Question 1

Figure 15-5  
-Refer to Figure 15-5. A profit-maximizing monopoly's total revenue is equal to

Accepted Answer

A)  P1 x Q1. 
B)  P2 x Q3. 
C)  P3 x Q4. 
D)  P2-P4) x Q3. 
A)  P1 x Q1. 
B)  P2 x Q3. 
C)  P3 x Q4. 
D)  P2-P4) x Q3.

Question 2

Which of the following is an example of price discrimination?

Accepted Answer

A)  Nabisco provides cents-off coupons for its products. 
B)  Amtrak offers a lower price for weekend travel compared to weekday rates on the same routes. 
C)  Hotel rates for AAA members are lower than for nonmembers. 
D)  All of the above are correct. 
A)  Nabisco provides cents-off coupons for its products. 
B)  Amtrak offers a lower price for weekend travel compared to weekday rates on the same routes. 
C)  Hotel rates for AAA members are lower than for nonmembers. 
D)  All of the above are correct.

Question 3

Due to the nature of the patent laws on pharmaceuticals, the market for such drugs

Accepted Answer

A)  always remains a competitive market. 
B)  always remains a monopolistic market. 
C)  switches from competitive to monopolistic once the firm's patent runs out. 
D)  switches from monopolistic to competitive once the firm's patent runs out. 
A)  always remains a competitive market. 
B)  always remains a monopolistic market. 
C)  switches from competitive to monopolistic once the firm's patent runs out. 
D)  switches from monopolistic to competitive once the firm's patent runs out.

Question 4

Patents, copyrights, and trademarks

Accepted Answer

A)  are examples of government-created monopolies. 
B)  are examples of barriers to entry. 
C)  allow their owners to charge higher prices. 
D)  All of the above are correct. 
A)  are examples of government-created monopolies. 
B)  are examples of barriers to entry. 
C)  allow their owners to charge higher prices. 
D)  All of the above are correct.

Question 5

Price discrimination is the business practice of

Accepted Answer

A)  bundling related products to increase total sales. 
B)  selling the same good at different prices to different customers. 
C)  pricing above marginal cost. 
D)  hiring marketing experts to increase consumers' brand loyalty. 
A)  bundling related products to increase total sales. 
B)  selling the same good at different prices to different customers. 
C)  pricing above marginal cost. 
D)  hiring marketing experts to increase consumers' brand loyalty.

Question 6

Scenario 15-8
Mega Media Cable TV is able to purchase an exclusive right to sell a premium sports channel in its market area. Let's assume that Mega Media pays $100,000 a year for the exclusive marketing rights to the sports channel. Since Mega Media has already installed cable to all of the homes in its market area, the marginal cost of delivering the sports channel to subscribers is zero. The manager of Mega Media needs to know what price to charge for the sports channel service to maximize her profit. Before setting price, she hires an economist to estimate demand for the sports channel. The economist discovers that there are two types of subscribers who value premium sporting channels. First are the 3,000 die-hard sports fans who will pay as much as $150 a year for the new channel. Second, the premium sports channel will appeal to 20,000 occasional sports viewers who will pay as much as $25 a year for a subscription to it.
-Refer to Scenario 15-8. How much profit will Mega Media Cable TV earn if it sets the price at $150?

Accepted Answer

A)  $350,000 
B)  $450,000 
C)  $475,000 
D)  $575,000 
A)  $350,000 
B)  $450,000 
C)  $475,000 
D)  $575,000

Question 7

The economic inefficiency of a monopolist can be measured by the

Accepted Answer

A)  number of consumers who are unable to purchase the product because of its high price. 
B)  excess profit generated by monopoly firms. 
C)  poor quality of service offered by monopoly firms. 
D)  deadweight loss. 
A)  number of consumers who are unable to purchase the product because of its high price. 
B)  excess profit generated by monopoly firms. 
C)  poor quality of service offered by monopoly firms. 
D)  deadweight loss.

Question 8

For a typical natural monopoly, average total cost is

Accepted Answer

A)  falling, and marginal cost is above average total cost. 
B)  falling, and marginal cost is below average total cost. 
C)  rising, and marginal cost is below average total cost. 
D)  rising, and marginal cost is above average total cost. 
A)  falling, and marginal cost is above average total cost. 
B)  falling, and marginal cost is below average total cost. 
C)  rising, and marginal cost is below average total cost. 
D)  rising, and marginal cost is above average total cost.

Question 9

Which of the following statements is correct?

Accepted Answer

A)  The benefits that accrue to a monopoly's owners are equal to the costs that are incurred by consumers of that firm's product. 
B)  The deadweight loss that arises in monopoly stems from the fact that the profit-maximizing monopoly firm produces a quantity of output that exceeds the socially-efficient quantity. 
C)  The deadweight loss caused by monopoly is similar to the deadweight loss caused by a tax on a product. 
D)  The primary social problem caused by monopoly is monopoly profit. 
A)  The benefits that accrue to a monopoly's owners are equal to the costs that are incurred by consumers of that firm's product. 
B)  The deadweight loss that arises in monopoly stems from the fact that the profit-maximizing monopoly firm produces a quantity of output that exceeds the socially-efficient quantity. 
C)  The deadweight loss caused by monopoly is similar to the deadweight loss caused by a tax on a product. 
D)  The primary social problem caused by monopoly is monopoly profit.

Question 10

When a monopolist is able to sell its product at different prices, it is engaging in

Accepted Answer

A)  distribution pricing. 
B)  quality-adjusted pricing. 
C)  arbitrage. 
D)  price discrimination. 
A)  distribution pricing. 
B)  quality-adjusted pricing. 
C)  arbitrage. 
D)  price discrimination.

Question 11

Scenario 15-3
A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $30, its average revenue is $60, and its average total cost is $34.
-Refer to Scenario 15-3. The firm's profit-maximizing price is

Accepted Answer

A)  $30. 
B)  between $30 and $34. 
C)  between $34 and $60. 
D)  $60. 
A)  $30. 
B)  between $30 and $34. 
C)  between $34 and $60. 
D)  $60.

Question 12

A monopoly chooses to supply the market with a quantity of a product that is determined by the intersection of the

Accepted Answer

A)  marginal cost and demand curves. 
B)  average total cost and demand curves. 
C)  marginal revenue and average total cost curves. 
D)  marginal revenue and marginal cost curves. 
A)  marginal cost and demand curves. 
B)  average total cost and demand curves. 
C)  marginal revenue and average total cost curves. 
D)  marginal revenue and marginal cost curves.

Question 13

A profit-maximizing monopolist will produce the level of output at which

Accepted Answer

A)  average revenue is equal to average total cost. 
B)  average revenue is equal to marginal cost. 
C)  marginal revenue is equal to marginal cost. 
D)  total revenue is equal to opportunity cost. 
A)  average revenue is equal to average total cost. 
B)  average revenue is equal to marginal cost. 
C)  marginal revenue is equal to marginal cost. 
D)  total revenue is equal to opportunity cost.

Question 14

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

Accepted Answer

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

Question 15

Table 15-16
A monopolist faces the following demand curve:
  
-Refer to Table 15-16. The monopolist has total fixed costs of $40 and a constant marginal cost of $5. At the profit-maximizing level of output, the monopolist's average total cost is

Accepted Answer

A)  $9.00. 
B)  $7.50. 
C)  $6.74. 
D)  $5.82. 
A)  $9.00. 
B)  $7.50. 
C)  $6.74. 
D)  $5.82.

Question 16

Scenario 15-8
Mega Media Cable TV is able to purchase an exclusive right to sell a premium sports channel in its market area. Let's assume that Mega Media pays $100,000 a year for the exclusive marketing rights to the sports channel. Since Mega Media has already installed cable to all of the homes in its market area, the marginal cost of delivering the sports channel to subscribers is zero. The manager of Mega Media needs to know what price to charge for the sports channel service to maximize her profit. Before setting price, she hires an economist to estimate demand for the sports channel. The economist discovers that there are two types of subscribers who value premium sporting channels. First are the 3,000 die-hard sports fans who will pay as much as $150 a year for the new channel. Second, the premium sports channel will appeal to 20,000 occasional sports viewers who will pay as much as $25 a year for a subscription to it.
-Refer to Scenario 15-8. How much profit will Mega Media Cable TV earn if it sets the price at $25?

Accepted Answer

A)  $350,000 
B)  $450,000 
C)  $475,000 
D)  $575,000 
A)  $350,000 
B)  $450,000 
C)  $475,000 
D)  $575,000

Question 17

Which of the following is not a reason for the existence of a monopoly?

Accepted Answer

A)  sole ownership of a key resource 
B)  patents 
C)  copyrights 
D)  diseconomies of scale 
A)  sole ownership of a key resource 
B)  patents 
C)  copyrights 
D)  diseconomies of scale

Question 18

If government officials break up a natural monopoly into four smaller firms, then

Accepted Answer

A)  each firm will be unable to maximize profits due to increased competition. 
B)  competition will force firms to produce surplus output, which drives up price. 
C)  the average cost of production will increase. 
D)  consumers will benefit from lower average total costs. 
A)  each firm will be unable to maximize profits due to increased competition. 
B)  competition will force firms to produce surplus output, which drives up price. 
C)  the average cost of production will increase. 
D)  consumers will benefit from lower average total costs.

Question 19

Scenario 15-8
Mega Media Cable TV is able to purchase an exclusive right to sell a premium sports channel in its market area. Let's assume that Mega Media pays $100,000 a year for the exclusive marketing rights to the sports channel. Since Mega Media has already installed cable to all of the homes in its market area, the marginal cost of delivering the sports channel to subscribers is zero. The manager of Mega Media needs to know what price to charge for the sports channel service to maximize her profit. Before setting price, she hires an economist to estimate demand for the sports channel. The economist discovers that there are two types of subscribers who value premium sporting channels. First are the 3,000 die-hard sports fans who will pay as much as $150 a year for the new channel. Second, the premium sports channel will appeal to 20,000 occasional sports viewers who will pay as much as $25 a year for a subscription to it.
-Refer to Scenario 15-8. If Mega Media Cable TV is able to price discriminate, what would be the maximum amount of profit it could generate?

Accepted Answer

A)  $950,000 
B)  $850,000 
C)  $400,000 
D)  $350,000 
A)  $950,000 
B)  $850,000 
C)  $400,000 
D)  $350,000

Question 20

The economic inefficiency of a monopolist can be measured by the

Accepted Answer

A)  deadweight loss. 
B)  value of the unrealized trades that could be made if the monopolist produced the socially-efficient output. 
C)  area above marginal cost but beneath demand from the monopoly output to the socially-efficient output. 
D)  All of the above are correct. 
A)  deadweight loss. 
B)  value of the unrealized trades that could be made if the monopolist produced the socially-efficient output. 
C)  area above marginal cost but beneath demand from the monopoly output to the socially-efficient output. 
D)  All of the above are correct.

Exam 14: Monopoly

Figure 15-5 -Refer to Figure 15-5. A profit-maximizing monopoly's total revenue is equal to

Which of the following is an example of price discrimination?

Due to the nature of the patent laws on pharmaceuticals, the market for such drugs

Patents, copyrights, and trademarks

Price discrimination is the business practice of

The economic inefficiency of a monopolist can be measured by the

For a typical natural monopoly, average total cost is

Which of the following statements is correct?

When a monopolist is able to sell its product at different prices, it is engaging in

Scenario 15-3 A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $30, its average revenue is $60, and its average total cost is $34. -Refer to Scenario 15-3. The firm's profit-maximizing price is

A monopoly chooses to supply the market with a quantity of a product that is determined by the intersection of the

A profit-maximizing monopolist will produce the level of output at which

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

Table 15-16 A monopolist faces the following demand curve: -Refer to Table 15-16. The monopolist has total fixed costs of $40 and a constant marginal cost of $5. At the profit-maximizing level of output, the monopolist's average total cost is

Which of the following is not a reason for the existence of a monopoly?

If government officials break up a natural monopoly into four smaller firms, then

The economic inefficiency of a monopolist can be measured by the

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

Filters