Question 1

Before World War II, Alcoa controlled the supply of bauxite in the United States.Because bauxite is a scarce resource that is vital to the production of aluminum:

Accepted Answer

A) Alcoa was bound to charge a nominal price in the U.S.aluminum market. 
B) Alcoa had a monopoly in the U.S.aluminum market. 
C) the U.S.aluminum market was highly competitive. 
D) Alcoa can be said to have operated a monopolistically competitive market. 
E) Alcoa was altruistic and willing to share its bauxite with other aluminum firms. 
A) Alcoa was bound to charge a nominal price in the U.S.aluminum market. 
B) Alcoa had a monopoly in the U.S.aluminum market. 
C) the U.S.aluminum market was highly competitive. 
D) Alcoa can be said to have operated a monopolistically competitive market. 
E) Alcoa was altruistic and willing to share its bauxite with other aluminum firms.

Question 2

The following figure shows revenue and cost curves of a monopolist. Figure 24.8   AR: Average revenue curve
MR: Marginal revenue curve
MC: Marginal cost curve
According to Figure 24.7, what will be the price charged by a perfectly competitive firm?

Accepted Answer

A) P4 
B) P3 
C) P2 
D) P1 
E) 0 
A) P4 
B) P3 
C) P2 
D) P1 
E) 0

Question 3

The following table shows the units of the output sold at different price levels by Gizmo's Inc. Table 24.1
  Refer to Table 24.1.At what level of output is total revenue maximized?

Accepted Answer

A) 3 
B) 4 
C) 5 
D) 6 
E) 7 
A) 3 
B) 4 
C) 5 
D) 6 
E) 7

Question 4

The following figure shows the revenue curves of a monopolist: Figure 24.6   D: Average revenue
MR: Marginal revenue
In Figure 24.6, assume that marginal costs are constant at $2, 500 and fixed costs are 0.What would be the amount of consumer surplus if the market was perfectly competitive?

Accepted Answer

A) $1, 000, 000 
B) $500, 000 
C) $300, 000 
D) $250, 000 
A) $1, 000, 000 
B) $500, 000 
C) $300, 000 
D) $250, 000

Question 5

If a monopolist's demand curve shifts to the left such that it becomes tangent to the ATC curve at the output for which marginal revenue equals marginal cost, the monopolist will make only a normal profit.

Accepted Answer

A) True 
 B)False

Question 6

When Glaxo-Wellcome introduced AZT, an AIDS drug, it was able to enjoy high profits because:

Accepted Answer

A) it was highly recommended by the doctors. 
B) the quick response of rivals in introducing substitute drugs. 
C) barriers to entry provided by patents. 
D) of its competitive price in the pharmaceutical industry. 
E) it experienced constant returns to scale in the long run. 
A) it was highly recommended by the doctors. 
B) the quick response of rivals in introducing substitute drugs. 
C) barriers to entry provided by patents. 
D) of its competitive price in the pharmaceutical industry. 
E) it experienced constant returns to scale in the long run.

Question 7

Given the same unit costs, a monopolist will produce less output than a perfectly competitive firm.

Accepted Answer

A) True 
 B)False

Question 8

Which of the following is an industry without significant barriers to entry?

Accepted Answer

A) Electricity generation 
B) Natural gas distribution 
C) Cable television provision 
D) Corn farming 
E) Postal services 
A) Electricity generation 
B) Natural gas distribution 
C) Cable television provision 
D) Corn farming 
E) Postal services

Question 9

Why is there a supply point and not a supply curve for a monopolist?

Accepted Answer

A) A monopolist cannot affect the market price by changing its supply. 
B) A monopolist produces a homogeneous product having similar substitutes 
C) A monopolist equates the price which it charges with its marginal cost 
D) There is only one quantity and price at which a monopolist operates 
E) A monopolist supplies to a large number of consumers 
A) A monopolist cannot affect the market price by changing its supply. 
B) A monopolist produces a homogeneous product having similar substitutes 
C) A monopolist equates the price which it charges with its marginal cost 
D) There is only one quantity and price at which a monopolist operates 
E) A monopolist supplies to a large number of consumers

Question 10

The marginal revenue curve of a monopolist firm coincides with its average revenue curve.

Accepted Answer

A) True 
 B)False

Question 11

The following figure shows the revenue curves of a monopolist: Figure 24.6   D: Average revenue
MR: Marginal revenue
In Figure 24.6, assume that marginal costs are constant at $2, 500 and fixed costs are zero.What price and output level would result from perfect competition?

Accepted Answer

A) P = $2, 500, Q = 400 
B) P = $2, 500, Q = 200 
C) P = $5, 000, Q = 0 
D) P = $4, 000, Q = 400 
E) P = $4, 000, Q = 200 
A) P = $2, 500, Q = 400 
B) P = $2, 500, Q = 200 
C) P = $5, 000, Q = 0 
D) P = $4, 000, Q = 400 
E) P = $4, 000, Q = 200

Question 12

The figure given below shows the demand curves of two classes of buyers for tickets to a football match. Figure 24.4   D1: Demand curve of group 1
D2: Demand curve of group 2
MR1: Marginal revenue of group 1
MR2: Marginal revenue of group 2
MC: Marginal cost
Refer to Figure 24.4.What price must be charged to both the groups to maximize profits?

Accepted Answer

A) P1 
B) P2 
C) Group 1 must be charged P1 and group 2 must be charged P2. 
D) Group 1 must be charged P2 and group 2 must be charged P1. 
E) Both the groups must be charged a price that is equal to the marginal cost. 
A) P1 
B) P2 
C) Group 1 must be charged P1 and group 2 must be charged P2. 
D) Group 1 must be charged P2 and group 2 must be charged P1. 
E) Both the groups must be charged a price that is equal to the marginal cost.

Question 13

When long-run average costs are declining for the entire range of demand, the firm is known as a(n):

Accepted Answer

A) local monopoly. 
B) regulated monopoly. 
C) monopolistically competitive firm. 
D) natural monopoly. 
E) oligopoly. 
A) local monopoly. 
B) regulated monopoly. 
C) monopolistically competitive firm. 
D) natural monopoly. 
E) oligopoly.

Question 14

A monopolist sells a lesser quantity at a higher price compared to a perfect competitor.

Accepted Answer

A) True 
 B)False

Question 15

In many cities the market for cab services is monopolized.This monopoly arises because:

Accepted Answer

A) of economies of scale. 
B) of government restriction of entry. 
C) there is a limited space on the streets for taxis. 
D) it protects the consumers from unscrupulous drivers. 
E) of high fixed costs of entering the business. 
A) of economies of scale. 
B) of government restriction of entry. 
C) there is a limited space on the streets for taxis. 
D) it protects the consumers from unscrupulous drivers. 
E) of high fixed costs of entering the business.

Question 16

Firms that have downward-sloping demand curves:

Accepted Answer

A) earn positive economic profits even in the long run. 
B) produce homogeneous products. 
C) operate in a perfectly competitive market structure. 
D) enjoy monopoly or market power. 
E) be price takers. 
A) earn positive economic profits even in the long run. 
B) produce homogeneous products. 
C) operate in a perfectly competitive market structure. 
D) enjoy monopoly or market power. 
E) be price takers.

Question 17

The following table shows the marginal revenues earned by a price discriminating monopolist from two different markets. Table 24.4
  Refer to Table 24.4.How would a price-discriminating monopolist allocate his or her product between market X and market Y if marginal cost is $40 in both markets?

Accepted Answer

A) 4 units in market X;1 unit in market Y 
B) 3 units in market X;2 units in market Y 
C) 2 units in market X;3 units in market Y 
D) Nothing in market X;5 units in market Y 
E) 5 units in market X;nothing in market Y 
A) 4 units in market X;1 unit in market Y 
B) 3 units in market X;2 units in market Y 
C) 2 units in market X;3 units in market Y 
D) Nothing in market X;5 units in market Y 
E) 5 units in market X;nothing in market Y

Question 18

A monopolist can charge a high price if:

Accepted Answer

A) the quantity demanded is positively related to price. 
B) the demand is relatively price-elastic. 
C) the demand curve is negatively sloped. 
D) the demand is relatively price-inelastic. 
E) there exist a large number of substitutes. 
A) the quantity demanded is positively related to price. 
B) the demand is relatively price-elastic. 
C) the demand curve is negatively sloped. 
D) the demand is relatively price-inelastic. 
E) there exist a large number of substitutes.

Question 19

The table given below shows the price charged by a firm and the marginal cost incurred by it for the different levels of the output. Table 24.2
  The firm described in Table 24.2:

Accepted Answer

A) must be a monopoly firm. 
B) must be a perfectly competitive firm. 
C) cannot be a perfectly competitive firm. 
D) has no market power. 
E) cannot be a monopoly. 
A) must be a monopoly firm. 
B) must be a perfectly competitive firm. 
C) cannot be a perfectly competitive firm. 
D) has no market power. 
E) cannot be a monopoly.

Question 20

The following figures show the demand and cost curves of a perfectly competitive and a monopoly firm respectively. Figure 24.7   D: Average Revenue
AC: Average cost
MC: Marginal cost
MR: Marginal cost
According to Figure 24.7, when the monopolist is maximizing profit:

Accepted Answer

A) its resources are not being used efficiently. 
B) its price is higher than that charged by the perfectly competitive firm. 
C) its price is equal to the price charged by the perfectly competitive firm. 
D) it is earning above-normal profit. 
E) it is actually incurring a loss. 
A) its resources are not being used efficiently. 
B) its price is higher than that charged by the perfectly competitive firm. 
C) its price is equal to the price charged by the perfectly competitive firm. 
D) it is earning above-normal profit. 
E) it is actually incurring a loss.

Exam 45: Monopoly

Before World War II, Alcoa controlled the supply of bauxite in the United States.Because bauxite is a scarce resource that is vital to the production of aluminum:

The following figure shows revenue and cost curves of a monopolist. Figure 24.8 AR: Average revenue curve MR: Marginal revenue curve MC: Marginal cost curve According to Figure 24.7, what will be the price charged by a perfectly competitive firm?

The following table shows the units of the output sold at different price levels by Gizmo's Inc. Table 24.1 Refer to Table 24.1.At what level of output is total revenue maximized?

The following figure shows the revenue curves of a monopolist: Figure 24.6 D: Average revenue MR: Marginal revenue In Figure 24.6, assume that marginal costs are constant at $2, 500 and fixed costs are 0.What would be the amount of consumer surplus if the market was perfectly competitive?

If a monopolist's demand curve shifts to the left such that it becomes tangent to the ATC curve at the output for which marginal revenue equals marginal cost, the monopolist will make only a normal profit.

When Glaxo-Wellcome introduced AZT, an AIDS drug, it was able to enjoy high profits because:

Given the same unit costs, a monopolist will produce less output than a perfectly competitive firm.

Which of the following is an industry without significant barriers to entry?

Why is there a supply point and not a supply curve for a monopolist?

The marginal revenue curve of a monopolist firm coincides with its average revenue curve.

The following figure shows the revenue curves of a monopolist: Figure 24.6 D: Average revenue MR: Marginal revenue In Figure 24.6, assume that marginal costs are constant at $2, 500 and fixed costs are zero.What price and output level would result from perfect competition?

When long-run average costs are declining for the entire range of demand, the firm is known as a(n):

A monopolist sells a lesser quantity at a higher price compared to a perfect competitor.

In many cities the market for cab services is monopolized.This monopoly arises because:

Firms that have downward-sloping demand curves:

The following table shows the marginal revenues earned by a price discriminating monopolist from two different markets. Table 24.4 Refer to Table 24.4.How would a price-discriminating monopolist allocate his or her product between market X and market Y if marginal cost is $40 in both markets?

A monopolist can charge a high price if:

The table given below shows the price charged by a firm and the marginal cost incurred by it for the different levels of the output. Table 24.2 The firm described in Table 24.2:

The following figures show the demand and cost curves of a perfectly competitive and a monopoly firm respectively. Figure 24.7 D: Average Revenue AC: Average cost MC: Marginal cost MR: Marginal cost According to Figure 24.7, when the monopolist is maximizing profit:

Economics: The World Around You

Choice, Opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

Elasticity: Demand and Supply

National Income Accounting

an Introduction to the Foreign Exchange Market and the Balance of Payments

Consumer Choice

Supply: The Costs of Doing Business

Unemployment and Inflation

Macroeconomic Equilibrium: Aggregate Demand and Supply

Profit Maximization

Aggregate Expenditures

Perfect Competition

Income and Expenditures Equilibrium

Monopoly

Fiscal Policy

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Money and Banking

Market Failures, Government Failures, and Rent Seeking

Monetary Policy

Macroeconomic Policy: Tradeoffs, Expectations, Credibility, and Sources of Business Cycles

Resource Markets

Macroeconomic Viewpoints: New Keynesian, Monetarist, and New Classical

The Labor Market

Capital Markets

Economic Growth

Development Economics

the Land Market and Natural Resources

Aging, Social Security and Health Care

Globalization

Elasticity: Demand and Supply

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

Consumer Choice

International Trade Restrictions

World Trade Equilibrium

Exchange Rates and Financial Links Between Countries

International Trade Restrictions

Supply: the Costs of Doing Business

Exchange Rates and Financial Links Between Countries

Profit Maximization

Perfect Competition

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Resource Markets

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution, Poverty and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

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