Question 1

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 total profit at the profit-maximizing quantity?

Accepted Answer

A)  $100 
B)  $245 
C)  $265 
D)  $395 
A)  $100 
B)  $245 
C)  $265 
D)  $395

Question 2

The government may choose to do nothing to reduce monopoly inefficiency because the "fix" may be worse than the problem.

Accepted Answer

A) True 
 B)False

Question 3

The profit that a monopolist earns represents a loss to society that is measured through deadweight loss.

Accepted Answer

A) True 
 B)False

Question 4

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. PPCo will continue to be a monopolist in the electricity industry only if

Accepted Answer

A)  population growth leads to an increased demand for electricity. 
B)  there are no new entrants to the market. 
C)  the price of natural gas decreases. 
D)  All of the above are correct. 
A)  population growth leads to an increased demand for electricity. 
B)  there are no new entrants to the market. 
C)  the price of natural gas decreases. 
D)  All of the above are correct.

Question 5

Declining average total cost with increased production is one of the defining characteristics of a natural monopoly.

Accepted Answer

A) True 
 B)False

Question 6

By selling hardcover books to die-hard fans and paperback books to less enthusiastic readers, the publisher is able to price discriminate and raise its profits.

Accepted Answer

A) True 
 B)False

Question 7

A natural monopolist's ability to price its product is

Accepted Answer

A)  constrained by the market demand curve. 
B)  constrained by market supply. 
C)  not affected by market demand. 
D)  enhanced by regulatory control of the government. 
A)  constrained by the market demand curve. 
B)  constrained by market supply. 
C)  not affected by market demand. 
D)  enhanced by regulatory control of the government.

Question 8

Airlines often separate their customers into business travelers and personal travelers by giving a discount to those travelers who stay over a Saturday night.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following statements is correct?

Accepted Answer

A)  Firms with some degree of monopoly power are common, but firms with substantial monopoly power are rare. 
B)  Firms with some degree of monopoly power are rare, as are firms with substantial monopoly power. 
C)  Firms with some degree of monopoly power are common, as are firms with substantial monopoly power. 
D)  Firms with some degree of monopoly power are rare, but firms with substantial monopoly power are common. 
A)  Firms with some degree of monopoly power are common, but firms with substantial monopoly power are rare. 
B)  Firms with some degree of monopoly power are rare, as are firms with substantial monopoly power. 
C)  Firms with some degree of monopoly power are common, as are firms with substantial monopoly power. 
D)  Firms with some degree of monopoly power are rare, but firms with substantial monopoly power are common.

Question 10

If the government regulates the price a natural monopolist can charge to be equal to the firm's marginal cost, the government will likely need to subsidize the firm.

Accepted Answer

A) True 
 B)False

Question 11

A perfectly competitive firm produces where

Accepted Answer

A)  marginal cost equals price, while a monopolist produces where price exceeds marginal cost. 
B)  marginal cost equals price, while a monopolist produces where marginal cost exceeds price. 
C)  price exceeds marginal cost, while a monopolist produces where marginal cost equals price. 
D)  marginal cost exceeds price, while a monopolist produces where marginal cost equals price. 
A)  marginal cost equals price, while a monopolist produces where price exceeds marginal cost. 
B)  marginal cost equals price, while a monopolist produces where marginal cost exceeds price. 
C)  price exceeds marginal cost, while a monopolist produces where marginal cost equals price. 
D)  marginal cost exceeds price, while a monopolist produces where marginal cost equals price.

Question 12

When we compare economic welfare in a monopoly market to a competitive market, the profits earned by the monopolist represent d. the higher marginal revenues gained by the monopolists in comparison to competitive firms.

Accepted Answer

A)  a transfer of benefits from the consumer to the producer. 
B)  a loss in total welfare. 
C)  the higher marginal costs incurred by the monopolists in comparison to competitive firms. 
A)  a transfer of benefits from the consumer to the producer. 
B)  a loss in total welfare. 
C)  the higher marginal costs incurred by the monopolists in comparison to competitive firms.

Question 13

When a firm experiences continually declining average total costs,

Accepted Answer

A)  the firm is a price taker. 
B)  society is better served by having one firm supply the product. 
C)  the firm will earn higher profits than if average total costs are increasing. 
D)  All of the above are correct. 
A)  the firm is a price taker. 
B)  society is better served by having one firm supply the product. 
C)  the firm will earn higher profits than if average total costs are increasing. 
D)  All of the above are correct.

Question 14

A market force that can prevent firms from price discriminating is

Accepted Answer

A)  fluctuating resource prices. 
B)  arbitrage. 
C)  high fixed costs. 
D)  marginal-cost pricing. 
A)  fluctuating resource prices. 
B)  arbitrage. 
C)  high fixed costs. 
D)  marginal-cost pricing.

Question 15

For a monopoly market, total surplus can be defined as the value of the good to

Accepted Answer

A)  producers minus the cost incurred by consumers. 
B)  producers plus the cost incurred by consumers. 
C)  consumers minus the costs of producing the good. 
D)  consumers plus the cost of producing the good. 
A)  producers minus the cost incurred by consumers. 
B)  producers plus the cost incurred by consumers. 
C)  consumers minus the costs of producing the good. 
D)  consumers plus the cost of producing the good.

Question 16

Perfect price discrimination

Accepted Answer

A)  increases profits to the firm. 
B)  increases total surplus. 
C)  decreases consumer surplus. 
D)  All of the above are correct. 
A)  increases profits to the firm. 
B)  increases total surplus. 
C)  decreases consumer surplus. 
D)  All of the above are correct.

Question 17

As a monopolist increases the quantity of output it sells, the price consumers are willing to pay for the good

Accepted Answer

A)  is unaffected. 
B)  decreases. 
C)  increases. 
D)  There is not enough information given in answer the question. 
A)  is unaffected. 
B)  decreases. 
C)  increases. 
D)  There is not enough information given in answer the question.

Question 18

Monopoly profit is not a social problem because

Accepted Answer

A)  the size of the economic pie grows when monopoly profits increase. 
B)  producers are more efficient than consumers. 
C)  the profit represents a transfer from the consumer to the producer with no loss in total surplus. 
D)  None of the above are correct. 
A)  the size of the economic pie grows when monopoly profits increase. 
B)  producers are more efficient than consumers. 
C)  the profit represents a transfer from the consumer to the producer with no loss in total surplus. 
D)  None of the above are correct.

Question 19

Scenario 15-5
An airline knows that there are two types of travelers: business travelers and vacationers. For a particular flight, there are 100 business travelers who will pay $600 for a ticket while there are 50 vacationers who will pay $300 for a ticket. There are 150 seats available on the plane. Suppose the cost to the airline of providing the flight is $20,000, which includes the cost of the pilots, flight attendants, fuel, etc.
-Refer to Scenario 15-5. How much additional profit can the airline earn by charging each customer their willingness to pay relative to charging a flat price of $600 per ticket?

Accepted Answer

A)  $15,000 
B)  $25,000 
C)  $40,000 
D)  $70,000 
A)  $15,000 
B)  $25,000 
C)  $40,000 
D)  $70,000

Question 20

Table 15-8
The following table provides information on the price, quantity, and average total cost for a monopoly.
  
-Refer to Table 15-8. What is the maximum profit that the monopolist can earn?

Accepted Answer

A)  $10 
B)  $20 
C)  $30 
D)  $40 
A)  $10 
B)  $20 
C)  $30 
D)  $40

Exam 14: Monopoly

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 total profit at the profit-maximizing quantity?

The government may choose to do nothing to reduce monopoly inefficiency because the "fix" may be worse than the problem.

The profit that a monopolist earns represents a loss to society that is measured through deadweight loss.

Declining average total cost with increased production is one of the defining characteristics of a natural monopoly.

By selling hardcover books to die-hard fans and paperback books to less enthusiastic readers, the publisher is able to price discriminate and raise its profits.

A natural monopolist's ability to price its product is

Airlines often separate their customers into business travelers and personal travelers by giving a discount to those travelers who stay over a Saturday night.

Which of the following statements is correct?

If the government regulates the price a natural monopolist can charge to be equal to the firm's marginal cost, the government will likely need to subsidize the firm.

A perfectly competitive firm produces where

When we compare economic welfare in a monopoly market to a competitive market, the profits earned by the monopolist represent d. the higher marginal revenues gained by the monopolists in comparison to competitive firms.

When a firm experiences continually declining average total costs,

A market force that can prevent firms from price discriminating is

For a monopoly market, total surplus can be defined as the value of the good to

Perfect price discrimination

As a monopolist increases the quantity of output it sells, the price consumers are willing to pay for the good

Monopoly profit is not a social problem because

Table 15-8 The following table provides information on the price, quantity, and average total cost for a monopoly. -Refer to Table 15-8. What is the maximum profit that the monopolist can earn?

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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