Question 1

Table 15-4
A monopolist faces the following demand curve:
  
-Refer to Table 15-4. If the monopolist produces 5 units, what is its marginal revenue?

Accepted Answer

A)  $100 
B)  $37.5 
C)  $15 
D)  $2.50 
A)  $100 
B)  $37.5 
C)  $15 
D)  $2.50

Question 2

Which of the following is not a characteristic of a monopoly?

Accepted Answer

A)  barriers to entry 
B)  one seller 
C)  one buyer 
D)  a product without close substitutes 
A)  barriers to entry 
B)  one seller 
C)  one buyer 
D)  a product without close substitutes

Question 3

If the government deems a newly-invented drug to be truly original, the pharmaceutical company is given the exclusive right to manufacture and sell the drug for 50 years.

Accepted Answer

A) True 
 B)False

Question 4

Scenario 15-1
Consider a transportation corporation named Reading's that has just completed the development of a new light rail system in Minneapolis. Currently, there are plenty of seats on the train, and it is never crowded. Its capacity far exceeds the needs of the city. After just a few years of operation, the shareholders of Reading's experienced incredibly high rates of return on their investment due to the profitability of the corporation.
-Refer to Scenario 15-1. 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 Reading's
Currently has.
Ii) Reading's is most likely experiencing decreasing average total cost.
Iii) Reading's is a natural monopoly.

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 5

When a monopolist decreases the price of its good, consumers

Accepted Answer

A)  continue to buy the same amount. 
B)  buy more. 
C)  buy less. 
D)  may buy more or less, depending on the price elasticity of demand. 
A)  continue to buy the same amount. 
B)  buy more. 
C)  buy less. 
D)  may buy more or less, depending on the price elasticity of demand.

Question 6

Figure 15-18  
-Refer to Figure 15-18. If there are no fixed costs of production, monopoly profit without price discrimination equals

Accepted Answer

A)  $0. 
B)  $1,000. 
C)  $2,000. 
D)  $4,000. 
A)  $0. 
B)  $1,000. 
C)  $2,000. 
D)  $4,000.

Question 7

Figure 15-5  
-Refer to Figure 15-5. A profit-maximizing monopoly will charge a price of

Accepted Answer

A)  P1. 
B)  P2. 
C)  P3. 
D)  P4. 
A)  P1. 
B)  P2. 
C)  P3. 
D)  P4.

Question 8

Which of the following is an example of a barrier to entry?

Accepted Answer

A)  Matthew offers free samples of his latest flavored coffee drink to entice customers to buy a cup. 
B)  Mark charges a lower price to students than to faculty for his tattoo services. 
C)  Luke charges a higher hourly price to business students than to liberal arts students for his economics tutoring. 
D)  John obtained a copyright for the song he wrote and recorded. 
A)  Matthew offers free samples of his latest flavored coffee drink to entice customers to buy a cup. 
B)  Mark charges a lower price to students than to faculty for his tattoo services. 
C)  Luke charges a higher hourly price to business students than to liberal arts students for his economics tutoring. 
D)  John obtained a copyright for the song he wrote and recorded.

Question 9

When a firm experiences continually declining average total costs, the firm is a

Accepted Answer

A)  government-created monopoly. 
B)  price taker. 
C)  natural monopoly. 
D)  revenue maximizer. 
A)  government-created monopoly. 
B)  price taker. 
C)  natural monopoly. 
D)  revenue maximizer.

Question 10

Table 15-6
A monopolist faces the following demand curve:
  
-Refer to Table 15-6. Suppose the monopolist has total fixed costs equal to $5 and a variable cost equal to $4 per unit for all units produced. What is the total profit if she operates at her profit-maximizing price?

Accepted Answer

A)  $1 
B)  $7 
C)  $9 
D)  $11 
A)  $1 
B)  $7 
C)  $9 
D)  $11

Question 11

Which of the following statements is correct?

Accepted Answer

A)  If the monopolist's marginal revenue is greater than its marginal cost, the monopolist can increase profit by selling more units at a lower price per unit. 
B)  If the monopolist's marginal revenue is greater than its marginal cost, the monopolist can increase profit by selling fewer units at a higher price per unit. 
C)  When a monopolist produces where price equals the minimum of average total cost, it earns a positive economic profit. 
D)  If the monopolist is earning a positive economic profit, it must be producing where MR = MC. 
A)  If the monopolist's marginal revenue is greater than its marginal cost, the monopolist can increase profit by selling more units at a lower price per unit. 
B)  If the monopolist's marginal revenue is greater than its marginal cost, the monopolist can increase profit by selling fewer units at a higher price per unit. 
C)  When a monopolist produces where price equals the minimum of average total cost, it earns a positive economic profit. 
D)  If the monopolist is earning a positive economic profit, it must be producing where MR = MC.

Question 12

Table 15-13
The following table gives information on the price, quantity, and total cost of production for a monopolist.
  
-Refer to Table 15-13. If the monopolist maximizes profits, he will charge a price of

Accepted Answer

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

Question 13

Policymakers are discussing various proposals regarding how to deal with natural monopolies. Senator Huff wants to regulate natural monopolies by equating price with average total cost. Huff contends that such a policy will ensure that monopolies make every effort to reduce costs. Senator Puff wants the government to own natural monopolies. Puff argues that government-owned monopolies usually do a better job of holding down costs than privately owned monopolies. Which senator's argument is correct?

Accepted Answer

A)  Senator Huff 
B)  Senator Puff 
C)  both senators 
D)  neither senator 
A)  Senator Huff 
B)  Senator Puff 
C)  both senators 
D)  neither senator

Question 14

Figure 15-17  
-Refer to Figure 15-17. Which of the following statements best describes the changes that would occur if this firm were to switch from operating as a single price profit-maximizing monopolist to perfect price discrimination?

Accepted Answer

A)  The quantity would increase from I to J, the profit would increase from BCFE to ACG, and the deadweight loss would decrease from EFG to zero. 
B)  The quantity would remain constant, the profit would increase from BCFE to ABCFE and the deadweight loss would decrease from EFG to zero. 
C)  The quantity would decrease from J to I, the profit would decrease from ACG to BCFE, and the deadweight loss would increase from EFG to ACG. 
D)  The quantity would increase from I to J, the profit would decrease from BCFE to EFG, and the deadweight loss remain constant. 
A)  The quantity would increase from I to J, the profit would increase from BCFE to ACG, and the deadweight loss would decrease from EFG to zero. 
B)  The quantity would remain constant, the profit would increase from BCFE to ABCFE and the deadweight loss would decrease from EFG to zero. 
C)  The quantity would decrease from J to I, the profit would decrease from ACG to BCFE, and the deadweight loss would increase from EFG to ACG. 
D)  The quantity would increase from I to J, the profit would decrease from BCFE to EFG, and the deadweight loss remain constant.

Question 15

Describe how government is involved in creating a monopoly. Why might the government create one? Give an example.

Accepted Answer

The government can create a monopoly by

Question 16

Additional firms often do not try to compete with a natural monopoly because

Accepted Answer

A)  they fear retaliation in the form of pricing wars from the natural monopolist. 
B)  they are unsure of the size of the market in general. 
C)  they know they cannot achieve the same low costs that the natural monopolist enjoys. 
D)  the natural monopoly does not make a large profit. 
A)  they fear retaliation in the form of pricing wars from the natural monopolist. 
B)  they are unsure of the size of the market in general. 
C)  they know they cannot achieve the same low costs that the natural monopolist enjoys. 
D)  the natural monopoly does not make a large profit.

Question 17

Which of the following statements is not correct?

Accepted Answer

A)  The government may use antitrust laws to prevent a merger if the government believes the merger will reduce competition and increase prices. 
B)  By regulating a natural monopoly where price equals average total cost, the monopoly earns zero profits. 
C)  An advantage of private ownership over public ownership is that private business owners tend to fire inefficient managers. 
D)  The government should always intervene to improve monopoly inefficiency. 
A)  The government may use antitrust laws to prevent a merger if the government believes the merger will reduce competition and increase prices. 
B)  By regulating a natural monopoly where price equals average total cost, the monopoly earns zero profits. 
C)  An advantage of private ownership over public ownership is that private business owners tend to fire inefficient managers. 
D)  The government should always intervene to improve monopoly inefficiency.

Question 18

Figure 15-6  
-Refer to Figure 15-6. What area measures the monopolist's profit?

Accepted Answer

A)  K-
C) *W 
B)  L-
A) *T 
C)  K-
B) *W 
D)  0.5[K-
C) *Z-T)] 
A)  K-
C) *W 
B)  L-
A) *T 
C)  K-
B) *W 
D)  0.5[K-
C) *Z-T)]

Question 19

Table 15-19
A monopolist faces the following demand curve:
  
-Refer to Table 15-19. If a monopolist faces a constant marginal cost of $9, how much output should the firm produce?

Accepted Answer

A)  2 units 
B)  3 units 
C)  4 units 
D)  5 units 
A)  2 units 
B)  3 units 
C)  4 units 
D)  5 units

Question 20

Which of the following is not an example of a barrier to entry?

Accepted Answer

A)  John owns the only parcel of lakeside property with a beach that is safe for swimming. He charges admission to neighbors who want to use the beach. 
B)  Jackie owns the copyright to a popular song. She receives royalties every time a radio station plays her song. 
C)  John Jr. owns the best seafood restaurant in a popular resort area. He charges high prices because the quality of the food is so good. 
D)  Caroline owns the patent for a new running shoe. She receives payments from the company who manufactures the shoes. 
A)  John owns the only parcel of lakeside property with a beach that is safe for swimming. He charges admission to neighbors who want to use the beach. 
B)  Jackie owns the copyright to a popular song. She receives royalties every time a radio station plays her song. 
C)  John Jr. owns the best seafood restaurant in a popular resort area. He charges high prices because the quality of the food is so good. 
D)  Caroline owns the patent for a new running shoe. She receives payments from the company who manufactures the shoes.

Exam 14: Monopoly

Table 15-4 A monopolist faces the following demand curve: -Refer to Table 15-4. If the monopolist produces 5 units, what is its marginal revenue?

Which of the following is not a characteristic of a monopoly?

If the government deems a newly-invented drug to be truly original, the pharmaceutical company is given the exclusive right to manufacture and sell the drug for 50 years.

When a monopolist decreases the price of its good, consumers

Figure 15-18 -Refer to Figure 15-18. If there are no fixed costs of production, monopoly profit without price discrimination equals

Figure 15-5 -Refer to Figure 15-5. A profit-maximizing monopoly will charge a price of

Which of the following is an example of a barrier to entry?

When a firm experiences continually declining average total costs, the firm is a

Table 15-6 A monopolist faces the following demand curve: -Refer to Table 15-6. Suppose the monopolist has total fixed costs equal to $5 and a variable cost equal to $4 per unit for all units produced. What is the total profit if she operates at her profit-maximizing price?

Which of the following statements is correct?

Table 15-13 The following table gives information on the price, quantity, and total cost of production for a monopolist. -Refer to Table 15-13. If the monopolist maximizes profits, he will charge a price of

Figure 15-17 -Refer to Figure 15-17. Which of the following statements best describes the changes that would occur if this firm were to switch from operating as a single price profit-maximizing monopolist to perfect price discrimination?

Describe how government is involved in creating a monopoly. Why might the government create one? Give an example.

Additional firms often do not try to compete with a natural monopoly because

Which of the following statements is not correct?

Figure 15-6 -Refer to Figure 15-6. What area measures the monopolist's profit?

Table 15-19 A monopolist faces the following demand curve: -Refer to Table 15-19. If a monopolist faces a constant marginal cost of $9, how much output should the firm produce?

Which of the following is not an example of a barrier to entry?

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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