Question 1

Natural monopolies differ from other forms of monopoly because they are

Accepted Answer

A)  not subject to barriers to entry. 
B)  not regulated by government. 
C)  unable to sustain long-run profits. 
D)  are generally not worried about competition eroding their monopoly position in the market. 
A)  not subject to barriers to entry. 
B)  not regulated by government. 
C)  unable to sustain long-run profits. 
D)  are generally not worried about competition eroding their monopoly position in the market.

Question 2

The proper level of government intervention is unclear when dealing with a monopoly.

Accepted Answer

A) True 
 B)False

Question 3

Patent and copyright laws encourage

Accepted Answer

A)  creative activity. 
B)  research and development. 
C)  competition among firms. 
D)  Both a and b are correct. 
A)  creative activity. 
B)  research and development. 
C)  competition among firms. 
D)  Both a and b are correct.

Question 4

If a pharmaceutical company discovers a new drug and successfully patents it, patent law gives the firm

Accepted Answer

A)  partial ownership of the right to sell the drug for a limited number of years. 
B)  partial ownership of the right to sell the drug for an unlimited number of years. 
C)  sole ownership of the right to sell the drug for a limited number of years. 
D)  sole ownership of the right to sell the drug for an unlimited number of years. 
A)  partial ownership of the right to sell the drug for a limited number of years. 
B)  partial ownership of the right to sell the drug for an unlimited number of years. 
C)  sole ownership of the right to sell the drug for a limited number of years. 
D)  sole ownership of the right to sell the drug for an unlimited number of years.

Question 5

A profit-maximizing monopolist charges a price of $14. The intersection of the marginal revenue curve and the marginal cost curve occurs where output is 15 units and marginal cost is $7. What is the monopolist's profit?

Accepted Answer

A)  $90 
B)  $105 
C)  $180 
D)  Not enough information is given to determine the answer. 
A)  $90 
B)  $105 
C)  $180 
D)  Not enough information is given to determine the answer.

Question 6

The reason to regulate utilities instead of using antitrust laws to promote competition is that a utility is usually a

Accepted Answer

A)  profit-maximizing monopoly. 
B)  producer of externalities. 
C)  revenue-maximizing monopoly. 
D)  natural monopoly. 
A)  profit-maximizing monopoly. 
B)  producer of externalities. 
C)  revenue-maximizing monopoly. 
D)  natural monopoly.

Question 7

Table 15-8
The following table provides information on the price, quantity, and average total cost for a monopoly.
  
-Refer to Table 15-8. How much extra revenue does the monopolist earn when he lowers the price from $18 to $12?

Accepted Answer

A)  $10 
B)  $12 
C)  $30 
D)  $41 
A)  $10 
B)  $12 
C)  $30 
D)  $41

Question 8

Comparing firms in perfectly competitive markets to monopoly firms, which charges higher prices?

Accepted Answer

The answer of Comparing firms in perfectly competitive markets to...

Question 9

Firms with substantial monopoly power are quite common because many goods are unique.

Accepted Answer

A) True 
 B)False

Question 10

Figure 15-8  
-Refer to Figure 15-8. What area represents the total surplus lost due to monopoly pricing?

Accepted Answer

A)  the rectangle A-
C) *X 
B)  the triangle 1/2[A-
C) *Y-X)] 
C)  the triangle 1/2[A-
B) *Y-X)] 
D)  the rectangle A-
C) *X plus the triangle 1/2[A-
C) *Y-X)] 
A)  the rectangle A-
C) *X 
B)  the triangle 1/2[A-
C) *Y-X)] 
C)  the triangle 1/2[A-
B) *Y-X)] 
D)  the rectangle A-
C) *X plus the triangle 1/2[A-
C) *Y-X)]

Question 11

Figure 15-17  
-Refer to Figure 15-17. If this firm were able to perfectly price discriminate, which of the following areas would represent the profit to this perfectly discriminating monopolist?

Accepted Answer

A)  ABE 
B)  BCFE 
C)  EFG 
D)  ACG 
A)  ABE 
B)  BCFE 
C)  EFG 
D)  ACG

Question 12

Figure 15-22  
-Refer to Figure 15-22. If the monopolist uses perfect price discrimination, how much output does the firm produce?

Accepted Answer

The answer of Figure 15-22  
-Refer to Figure 15-22....

Question 13

When a monopolist increases the amount of output that it produces and sells, the price of its output

Accepted Answer

A)  stays the same. 
B)  increases. 
C)  decreases. 
D)  may increase or decrease depending on the price elasticity of demand. 
A)  stays the same. 
B)  increases. 
C)  decreases. 
D)  may increase or decrease depending on the price elasticity of demand.

Question 14

Figure 15-23  
-Refer to Figure 15-23. If the firm profit-maximizes, what amount of output will it produce?

Accepted Answer

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

Question 15

If a monopolist can sell 7 units when the price is $4 and 8 units when the price is $3, then the marginal revenue of selling the eighth unit is equal to

Accepted Answer

A)  $3. 
B)  $4. 
C)  $24. 
D)  -$4. 
A)  $3. 
B)  $4. 
C)  $24. 
D)  -$4.

Question 16

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 marginal revenue from selling the 8th tie?

Accepted Answer

A)  $45 
B)  $60 
C)  $80 
D)  $95 
A)  $45 
B)  $60 
C)  $80 
D)  $95

Question 17

If the government regulates the price a natural monopolist can charge to be equal to the firm's average total cost, the firm has no incentive to reduce costs.

Accepted Answer

A) True 
 B)False

Question 18

Monopolies are inefficient because they i) eliminate barriers to entry.
Ii) price their product at a level where marginal revenue exceeds marginal cost.
Iii) restrict output below the socially efficient level of production.

Accepted Answer

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

Question 19

Scenario 15-11
Vincent operates a scenic tour business in Boston. He has one bus which can fit 50 people per tour and each tour lasts 2 hours. His total cost of operating one tour is fixed at $450. Vincent's cost is not reduced if he runs a tour with a partially full bus. While his cost is the same for all tours, Vincent charges each passenger his/her willingness to pay: adults $18 per trip, children $10 per trip, and senior citizens $12 per trip. At those rates, on a typical day Vincent's demand is:
   Assume that Vincent's customers are always available for the tour; therefore, he can fill his bus for each tour as long as there is sufficient total demand for the day.
-Refer to Scenario 15-11. What is Vincent's cost of serving all passengers demanding a tour on a typical day?

Accepted Answer

The answer of Scenario 15-11
Vincent operates a scenic tour business...

Question 20

The collection of statutes aimed at curbing monopoly power is called

Accepted Answer

A)  the 14th amendment. 
B)  the Clayton Act. 
C)  the Sherman Act. 
D)  antitrust law. 
A)  the 14th amendment. 
B)  the Clayton Act. 
C)  the Sherman Act. 
D)  antitrust law.

Exam 14: Monopoly

Natural monopolies differ from other forms of monopoly because they are

The proper level of government intervention is unclear when dealing with a monopoly.

Patent and copyright laws encourage

If a pharmaceutical company discovers a new drug and successfully patents it, patent law gives the firm

A profit-maximizing monopolist charges a price of $14. The intersection of the marginal revenue curve and the marginal cost curve occurs where output is 15 units and marginal cost is $7. What is the monopolist's profit?

The reason to regulate utilities instead of using antitrust laws to promote competition is that a utility is usually a

Table 15-8 The following table provides information on the price, quantity, and average total cost for a monopoly. -Refer to Table 15-8. How much extra revenue does the monopolist earn when he lowers the price from $18 to $12?

Comparing firms in perfectly competitive markets to monopoly firms, which charges higher prices?

Firms with substantial monopoly power are quite common because many goods are unique.

Figure 15-8 -Refer to Figure 15-8. What area represents the total surplus lost due to monopoly pricing?

Figure 15-17 -Refer to Figure 15-17. If this firm were able to perfectly price discriminate, which of the following areas would represent the profit to this perfectly discriminating monopolist?

Figure 15-22 -Refer to Figure 15-22. If the monopolist uses perfect price discrimination, how much output does the firm produce?

When a monopolist increases the amount of output that it produces and sells, the price of its output

Figure 15-23 -Refer to Figure 15-23. If the firm profit-maximizes, what amount of output will it produce?

If a monopolist can sell 7 units when the price is $4 and 8 units when the price is $3, then the marginal revenue of selling the eighth unit is equal to

If the government regulates the price a natural monopolist can charge to be equal to the firm's average total cost, the firm has no incentive to reduce costs.

Monopolies are inefficient because they i) eliminate barriers to entry. Ii) price their product at a level where marginal revenue exceeds marginal cost. Iii) restrict output below the socially efficient level of production.

The collection of statutes aimed at curbing monopoly power is called

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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