Question 1

Which of the following statements is not correct?

Accepted Answer

A)  The government may use antitrust laws to break up an existing company to improve competition. 
B)  The government may break up a natural monopoly to lower the price charged to customers. 
C)  Private ownership is typically preferred to public ownership. 
D)  Sometimes the best strategy is for the government to do nothing about monopoly inefficiency because the "fix" may be worse than the problem. 
A)  The government may use antitrust laws to break up an existing company to improve competition. 
B)  The government may break up a natural monopoly to lower the price charged to customers. 
C)  Private ownership is typically preferred to public ownership. 
D)  Sometimes the best strategy is for the government to do nothing about monopoly inefficiency because the "fix" may be worse than the problem.

Question 2

What happens to the price and quantity sold of a drug when its patent runs out? i) The price will fall.
Ii) The quantity sold will fall.
Iii) The marginal cost of producing the drug will rise.

Accepted Answer

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

Question 3

Which of the following is a characteristic of a natural monopoly?

Accepted Answer

A)  Fixed costs are typically a small portion of total costs. 
B)  Average total cost declines over large regions of output. 
C)  The product sold is a natural resource such as diamonds or water. 
D)  All of the above are correct. 
A)  Fixed costs are typically a small portion of total costs. 
B)  Average total cost declines over large regions of output. 
C)  The product sold is a natural resource such as diamonds or water. 
D)  All of the above are correct.

Question 4

A government-created monopoly arises when

Accepted Answer

A)  government spending in a certain industry gives rise to monopoly power. 
B)  the government exercises its market control by encouraging competition among sellers. 
C)  the government gives a firm the exclusive right to sell some good or service. 
D)  Both a and c are correct. 
A)  government spending in a certain industry gives rise to monopoly power. 
B)  the government exercises its market control by encouraging competition among sellers. 
C)  the government gives a firm the exclusive right to sell some good or service. 
D)  Both a and c are correct.

Question 5

If a monopolist can practice perfect price discrimination, the monopolist will

Accepted Answer

A)  eliminate consumer surplus. 
B)  eliminate deadweight loss. 
C)  maximize profits. 
D)  All of the above are correct. 
A)  eliminate consumer surplus. 
B)  eliminate deadweight loss. 
C)  maximize profits. 
D)  All of the above are correct.

Question 6

Table 15-6
A monopolist faces the following demand curve:
  
-Refer to Table 15-6. What is the marginal revenue from the sale of the 4th unit?

Accepted Answer

A)  -$3 
B)  $3 
C)  $9 
D)  $24 
A)  -$3 
B)  $3 
C)  $9 
D)  $24

Question 7

Figure 15-4  
-Refer to Figure 15-4. The average total cost curve for a monopoly firm is depicted by curve

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  D. 
A)  A. 
B)  B. 
C)  C. 
D)  D.

Question 8

Most markets are not monopolies in the real world because

Accepted Answer

A)  firms usually face downward-sloping demand curves. 
B)  supply curves slope upward. 
C)  firms usually equate price with marginal cost. 
D)  there are reasonable substitutes for most goods. 
A)  firms usually face downward-sloping demand curves. 
B)  supply curves slope upward. 
C)  firms usually equate price with marginal cost. 
D)  there are reasonable substitutes for most goods.

Question 9

A benefit to society of the patent and copyright laws is that those laws

Accepted Answer

A)  help to keep prices down. 
B)  help to prevent a single firm from acquiring ownership of a key resource. 
C)  encourage creative activity. 
D)  discourage the production of inefficient products. 
A)  help to keep prices down. 
B)  help to prevent a single firm from acquiring ownership of a key resource. 
C)  encourage creative activity. 
D)  discourage the production of inefficient products.

Question 10

In a monopoly market, the socially efficient quantity of output is typically higher than the profit-maximizing quantity of output for the monopolist.

Accepted Answer

A) True 
 B)False

Question 11

Competitive firms have

Accepted Answer

A)  downward-sloping demand curves, and they can sell as much output as they desire at the market price. 
B)  downward-sloping demand curves, and they can sell only a limited quantity of output at each price. 
C)  horizontal demand curves, and they can sell as much output as they desire at the market price. 
D)  horizontal demand curves, and they can sell only a limited quantity of output at each price. 
A)  downward-sloping demand curves, and they can sell as much output as they desire at the market price. 
B)  downward-sloping demand curves, and they can sell only a limited quantity of output at each price. 
C)  horizontal demand curves, and they can sell as much output as they desire at the market price. 
D)  horizontal demand curves, and they can sell only a limited quantity of output at each price.

Question 12

The first major piece of antitrust legislation was the

Accepted Answer

A)  Clayton Act. 
B)  Obama Care Act. 
C)  Sherman Act. 
D)  Clinton Act. 
A)  Clayton Act. 
B)  Obama Care Act. 
C)  Sherman Act. 
D)  Clinton Act.

Question 13

Table 15-18
A monopolist faces the following demand curve:
   Suppose marginal cost is constant at $8 per unit.
-Refer to Table 15-18. When the price effect on revenue is greater than the output effect, marginal revenue is

Accepted Answer

A)  positive. This occurs with the 3rd unit of output. 
B)  positive. This occurs with the 4th unit of output. 
C)  negative. This occurs with the 5th unit of output. 
D)  negative. This occurs with the 6th unit of output. 
A)  positive. This occurs with the 3rd unit of output. 
B)  positive. This occurs with the 4th unit of output. 
C)  negative. This occurs with the 5th unit of output. 
D)  negative. This occurs with the 6th unit of output.

Question 14

Suppose a profit-maximizing monopolist faces a constant marginal cost of $10, 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 $4,000.

Accepted Answer

A) True 
 B)False

Question 15

When a single firm can supply a product to an entire market at a lower cost than could two or more firms, the industry is called a

Accepted Answer

A)  resource industry. 
B)  exclusive industry. 
C)  government monopoly. 
D)  natural monopoly. 
A)  resource industry. 
B)  exclusive industry. 
C)  government monopoly. 
D)  natural monopoly.

Question 16

Table 15-7
Sally owns the only shoe store in town. She has the following cost and revenue information.
  
-Refer to Table 15-7. What is the marginal revenue from selling the 8th pair of shoes?

Accepted Answer

A)  $10 
B)  $20 
C)  $40 
D)  $90 
A)  $10 
B)  $20 
C)  $40 
D)  $90

Question 17

Suppose a firm has a monopoly on the sale of a computer game and faces a downward-sloping demand curve. When selling the 50th game, the firm will always receive

Accepted Answer

A)  less marginal revenue on the 50th game than it received on the 49th game. 
B)  more average revenue on the 50th game than it received on the 49th game. 
C)  more total revenue on the 50 games than it received on the first 49 games. 
D)  Both b and c are correct. 
A)  less marginal revenue on the 50th game than it received on the 49th game. 
B)  more average revenue on the 50th game than it received on the 49th game. 
C)  more total revenue on the 50 games than it received on the first 49 games. 
D)  Both b and c are correct.

Question 18

Suppose a monopolist chooses the price and production level that maximizes its profit. From that point, to increase society's economic welfare, output would need to be increased as long as

Accepted Answer

A)  average revenue exceeds marginal cost. 
B)  average revenue exceeds average total cost. 
C)  marginal revenue exceeds marginal cost. 
D)  marginal revenue exceeds average total cost. 
A)  average revenue exceeds marginal cost. 
B)  average revenue exceeds average total cost. 
C)  marginal revenue exceeds marginal cost. 
D)  marginal revenue exceeds average total cost.

Question 19

How does a competitive market compare to a monopoly that engages in perfect price discrimination?

Accepted Answer

A)  In both cases, total social welfare is the same. 
B)  Total social welfare is higher in the competitive market than with the perfectly price discriminating monopoly. 
C)  In both cases, some potentially mutually beneficial trades do not occur. 
D)  Consumer surplus is the same in both cases. 
A)  In both cases, total social welfare is the same. 
B)  Total social welfare is higher in the competitive market than with the perfectly price discriminating monopoly. 
C)  In both cases, some potentially mutually beneficial trades do not occur. 
D)  Consumer surplus is the same in both cases.

Question 20

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. At Q = 500, the firm's profit is

Accepted Answer

A)  $13,000. 
B)  $15,000. 
C)  $17,000. 
D)  $30,000. 
A)  $13,000. 
B)  $15,000. 
C)  $17,000. 
D)  $30,000.

Exam 14: Monopoly

Which of the following statements is not correct?

What happens to the price and quantity sold of a drug when its patent runs out? i) The price will fall. Ii) The quantity sold will fall. Iii) The marginal cost of producing the drug will rise.

Which of the following is a characteristic of a natural monopoly?

A government-created monopoly arises when

If a monopolist can practice perfect price discrimination, the monopolist will

Table 15-6 A monopolist faces the following demand curve: -Refer to Table 15-6. What is the marginal revenue from the sale of the 4th unit?

Figure 15-4 -Refer to Figure 15-4. The average total cost curve for a monopoly firm is depicted by curve

Most markets are not monopolies in the real world because

A benefit to society of the patent and copyright laws is that those laws

In a monopoly market, the socially efficient quantity of output is typically higher than the profit-maximizing quantity of output for the monopolist.

Competitive firms have

The first major piece of antitrust legislation was the

Table 15-18 A monopolist faces the following demand curve: Suppose marginal cost is constant at $8 per unit. -Refer to Table 15-18. When the price effect on revenue is greater than the output effect, marginal revenue is

When a single firm can supply a product to an entire market at a lower cost than could two or more firms, the industry is called a

Table 15-7 Sally owns the only shoe store in town. She has the following cost and revenue information. -Refer to Table 15-7. What is the marginal revenue from selling the 8th pair of shoes?

Suppose a firm has a monopoly on the sale of a computer game and faces a downward-sloping demand curve. When selling the 50th game, the firm will always receive

Suppose a monopolist chooses the price and production level that maximizes its profit. From that point, to increase society's economic welfare, output would need to be increased as long as

How does a competitive market compare to a monopoly that engages in perfect price discrimination?

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. At Q = 500, the firm's profit is

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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