Question 1

When we compare economic welfare in a monopoly market to a competitive market, the profits earned by the monopolist represent

Accepted Answer

A)  a loss in total welfare. 
B)  a transfer of benefits from the buyer to the seller. 
C)  the higher marginal costs incurred by the monopolists in comparison to competitive firms. 
D)  All of the above are correct. 
A)  a loss in total welfare. 
B)  a transfer of benefits from the buyer to the seller. 
C)  the higher marginal costs incurred by the monopolists in comparison to competitive firms. 
D)  All of the above are correct.

Question 2

If the distribution of water is a natural monopoly, then i) imultiple firms would likely each have to pay large fixed costs to develop their own network of pipes.
Ii) allowing for competition among different firms in the water-distribution industry is efficient.
Iii) a single firm can serve the market at the lowest possible average total cost.

Accepted Answer

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

Question 3

A monopolist's supply curve is horizontal.

Accepted Answer

A) True 
 B)False

Question 4

At the profit-maximizing quantity of output for a monopolist, average revenue, marginal revenue, and price are all equal.

Accepted Answer

A) True 
 B)False

Question 5

Which statement best describes the effects) that occur when a monopoly firm reduces the price of its product?

Accepted Answer

A)  The "price effect" causes total revenue to fall. 
B)  The "output effect" causes total revenue to rise. 
C)  The "revenue effect" causes total revenue to remain constant. 
D)  Both a and b are correct. 
A)  The "price effect" causes total revenue to fall. 
B)  The "output effect" causes total revenue to rise. 
C)  The "revenue effect" causes total revenue to remain constant. 
D)  Both a and b are correct.

Question 6

Name brand drugs are able to continue capitalizing on their market power even after generic drugs enter the market because i) almost all people fear the generic drug companies are devoting too few resources to research and development.
Ii) some people fear that generic drugs are inferior.
Iii) some people are loyal to the name brand.

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 7

Table 15-15
A monopolist faces the following demand curve:
  
-Refer to Table 15-15. 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 profit is

Accepted Answer

A)  $88. 
B)  $8. 
C)  $6. 
D)  We do not have enough information to determine profit. 
A)  $88. 
B)  $8. 
C)  $6. 
D)  We do not have enough information to determine profit.

Question 8

Figure 15-3  
-Refer to Figure 15-3. Which panel could represent the demand curve facing a local cable television provider if that firm in a monopolist?

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 9

Suppose a monopolist is able to charge each customer a price equal to that customer's willingness­to­pay for the product. Then the monopolist is engaging in

Accepted Answer

A)  marginal cost pricing. 
B)  arbitrage pricing. 
C)  voodoo economics. 
D)  perfect price discrimination. 
A)  marginal cost pricing. 
B)  arbitrage pricing. 
C)  voodoo economics. 
D)  perfect price discrimination.

Question 10

When a natural monopoly exists, it is

Accepted Answer

A)  always cost effective for government-owned firms to produce the product. 
B)  never cost effective for one firm to produce the product. 
C)  always cost effective for two or more private firms to produce the product. 
D)  never cost effective for two or more private firms to produce the product. 
A)  always cost effective for government-owned firms to produce the product. 
B)  never cost effective for one firm to produce the product. 
C)  always cost effective for two or more private firms to produce the product. 
D)  never cost effective for two or more private firms to produce the product.

Question 11

Table 15-11
The following table shows quantity, price, and marginal cost information for a monopoly:
  
-Refer to Table 15-11. What price should the firm charge to maximize its profit?

Accepted Answer

A)  $4 
B)  $5 
C)  $6 
D)  $7 
A)  $4 
B)  $5 
C)  $6 
D)  $7

Question 12

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 total revenue 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.

Question 13

Bob's Butcher Shop is the only place within 100 miles that sells bison burgers. Assuming that Bob is maximizing his profit, which of the following statements is true?

Accepted Answer

A)  The price of Bob's bison burgers will be less than Bob's marginal cost. 
B)  The price of Bob's bison burgers will exceed Bob's marginal cost. 
C)  The price of Bob's bison burgers will equal Bob's marginal cost. 
D)  Costs are irrelevant to Bob because he is a monopolist. 
A)  The price of Bob's bison burgers will be less than Bob's marginal cost. 
B)  The price of Bob's bison burgers will exceed Bob's marginal cost. 
C)  The price of Bob's bison burgers will equal Bob's marginal cost. 
D)  Costs are irrelevant to Bob because he is a monopolist.

Question 14

The market demand curve for a monopolist is typically

Accepted Answer

A)  unit price elastic. 
B)  downward sloping. 
C)  horizontal. 
D)  vertical. 
A)  unit price elastic. 
B)  downward sloping. 
C)  horizontal. 
D)  vertical.

Question 15

Table 15-7
Sally owns the only shoe store in town. She has the following cost and revenue information.
  
-Refer to Table 15-7. Sally will maximize her profits by selling

Accepted Answer

A)  3 pairs of shoes. 
B)  4 pairs of shoes. 
C)  6 pairs of shoes. 
D)  7 pairs of shoes. 
A)  3 pairs of shoes. 
B)  4 pairs of shoes. 
C)  6 pairs of shoes. 
D)  7 pairs of shoes.

Question 16

One example of price discrimination occurs in the publishing industry when a publisher initially releases an expensive hardcover edition of a popular novel and later releases a cheaper paperback edition. Use this example to demonstrate the benefits and potential pitfalls of a price discrimination pricing strategy.

Accepted Answer

The answer should address the three basi

Question 17

In order for a firm to maximize profits through price discrimination, the firm must have some market power and be able to prevent arbitrage.

Accepted Answer

A) True 
 B)False

Question 18

Figure 15-13  
-Refer to Figure 15-13. A profit-maximizing monopolist would create a deadweight loss to society valued at

Accepted Answer

A)  $12. 
B)  $24. 
C)  $42. 
D)  $84. 
A)  $12. 
B)  $24. 
C)  $42. 
D)  $84.

Question 19

When a monopolist increases the quantity that it sells, all else equal, total revenue increases, which is called the output effect.

Accepted Answer

A) True 
 B)False

Question 20

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 have a deadweight loss of

Accepted Answer

A)  $6,400. 
B)  $3,200. 
C)  $1,600. 
D)  $800. 
A)  $6,400. 
B)  $3,200. 
C)  $1,600. 
D)  $800.

When we compare economic welfare in a monopoly market to a competitive market, the profits earned by the monopolist represent

A monopolist's supply curve is horizontal.

At the profit-maximizing quantity of output for a monopolist, average revenue, marginal revenue, and price are all equal.

Which statement best describes the effects) that occur when a monopoly firm reduces the price of its product?

Table 15-15 A monopolist faces the following demand curve: -Refer to Table 15-15. 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 profit is

Figure 15-3 -Refer to Figure 15-3. Which panel could represent the demand curve facing a local cable television provider if that firm in a monopolist?

Suppose a monopolist is able to charge each customer a price equal to that customer's willingnesstopay for the product. Then the monopolist is engaging in

When a natural monopoly exists, it is

Table 15-11 The following table shows quantity, price, and marginal cost information for a monopoly: -Refer to Table 15-11. What price should the firm charge to maximize its profit?

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 total revenue is

Bob's Butcher Shop is the only place within 100 miles that sells bison burgers. Assuming that Bob is maximizing his profit, which of the following statements is true?

The market demand curve for a monopolist is typically

Table 15-7 Sally owns the only shoe store in town. She has the following cost and revenue information. -Refer to Table 15-7. Sally will maximize her profits by selling

In order for a firm to maximize profits through price discrimination, the firm must have some market power and be able to prevent arbitrage.

Figure 15-13 -Refer to Figure 15-13. A profit-maximizing monopolist would create a deadweight loss to society valued at

When a monopolist increases the quantity that it sells, all else equal, total revenue increases, which is called the output effect.

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

Exam 14: Monopoly

When we compare economic welfare in a monopoly market to a competitive market, the profits earned by the monopolist represent

A monopolist's supply curve is horizontal.

At the profit-maximizing quantity of output for a monopolist, average revenue, marginal revenue, and price are all equal.

Which statement best describes the effects) that occur when a monopoly firm reduces the price of its product?

Table 15-15 A monopolist faces the following demand curve: -Refer to Table 15-15. 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 profit is

Figure 15-3 -Refer to Figure 15-3. Which panel could represent the demand curve facing a local cable television provider if that firm in a monopolist?

Suppose a monopolist is able to charge each customer a price equal to that customer's willingness­to­pay for the product. Then the monopolist is engaging in

When a natural monopoly exists, it is

Table 15-11 The following table shows quantity, price, and marginal cost information for a monopoly: -Refer to Table 15-11. What price should the firm charge to maximize its profit?

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 total revenue is

Bob's Butcher Shop is the only place within 100 miles that sells bison burgers. Assuming that Bob is maximizing his profit, which of the following statements is true?

The market demand curve for a monopolist is typically

Table 15-7 Sally owns the only shoe store in town. She has the following cost and revenue information. -Refer to Table 15-7. Sally will maximize her profits by selling

In order for a firm to maximize profits through price discrimination, the firm must have some market power and be able to prevent arbitrage.

Figure 15-13 -Refer to Figure 15-13. A profit-maximizing monopolist would create a deadweight loss to society valued at

When a monopolist increases the quantity that it sells, all else equal, total revenue increases, which is called the output effect.

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

Suppose a monopolist is able to charge each customer a price equal to that customer's willingnesstopay for the product. Then the monopolist is engaging in