Question 1

A natural monopoly occurs when

Accepted Answer

A)  the product is sold in its natural state, such as water or diamonds. 
B)  there are economies of scale over the relevant range of output. 
C)  the firm is characterized by a rising marginal cost curve. 
D)  production requires the use of free natural resources, such as water or air. 
A)  the product is sold in its natural state, such as water or diamonds. 
B)  there are economies of scale over the relevant range of output. 
C)  the firm is characterized by a rising marginal cost curve. 
D)  production requires the use of free natural resources, such as water or air.

Question 2

Compared to the monopoly outcome with a single price, imperfect price discrimination i) sometimes raises total surplus.
Ii) sometimes lowers total surplus.
Iii) always leads to a lower quantity of output.

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 3

Figure 15-25  
-Refer to Figure 15-25. If a regulator requires this firm to charge a socially optimal price, how much deadweight loss results?

Accepted Answer

The answer of Figure 15-25  
-Refer to Figure 15-25....

Question 4

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

Accepted Answer

A)  not a concern if a market is perfectly competitive. 
B)  a deadweight loss to society. 
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)  not a concern if a market is perfectly competitive. 
B)  a deadweight loss to society. 
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 5

Because a monopolist is the sole producer in its market, it can necessarily alter the price of its good i) without affecting the quantity sold.
Ii) without affecting its average total cost.
Iii) by adjusting the quantity it supplies to the market.

Accepted Answer

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

Question 6

If a profit-maximizing monopolist faces a downward-sloping market demand curve, its

Accepted Answer

A)  average revenue is less than the price of the product. 
B)  average revenue is less than marginal revenue. 
C)  marginal revenue is less than the price of the product. 
D)  marginal revenue is greater than the price of the product. 
A)  average revenue is less than the price of the product. 
B)  average revenue is less than marginal revenue. 
C)  marginal revenue is less than the price of the product. 
D)  marginal revenue is greater than the price of the product.

Question 7

A monopoly market

Accepted Answer

A)  always maximizes total economic well-being. 
B)  always minimizes consumer surplus. 
C)  generally fails to maximize total economic well-being. 
D)  generally fails to maximize producer surplus. 
A)  always maximizes total economic well-being. 
B)  always minimizes consumer surplus. 
C)  generally fails to maximize total economic well-being. 
D)  generally fails to maximize producer surplus.

Question 8

Which of the following is not one of the ways that antitrust laws promote competition?

Accepted Answer

A)  Antitrust laws allow the government to prevent mergers. 
B)  Antitrust laws allow the government to break up companies into smaller ones. 
C)  Antitrust laws prevent companies from coordinating their activities in ways that make markets less competitive. 
D)  Antitrust laws allow the government to shut down any firm the government believes has monopoly power. 
A)  Antitrust laws allow the government to prevent mergers. 
B)  Antitrust laws allow the government to break up companies into smaller ones. 
C)  Antitrust laws prevent companies from coordinating their activities in ways that make markets less competitive. 
D)  Antitrust laws allow the government to shut down any firm the government believes has monopoly power.

Question 9

The De Beers Diamond company advertises heavily to promote the sale of all diamonds, not just its own. This is evidence that it has a monopoly position to some degree.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following is not correct?

Accepted Answer

A)  The demand curve facing a competitive firm is perfectly elastic. 
B)  The demand curve facing a monopolist is the market demand curve. 
C)  A monopolist can charge any price and sell any quantity that it chooses. 
D)  A monopolist can alter the market price by adjusting the quantity that it produces. 
A)  The demand curve facing a competitive firm is perfectly elastic. 
B)  The demand curve facing a monopolist is the market demand curve. 
C)  A monopolist can charge any price and sell any quantity that it chooses. 
D)  A monopolist can alter the market price by adjusting the quantity that it produces.

Question 11

Financial aid to college students, quantity discounts, and senior citizen discounts are all examples of

Accepted Answer

A)  consumer surplus. 
B)  deadweight loss. 
C)  price discrimination. 
D)  nonprofit pricing strategies. 
A)  consumer surplus. 
B)  deadweight loss. 
C)  price discrimination. 
D)  nonprofit pricing strategies.

Question 12

Suppose a profit-maximizing monopolist faces a constant marginal cost of $20, produces an output level of 100 units, and charges a price of $50. The socially efficient level of output is 200 units. Assume that the demand curve and marginal revenue curve are the typical downward-sloping straight lines. The monopoly deadweight loss equals $1,500.

Accepted Answer

A) True 
 B)False

Question 13

Figure 15-4  
-Refer to Figure 15-4. If the monopoly firm wants to maximize its profit, it should operate at a level of output equal to

Accepted Answer

A)  Q1. 
B)  Q2. 
C)  Q3. 
D)  Q4. 
A)  Q1. 
B)  Q2. 
C)  Q3. 
D)  Q4.

Question 14

Sizable economic profits can persist over time under monopoly if the monopolist

Accepted Answer

A)  produces that output where average total cost is at a maximum. 
B)  is protected by barriers to entry. 
C)  operates as a price taker rather than a price maker. 
D)  earns revenues that exceed variable costs. 
A)  produces that output where average total cost is at a maximum. 
B)  is protected by barriers to entry. 
C)  operates as a price taker rather than a price maker. 
D)  earns revenues that exceed variable costs.

Question 15

The fundamental cause of monopoly is

Accepted Answer

A)  incompetent management in competitive firms. 
B)  the zero-profit feature of long-run equilibrium in competitive markets. 
C)  advertising. 
D)  barriers to entry. 
A)  incompetent management in competitive firms. 
B)  the zero-profit feature of long-run equilibrium in competitive markets. 
C)  advertising. 
D)  barriers to entry.

Question 16

Figure 15-4  
-Refer to Figure 15-4. Profit can always be increased by increasing the level of output by one unit if the monopolist is currently operating at i) Q1.
Ii) Q2.
Iii) Q3.
Iv) Q4.

Accepted Answer

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

Question 17

Suppose a monopolist charges a price of $27 for its product and sells 10 units at that price. At 10 units of production the firm has average fixed cost equal to $10 and average variable cost equal to $12. How much total profit is the firm earning at this price?

Accepted Answer

A)  $5 
B)  $25 
C)  $50 
D)  $140 
A)  $5 
B)  $25 
C)  $50 
D)  $140

Question 18

A monopolist earns higher profits by charging one price than by practicing price discrimination.

Accepted Answer

A) True 
 B)False

Question 19

For a monopoly firm,

Accepted Answer

A)  price always equals marginal revenue. 
B)  price always exceeds average revenue. 
C)  any price-quantity combination will maximize profits. 
D)  None of the above is correct. 
A)  price always equals marginal revenue. 
B)  price always exceeds average revenue. 
C)  any price-quantity combination will maximize profits. 
D)  None of the above is correct.

Question 20

Figure 15-6  
-Refer to Figure 15-6. What price will the monopolist charge?

Accepted Answer

A)  A 
B)  C 
C)  K 
D)  L 
A)  A 
B)  C 
C)  K 
D)  L

Exam 14: Monopoly

A natural monopoly occurs when

Compared to the monopoly outcome with a single price, imperfect price discrimination i) sometimes raises total surplus. Ii) sometimes lowers total surplus. Iii) always leads to a lower quantity of output.

Figure 15-25 -Refer to Figure 15-25. If a regulator requires this firm to charge a socially optimal price, how much deadweight loss results?

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

Because a monopolist is the sole producer in its market, it can necessarily alter the price of its good i) without affecting the quantity sold. Ii) without affecting its average total cost. Iii) by adjusting the quantity it supplies to the market.

If a profit-maximizing monopolist faces a downward-sloping market demand curve, its

A monopoly market

Which of the following is not one of the ways that antitrust laws promote competition?

The De Beers Diamond company advertises heavily to promote the sale of all diamonds, not just its own. This is evidence that it has a monopoly position to some degree.

Which of the following is not correct?

Financial aid to college students, quantity discounts, and senior citizen discounts are all examples of

Figure 15-4 -Refer to Figure 15-4. If the monopoly firm wants to maximize its profit, it should operate at a level of output equal to

Sizable economic profits can persist over time under monopoly if the monopolist

The fundamental cause of monopoly is

Figure 15-4 -Refer to Figure 15-4. Profit can always be increased by increasing the level of output by one unit if the monopolist is currently operating at i) Q1. Ii) Q2. Iii) Q3. Iv) Q4.

Suppose a monopolist charges a price of $27 for its product and sells 10 units at that price. At 10 units of production the firm has average fixed cost equal to $10 and average variable cost equal to $12. How much total profit is the firm earning at this price?

A monopolist earns higher profits by charging one price than by practicing price discrimination.

For a monopoly firm,

Figure 15-6 -Refer to Figure 15-6. What price will the monopolist charge?

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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