Question 1

Drug companies are allowed to be monopolists in the drugs they discover in order to

Accepted Answer

A)  allow drug companies to charge a price that is equal to their marginal cost. 
B)  discourage new firms from entering the drug market. 
C)  allow the government to earn patent revenue. 
D)  None of the above is correct. 
A)  allow drug companies to charge a price that is equal to their marginal cost. 
B)  discourage new firms from entering the drug market. 
C)  allow the government to earn patent revenue. 
D)  None of the above is correct.

Question 2

A monopoly's marginal cost will

Accepted Answer

A)  be less than its average fixed cost. 
B)  be less than the price per unit of its product. 
C)  exceed its marginal revenue. 
D)  equal its average total cost. 
A)  be less than its average fixed cost. 
B)  be less than the price per unit of its product. 
C)  exceed its marginal revenue. 
D)  equal its average total cost.

Question 3

Exclusive ownership of a key resource

Accepted Answer

A)  is the most common cause of a monopoly. 
B)  is a potential but rare cause of a monopoly. 
C)  explains the monopoly ownership of the US Postal Service. 
D)  explains why a single firm distributes water to a community. 
A)  is the most common cause of a monopoly. 
B)  is a potential but rare cause of a monopoly. 
C)  explains the monopoly ownership of the US Postal Service. 
D)  explains why a single firm distributes water to a community.

Question 4

Government intervention always reduces monopoly deadweight loss.

Accepted Answer

A) True 
 B)False

Question 5

Figure 15-5  
-Refer to Figure 15-5. Profit on a typical unit sold for a profit-maximizing monopoly would equal

Accepted Answer

A)  P1-P6. 
B)  P2-P4. 
C)  P2-P5. 
D)  P2-P3. 
A)  P1-P6. 
B)  P2-P4. 
C)  P2-P5. 
D)  P2-P3.

Question 6

Consumers' willingness to pay for a good minus the amount they actually pay for it equals

Accepted Answer

A)  consumer surplus. 
B)  consumer benefit. 
C)  price discriminant. 
D)  deadweight loss. 
A)  consumer surplus. 
B)  consumer benefit. 
C)  price discriminant. 
D)  deadweight loss.

Question 7

Price discrimination adds to social welfare in the form of i) increased total surplus.
Ii) reduced costs of production.
Iii) increased consumer surplus.

Accepted Answer

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

Question 8

Which of the following is not an example of price discrimination by a firm?

Accepted Answer

A)  children's meals at a restaurant 
B)  a natural gas company charging customers a higher rate in the winter than in the summer 
C)  a senior citizens' discount 
D)  coupons in the Sunday newspaper 
A)  children's meals at a restaurant 
B)  a natural gas company charging customers a higher rate in the winter than in the summer 
C)  a senior citizens' discount 
D)  coupons in the Sunday newspaper

Question 9

Which of the following statements is not correct?

Accepted Answer

A)  Consumers will likely benefit in the form of lower prices from buying a product made by a natural monopoly than if the market were served by several firms. 
B)  Monopolists typically charge higher prices than competitive firms. 
C)  Monopolists typically produce larger quantities of output than competitive firms. 
D)  Consumers may benefit from monopolies if the firms invest their higher profits into something that benefits society such as medical research. 
A)  Consumers will likely benefit in the form of lower prices from buying a product made by a natural monopoly than if the market were served by several firms. 
B)  Monopolists typically charge higher prices than competitive firms. 
C)  Monopolists typically produce larger quantities of output than competitive firms. 
D)  Consumers may benefit from monopolies if the firms invest their higher profits into something that benefits society such as medical research.

Question 10

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. If Black Box Cable TV is unable to price discriminate, what price will it choose to maximize its profit, and what is the amount of the profit?

Accepted Answer

A)  price = $20; profit = $400,000 
B)  price = $20; profit = $330,000 
C)  price = $150; profit = $450,000 
D)  price = $150; profit = $600,000 
A)  price = $20; profit = $400,000 
B)  price = $20; profit = $330,000 
C)  price = $150; profit = $450,000 
D)  price = $150; profit = $600,000

Question 11

A monopolist that can practice perfect price discrimination will not impose a deadweight loss on society.

Accepted Answer

A) True 
 B)False

Question 12

A reduction in a monopolist's fixed costs would

Accepted Answer

A)  decrease the profit-maximizing price and increase the profit-maximizing quantity produced. 
B)  increase the profit-maximizing price and decrease the profit-maximizing quantity produced. 
C)  not effect the profit-maximizing price or quantity. 
D)  possibly increase, decrease or not effect profit-maximizing price and quantity, depending on the elasticity of demand. 
A)  decrease the profit-maximizing price and increase the profit-maximizing quantity produced. 
B)  increase the profit-maximizing price and decrease the profit-maximizing quantity produced. 
C)  not effect the profit-maximizing price or quantity. 
D)  possibly increase, decrease or not effect profit-maximizing price and quantity, depending on the elasticity of demand.

Question 13

When a certain monopoly sets its price at $8 it sells 64 units. When the monopoly sets its price at $9 it sells 62 units. The marginal revenue for the firm over this range is

Accepted Answer

A)  $18. 
B)  $23. 
C)  $46. 
D)  $92. 
A)  $18. 
B)  $23. 
C)  $46. 
D)  $92.

Question 14

Figure 15-9  
-Refer to Figure 15-9. To maximize its profit, a monopolist would choose which of the following outcomes?

Accepted Answer

A)  100 units of output and a price of $20 per unit 
B)  100 units of output and a price of $40 per unit 
C)  150 units of output and a price of $30 per unit 
D)  200 units of output and a price of $40 per unit 
A)  100 units of output and a price of $20 per unit 
B)  100 units of output and a price of $40 per unit 
C)  150 units of output and a price of $30 per unit 
D)  200 units of output and a price of $40 per unit

Question 15

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

Accepted Answer

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

Question 16

Figure 15-23  
-Refer to Figure 15-23. If a regulator requires the firm to charge a marginal cost price, what is the amount of profit or loss earned by the firm?

Accepted Answer

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

Question 17

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 the average revenue when 7 ties are sold?

Accepted Answer

A)  $90 
B)  $100 
C)  $110 
D)  $130 
A)  $90 
B)  $100 
C)  $110 
D)  $130

Question 18

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 3rd unit?

Accepted Answer

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

Question 19

The best solution to the problem of welfare loss from monopoly is public ownership.

Accepted Answer

A) True 
 B)False

Question 20

A monopolist maximizes profits by

Accepted Answer

A)  producing an output level where marginal revenue equals marginal cost. 
B)  charging a price that is greater than marginal revenue. 
C)  earning a profit of P - M
C)  x Q. 
D)  Both a and b are correct. 
A)  producing an output level where marginal revenue equals marginal cost. 
B)  charging a price that is greater than marginal revenue. 
C)  earning a profit of P - M
C)  x Q. 
D)  Both a and b are correct.

Exam 14: Monopoly

Drug companies are allowed to be monopolists in the drugs they discover in order to

A monopoly's marginal cost will

Exclusive ownership of a key resource

Government intervention always reduces monopoly deadweight loss.

Figure 15-5 -Refer to Figure 15-5. Profit on a typical unit sold for a profit-maximizing monopoly would equal

Consumers' willingness to pay for a good minus the amount they actually pay for it equals

Price discrimination adds to social welfare in the form of i) increased total surplus. Ii) reduced costs of production. Iii) increased consumer surplus.

Which of the following is not an example of price discrimination by a firm?

Which of the following statements is not correct?

A monopolist that can practice perfect price discrimination will not impose a deadweight loss on society.

A reduction in a monopolist's fixed costs would

When a certain monopoly sets its price at $8 it sells 64 units. When the monopoly sets its price at $9 it sells 62 units. The marginal revenue for the firm over this range is

Figure 15-9 -Refer to Figure 15-9. To maximize its profit, a monopolist would choose which of the following outcomes?

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

Figure 15-23 -Refer to Figure 15-23. If a regulator requires the firm to charge a marginal cost price, what is the amount of profit or loss earned by the firm?

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 3rd unit?

The best solution to the problem of welfare loss from monopoly is public ownership.

A monopolist maximizes profits by

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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