Question 1

A monopolist maximizes profit:

Accepted Answer

A) by charging the highest possible price on the demand curve. 
B) by charging a price that equals its marginal cost. 
C) by producing a level of output where the average-cost curve intersects the demand curve. 
D) by producing a level of output where marginal revenue equals marginal cost. 
E) by charging a price equal to its average total cost. 
A) by charging the highest possible price on the demand curve. 
B) by charging a price that equals its marginal cost. 
C) by producing a level of output where the average-cost curve intersects the demand curve. 
D) by producing a level of output where marginal revenue equals marginal cost. 
E) by charging a price equal to its average total cost.

Question 2

The following table shows the units of the output sold at different price levels by Gizmo's Inc. Table 24.1
  According to Table 24.1, Gizmo's cannot be:

Accepted Answer

A) a monopsonist. 
B) a monopoly. 
C) an oligopolistic firm. 
D) a perfectly competitive firm. 
E) a monopolistically competitive firm. 
A) a monopsonist. 
B) a monopoly. 
C) an oligopolistic firm. 
D) a perfectly competitive firm. 
E) a monopolistically competitive firm.

Question 3

To practice price discrimination, a firm:

Accepted Answer

A) must be facing a relatively elastic demand curve. 
B) must have customers with different elasticities of demand. 
C) must not be able to distinguish between customers based on elasticities of demand. 
D) must not be able to prevent resale of the product. 
E) must be a price taker. 
A) must be facing a relatively elastic demand curve. 
B) must have customers with different elasticities of demand. 
C) must not be able to distinguish between customers based on elasticities of demand. 
D) must not be able to prevent resale of the product. 
E) must be a price taker.

Question 4

Why does a efficiency loss arise under monopoly rather than under perfect competition?

Accepted Answer

A) A monopolist charges a lower price for the product to gain market entry. 
B) A monopolist sells a lesser quantity at a higher price. 
C) There is a net increase in consumer surplus but a net decline in producer surplus. 
D) There is an increase in producer surplus, consumer surplus remaining unchanged. 
E) A monopolist sells a greater quantity than a perfect competitor. 
A) A monopolist charges a lower price for the product to gain market entry. 
B) A monopolist sells a lesser quantity at a higher price. 
C) There is a net increase in consumer surplus but a net decline in producer surplus. 
D) There is an increase in producer surplus, consumer surplus remaining unchanged. 
E) A monopolist sells a greater quantity than a perfect competitor.

Question 5

For a monopolist with a linear demand curve, total revenue is maximum when:

Accepted Answer

A) marginal revenue is positive. 
B) marginal revenue is at its maximum. 
C) the price elasticity of demand is greater than unity. 
D) the price elasticity of demand is equal to unity. 
E) the marginal revenue is at its minimum. 
A) marginal revenue is positive. 
B) marginal revenue is at its maximum. 
C) the price elasticity of demand is greater than unity. 
D) the price elasticity of demand is equal to unity. 
E) the marginal revenue is at its minimum.

Question 6

The long-run equilibrium price-output combination for a monopolist is economically inefficient because:

Accepted Answer

A) it does not operate on the minimum point of its marginal-cost curve. 
B) it does not produce the level of output at which price equals marginal cost. 
C) consumer surplus is maximized but not producer surplus. 
D) producer surplus is maximized but not consumer surplus. 
E) it operates on the downward sloping portion of the average-total-cost curve. 
A) it does not operate on the minimum point of its marginal-cost curve. 
B) it does not produce the level of output at which price equals marginal cost. 
C) consumer surplus is maximized but not producer surplus. 
D) producer surplus is maximized but not consumer surplus. 
E) it operates on the downward sloping portion of the average-total-cost curve.

Question 7

A monopolist's supply curve cannot be derived directly from its marginal cost curve as in the case of a competitive firm.

Accepted Answer

A) True 
 B)False

Question 8

If a monopolist is producing at that output where price equals average variable cost in the short run, then it is earning a negative profit.

Accepted Answer

A) True 
 B)False

Question 9

The table given below shows the price, marginal revenue and marginal cost of a monopolist at different levels of the output.The firm does not incur a fixed cost of production. Table 24.5
  Refer to Table 24.5.Assuming that the monopolist is maximizing profits, the price the monopolist will charge is _____.

Accepted Answer

A) $13. 
B) $14. 
C) $12. 
D) $16. 
E) $15. 
A) $13. 
B) $14. 
C) $12. 
D) $16. 
E) $15.

Question 10

Price discrimination is best described as a monopolist:

Accepted Answer

A) selling a product at the fixed market determined price. 
B) charging buyers an excessive price for the product. 
C) charging different customers different prices when the costs are equal. 
D) selling a product for different prices during two different periods of time. 
E) charging same prices to different customers when the costs are different. 
A) selling a product at the fixed market determined price. 
B) charging buyers an excessive price for the product. 
C) charging different customers different prices when the costs are equal. 
D) selling a product for different prices during two different periods of time. 
E) charging same prices to different customers when the costs are different.

Question 11

Monopolization is a process by which the government restricts the growth of monopoly firms.

Accepted Answer

A) True 
 B)False

Question 12

Which of the following will be the best example of a monopoly firm?

Accepted Answer

A) The US Bank 
B) The Bank of America 
C) National City Bank 
D) The Federal Reserve 
E) Washington Mutual Funds Bank 
A) The US Bank 
B) The Bank of America 
C) National City Bank 
D) The Federal Reserve 
E) Washington Mutual Funds Bank

Question 13

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, which of the following statements is incorrect about the price P1?

Accepted Answer

A) The monopolist is maximizing profit at P1. 
B) In the long run, firms will leave the perfectly competitive industry and force the price upward. 
C) The monopolist is earning normal profit at P1. 
D) Both the firms maximize their profits at P1 . 
E) The perfectly competitive firm would produce 10 units of output at P1. 
A) The monopolist is maximizing profit at P1. 
B) In the long run, firms will leave the perfectly competitive industry and force the price upward. 
C) The monopolist is earning normal profit at P1. 
D) Both the firms maximize their profits at P1 . 
E) The perfectly competitive firm would produce 10 units of output at P1.

Question 14

Economies of scale, control over a scarce input, and patents are all examples of barriers to entry.

Accepted Answer

A) True 
 B)False

Question 15

The following figure shows the revenue and cost curves of a monopolist. Figure 24.3   D: Average Revenue
MR: Marginal Revenue
ATC: Average Total Cost
MC: marginal Cost
Consider the monopolist described in Figure 24.3.The firm can maximize profit by producing:

Accepted Answer

A) zero units. 
B) Q1 units. 
C) Q2 units. 
D) Q3 units. 
E) Q4 units. 
A) zero units. 
B) Q1 units. 
C) Q2 units. 
D) Q3 units. 
E) Q4 units.

Question 16

In order to practice price discrimination successfully, a monopolist must ensure that there is no resale of the product.

Accepted Answer

A) True 
 B)False

Question 17

Compared with a perfectly competitive market with similar cost conditions, a monopolist will have:

Accepted Answer

A) a higher output and lower price. 
B) a lower output and lower price. 
C) a higher output and a lower price. 
D) a lower output and a higher price. 
E) equal output and a higher price. 
A) a higher output and lower price. 
B) a lower output and lower price. 
C) a higher output and a lower price. 
D) a lower output and a higher price. 
E) equal output and a higher price.

Question 18

The price charged by a monopolist is the point on the demand curve that corresponds to the output where marginal revenue equals marginal cost.

Accepted Answer

A) True 
 B)False

Question 19

If a monopolist is producing at a point at which marginal revenue is greater than marginal cost, it should:

Accepted Answer

A) continue producing at the current level. 
B) raise its prices. 
C) lower its prices. 
D) increase the level of production. 
E) decrease the level of production. 
A) continue producing at the current level. 
B) raise its prices. 
C) lower its prices. 
D) increase the level of production. 
E) decrease the level of production.

Question 20

Under price discrimination, a monopolist equates the marginal cost with the average revenues in different markets.

Accepted Answer

A) True 
 B)False

Exam 45: Monopoly

A monopolist maximizes profit:

The following table shows the units of the output sold at different price levels by Gizmo's Inc. Table 24.1 According to Table 24.1, Gizmo's cannot be:

To practice price discrimination, a firm:

Why does a efficiency loss arise under monopoly rather than under perfect competition?

For a monopolist with a linear demand curve, total revenue is maximum when:

The long-run equilibrium price-output combination for a monopolist is economically inefficient because:

A monopolist's supply curve cannot be derived directly from its marginal cost curve as in the case of a competitive firm.

If a monopolist is producing at that output where price equals average variable cost in the short run, then it is earning a negative profit.

Price discrimination is best described as a monopolist:

Monopolization is a process by which the government restricts the growth of monopoly firms.

Which of the following will be the best example of a monopoly firm?

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, which of the following statements is incorrect about the price P1?

Economies of scale, control over a scarce input, and patents are all examples of barriers to entry.

The following figure shows the revenue and cost curves of a monopolist. Figure 24.3 D: Average Revenue MR: Marginal Revenue ATC: Average Total Cost MC: marginal Cost Consider the monopolist described in Figure 24.3.The firm can maximize profit by producing:

In order to practice price discrimination successfully, a monopolist must ensure that there is no resale of the product.

Compared with a perfectly competitive market with similar cost conditions, a monopolist will have:

The price charged by a monopolist is the point on the demand curve that corresponds to the output where marginal revenue equals marginal cost.

If a monopolist is producing at a point at which marginal revenue is greater than marginal cost, it should:

Under price discrimination, a monopolist equates the marginal cost with the average revenues in different markets.

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

Filters

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, which of the following statements is incorrect about the price P₁?