Question 1

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

Accepted Answer

A)  Mighty Mitch's Mining Company owns a unique plot of land in Tanzania, under which lies the only large deposit of Tanzanite in the world. 
B)  A pharmaceutical company obtains a patent for a specific high blood pressure medication. 
C)  A musician obtains a copyright for her original song. 
D)  An entrepreneur opens a popular new restaurant. 
A)  Mighty Mitch's Mining Company owns a unique plot of land in Tanzania, under which lies the only large deposit of Tanzanite in the world. 
B)  A pharmaceutical company obtains a patent for a specific high blood pressure medication. 
C)  A musician obtains a copyright for her original song. 
D)  An entrepreneur opens a popular new restaurant.

Question 2

One characteristic of a monopoly market is that the product is virtually identical to products produced by competing firms.

Accepted Answer

A) True 
 B)False

Question 3

Movie theatres charge different prices to different groups of people based on the differing marginal costs that exist from group to group.

Accepted Answer

A) True 
 B)False

Question 4

Which of the following would be most likely to have monopoly power?

Accepted Answer

A)  an online bookstore 
B)  a municipal water company 
C)  a local restaurant 
D)  a grocery store 
A)  an online bookstore 
B)  a municipal water company 
C)  a local restaurant 
D)  a grocery store

Question 5

Perfect price discrimination describes a situation in which the monopolist

Accepted Answer

A)  knows the exact willingness to pay of each of its customers. 
B)  charges exactly two different prices to exactly two different groups of customers. 
C)  maximizes consumer surplus. 
D)  experiences a zero economic profit. 
A)  knows the exact willingness to pay of each of its customers. 
B)  charges exactly two different prices to exactly two different groups of customers. 
C)  maximizes consumer surplus. 
D)  experiences a zero economic profit.

Question 6

Figure 15-25  
-Refer to Figure 15-25. If a regulator requires this firm to charge a socially optimal price, which letter represents the amount of output it will produce?

Accepted Answer

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

Question 7

Figure 15-4  
-Refer to Figure 15-4. If the monopoly firm is currently producing Q4 units of output, then a decrease in output will necessarily cause profit to

Accepted Answer

A)  remain unchanged. 
B)  decrease. 
C)  increase as long as the new level of output is at least Q2. 
D)  None of the above is correct. The monopolist currently maximizing profits at Q4. 
A)  remain unchanged. 
B)  decrease. 
C)  increase as long as the new level of output is at least Q2. 
D)  None of the above is correct. The monopolist currently maximizing profits at Q4.

Question 8

A monopoly creates a deadweight loss to society because it produces less output than the socially efficient level.

Accepted Answer

A) True 
 B)False

Question 9

Patent and copyright laws are major sources of

Accepted Answer

A)  natural monopolies. 
B)  government-created monopolies. 
C)  resource monopolies. 
D)  antitrust regulation. 
A)  natural monopolies. 
B)  government-created monopolies. 
C)  resource monopolies. 
D)  antitrust regulation.

Question 10

Which of the following statements is correct?

Accepted Answer

A)  The demand curve facing a competitive firm is horizontal, as is the demand curve facing a monopolist. 
B)  The demand curve facing a competitive firm is downward sloping, whereas the demand curve facing a monopolist is horizontal. 
C)  The demand curve facing a competitive firm is horizontal, whereas the demand curve facing a monopolist is downward sloping. 
D)  The demand curve facing a competitive firm is downward sloping, as is the demand curve facing a monopolist. 
A)  The demand curve facing a competitive firm is horizontal, as is the demand curve facing a monopolist. 
B)  The demand curve facing a competitive firm is downward sloping, whereas the demand curve facing a monopolist is horizontal. 
C)  The demand curve facing a competitive firm is horizontal, whereas the demand curve facing a monopolist is downward sloping. 
D)  The demand curve facing a competitive firm is downward sloping, as is the demand curve facing a monopolist.

Question 11

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 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 = $25; profit = $575,000 
B)  price = $25; profit = $475,000 
C)  price = $150; profit = $450,000 
D)  price = $150; profit = $350,000 
A)  price = $25; profit = $575,000 
B)  price = $25; profit = $475,000 
C)  price = $150; profit = $450,000 
D)  price = $150; profit = $350,000

Question 12

For a monopolist,

Accepted Answer

A)  average revenue is always greater than the price of the good. 
B)  marginal revenue is always less than the price of the good. 
C)  marginal cost is always greater than average total cost. 
D)  marginal revenue equals marginal cost at the point where total revenue is maximized. 
A)  average revenue is always greater than the price of the good. 
B)  marginal revenue is always less than the price of the good. 
C)  marginal cost is always greater than average total cost. 
D)  marginal revenue equals marginal cost at the point where total revenue is maximized.

Question 13

Antitrust laws

Accepted Answer

A)  prevent firms from maximizing profits. 
B)  allow the government to prevent mergers, even ones that would benefit consumers. 
C)  require the government to measure both the benefits and costs of a potential merger. 
D)  All of the above are correct. 
A)  prevent firms from maximizing profits. 
B)  allow the government to prevent mergers, even ones that would benefit consumers. 
C)  require the government to measure both the benefits and costs of a potential merger. 
D)  All of the above are correct.

Question 14

Which of the following is the preferred strategy for the government to follow to remedy the inefficient allocation of resources associated with monopolies?

Accepted Answer

A)  preventing mergers through antitrust laws 
B)  regulating the prices that monopolies can charge 
C)  doing nothing 
D)  None of the above strategies is preferred. Each is a viable strategy. 
A)  preventing mergers through antitrust laws 
B)  regulating the prices that monopolies can charge 
C)  doing nothing 
D)  None of the above strategies is preferred. Each is a viable strategy.

Question 15

Scenario 15-4
Suppose a monopolist has a demand curve that can be expressed as P=90-Q. The monopolist's marginal revenue curve can be expressed as MR=90-2Q. The monopolist has constant marginal costs and average total costs of $10.
-Refer to Scenario 15-4. The profit-maximizing monopolist will charge a price of

Accepted Answer

A)  $50. 
B)  $40. 
C)  $20. 
D)  $10. 
A)  $50. 
B)  $40. 
C)  $20. 
D)  $10.

Question 16

Table 15-4
A monopolist faces the following demand curve:
  
-Refer to Table 15-4. In order to maximize profits, the monopolist should produce

Accepted Answer

A)  7.5 units. 
B)  10 units. 
C)  where marginal revenue equals marginal cost. 
D)  Both a and c are correct. 
A)  7.5 units. 
B)  10 units. 
C)  where marginal revenue equals marginal cost. 
D)  Both a and c are correct.

Question 17

Figure 15-3  
-Refer to Figure 15-3. Which panel could represent the demand curve facing a soybean farmer?

Accepted Answer

A)  Panel A 
B)  Panel B 
C)  Panel C 
D)  Panel D 
A)  Panel A 
B)  Panel B 
C)  Panel C 
D)  Panel D

Question 18

The laws governing patents and copyrights

Accepted Answer

A)  eliminate the need for firms to engage in research and development. 
B)  are intended to serve private interests, not the public's interest. 
C)  reduce fixed costs for firms that obtain them. 
D)  None of the above is correct. 
A)  eliminate the need for firms to engage in research and development. 
B)  are intended to serve private interests, not the public's interest. 
C)  reduce fixed costs for firms that obtain them. 
D)  None of the above is correct.

Question 19

Figure 15-17  
-Refer to Figure 15-17. Which of the following areas represents the consumer surplus from this profit-maximizing monopolist?

Accepted Answer

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

Question 20

The task of economic regulation is to

Accepted Answer

A)  protect monopoly profits. 
B)  approximate the results of the competitive market. 
C)  replace competition with government ownership. 
D)  increase competition within the market. 
A)  protect monopoly profits. 
B)  approximate the results of the competitive market. 
C)  replace competition with government ownership. 
D)  increase competition within the market.

Exam 14: Monopoly

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

One characteristic of a monopoly market is that the product is virtually identical to products produced by competing firms.

Movie theatres charge different prices to different groups of people based on the differing marginal costs that exist from group to group.

Which of the following would be most likely to have monopoly power?

Perfect price discrimination describes a situation in which the monopolist

Figure 15-25 -Refer to Figure 15-25. If a regulator requires this firm to charge a socially optimal price, which letter represents the amount of output it will produce?

Figure 15-4 -Refer to Figure 15-4. If the monopoly firm is currently producing Q4 units of output, then a decrease in output will necessarily cause profit to

A monopoly creates a deadweight loss to society because it produces less output than the socially efficient level.

Patent and copyright laws are major sources of

Which of the following statements is correct?

For a monopolist,

Antitrust laws

Which of the following is the preferred strategy for the government to follow to remedy the inefficient allocation of resources associated with monopolies?

Table 15-4 A monopolist faces the following demand curve: -Refer to Table 15-4. In order to maximize profits, the monopolist should produce

Figure 15-3 -Refer to Figure 15-3. Which panel could represent the demand curve facing a soybean farmer?

The laws governing patents and copyrights

Figure 15-17 -Refer to Figure 15-17. Which of the following areas represents the consumer surplus from this profit-maximizing monopolist?

The task of economic regulation is to

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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