decreases consumer surplus. 
C)  increases deadweight loss. 
D)  reduces the number of consumers who purchase the monopoly's product. 
A)  decreases the monopolist's profits. 
B)  decreases consumer surplus. 
C)  increases deadweight loss. 
D)  reduces the number of consumers who purchase the monopoly's product.

Exam 14: Monopoly

For a monopolist, marginal revenue is

A monopolist maximizes profits by

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 marginal revenue from selling the 2nd pair of shoes?

Figure 15-21 -Refer to Figure 15-21. What is the price and quantity for this natural monopolist under fair return pricing?

The social cost of a monopoly is equal to its

When deciding what price to charge consumers, the monopolist may choose to charge them different prices based on the customers'

Figure 15-24 -Refer to Figure 15-24. Use the letters in the figure to identify the profit area for the single price monopolist.

Figure 15-21 -Refer to Figure 15-21. What is the price and quantity for this natural monopolist under socially optimal pricing?

Monopoly pricing prevents some mutually beneficial trades from taking place. These unrealized, mutually beneficial trades are

If a monopolist's marginal costs increase by $1 for all levels of output, then the monopoly price will

The fundamental source of monopoly power is

Table 15-1 -Refer to Table 15-1. If the monopolist sells 8 units of its product, how much total revenue will it receive from the sale?

Which of the following can defeat the profit-maximizing strategy of price discrimination?

When regulators use a marginal-cost pricing strategy to regulate a natural monopoly, the regulated monopoly

Figure 15-5 -Refer to Figure 15-5. At the profit-maximizing level of output,

A benefit of a monopoly is

With perfect price discrimination the monopoly

Which of the following statements is true about patents and copyrights? i) They have benefits and costs. Ii) They lead to higher prices. Iii) They enhance the ability of monopolists to earn above-average profits.

In theory, perfect price discrimination

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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