Question 1

Airlines can increase profits by charging higher fares to business customers because those customers have a more elastic demand for airline travel.

Accepted Answer

A) True 
 B)False

Question 2

The figure given below shows the cost and revenue curves of a monopolist. Figure 24.9   D: Average revenue
MR: Marginal revenue
ATC: Average total cost
MC: Marginal cost
In Figure 24.9, what is the consumer surplus at the profit-maximizing levels of output and price?

Accepted Answer

A) JNM 
B) 0JNV 
C) HMQ 
D) 0HQX 
E) JHQN 
A) JNM 
B) 0JNV 
C) HMQ 
D) 0HQX 
E) JHQN

Question 3

A monopolist's demand curve is less elastic than a perfect competitor's demand curve.

Accepted Answer

A) True 
 B)False

Question 4

A monopoly firm never incurs a loss as it is the sole supplier of the good in the market.

Accepted Answer

A) True 
 B)False

Question 5

The table given below shows the prices charged and marginal cost incurred by a monopolist for different units of the output. Table 24.3
  What price will the profit-maximizing firm described in Table 24.3 charge, if the firm is earning a positive economic profit?

Accepted Answer

A) $1, 500 
B) $1, 400 
C) $1, 350 
D) $1, 300 
E) $1, 550 
A) $1, 500 
B) $1, 400 
C) $1, 350 
D) $1, 300 
E) $1, 550

Question 6

Which of the following is true under monopoly?

Accepted Answer

A) Price is equal to marginal revenue 
B) Price is equal to marginal cost 
C) Price is less than marginal revenue 
D) Price is less than marginal cost 
E) Price is greater than marginal revenue 
A) Price is equal to marginal revenue 
B) Price is equal to marginal cost 
C) Price is less than marginal revenue 
D) Price is less than marginal cost 
E) Price is greater than marginal revenue

Question 7

Suppose you inherit the only spring of mineral water in an area and want to maximize profits from this costless product.You would ask your customers to bring their containers with them and:

Accepted Answer

A) charge them the highest price possible to sell some output. 
B) charge them the lowest price possible to sell as much as you can. 
C) ask them how much they would like to pay and accept it. 
D) charge the price at which MR is zero. 
E) charge the price at which MR is maximum. 
A) charge them the highest price possible to sell some output. 
B) charge them the lowest price possible to sell as much as you can. 
C) ask them how much they would like to pay and accept it. 
D) charge the price at which MR is zero. 
E) charge the price at which MR is maximum.

Question 8

A monopolist enjoys the least market power compared to the other market structures.

Accepted Answer

A) True 
 B)False

Question 9

The figure below shows the market equilibrium (point B)at the intersection of demand and supply curves under perfect competition. Figure 24.5   D: Market demand curve
S: Market supply curve
Refer to Figure 24.5.Which of the following regions on the graph represents consumer surplus in a perfectly competitive market?

Accepted Answer

A) The area PPCBA 
B) The area 0BPPC 
C) The area 0BA 
D) Half of area PPCBA 
E) The area ABS 
A) The area PPCBA 
B) The area 0BPPC 
C) The area 0BA 
D) Half of area PPCBA 
E) The area ABS

Question 10

Which of the following would least likely be a barrier to entry into a monopoly?

Accepted Answer

A) Economies of scale enjoyed by a large firm. 
B) Tariffs on foreign goods are eliminated. 
C) A company is the sole inventor of what it produces and no one else can make a good substitute. 
D) Government restrictions such as license requirements are enacted. 
E) A company is the only owner of an essential resource needed to produce its product. 
A) Economies of scale enjoyed by a large firm. 
B) Tariffs on foreign goods are eliminated. 
C) A company is the sole inventor of what it produces and no one else can make a good substitute. 
D) Government restrictions such as license requirements are enacted. 
E) A company is the only owner of an essential resource needed to produce its product.

Question 11

Identify the correct statement.

Accepted Answer

A) A monopolist's pricing decision is limited by the demand for its product. 
B) A monopolist is able to choose any price and quantity combination that it desires. 
C) A monopolist can increase its profits by increasing price if the demand for its good is relatively elastic. 
D) A monopolist does not suffer losses even in the short run. 
E) A monopolist is not able to reap positive profits in the long run. 
A) A monopolist's pricing decision is limited by the demand for its product. 
B) A monopolist is able to choose any price and quantity combination that it desires. 
C) A monopolist can increase its profits by increasing price if the demand for its good is relatively elastic. 
D) A monopolist does not suffer losses even in the short run. 
E) A monopolist is not able to reap positive profits in the long run.

Question 12

If a monopolist is producing at a point at which marginal revenue is greater than marginal cost, it should decrease the level of production.

Accepted Answer

A) True 
 B)False

Question 13

A patent issued by the government, gives a firm monopoly power on certain products or discoveries.

Accepted Answer

A) True 
 B)False

Question 14

Grocery coupons and mail-in rebates are forms of price discrimination.

Accepted Answer

A) True 
 B)False

Question 15

A firm such as a public utility, which is the sole producer in a market in which government determines prices and standards of service, is known as a(n):

Accepted Answer

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

Question 16

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
  Assume that the firm described in Table 24.2 is incurring a total cost of $25 at the profit-maximizing output level.The firm will:

Accepted Answer

A) lose $10 in the short run. 
B) break even. 
C) earn a profit of $50. 
D) earn a profit of $30. 
E) earn a profit of $55. 
A) lose $10 in the short run. 
B) break even. 
C) earn a profit of $50. 
D) earn a profit of $30. 
E) earn a profit of $55.

Question 17

The figure given below shows the cost and revenue curves of a monopolist. Figure 24.9   D: Average revenue
MR: Marginal revenue
ATC: Average total cost
MC: Marginal cost
Refer to Figure 24.9.Suppose that the market is perfectly competitive.The consumer surplus would be represented by the area _____.

Accepted Answer

A) JNM 
B) 0JNV 
C) HMQ 
D) 0HQX 
E) JHQN 
A) JNM 
B) 0JNV 
C) HMQ 
D) 0HQX 
E) JHQN

Question 18

If the monopolist's price happens to be greater than the average-variable cost but less than the average total cost, in the short run the monopolist will:

Accepted Answer

A) be forced to shut down to minimize the cost. 
B) operate at a loss. 
C) operate at an economic profit. 
D) operate at a normal profit. 
E) go out of business. 
A) be forced to shut down to minimize the cost. 
B) operate at a loss. 
C) operate at an economic profit. 
D) operate at a normal profit. 
E) go out of business.

Question 19

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.If the firm engages in profit-maximizing behavior, what price will it charge?

Accepted Answer

A) P1 
B) P2 
C) P3 
D) P4 
E) P5 
A) P1 
B) P2 
C) P3 
D) P4 
E) P5

Question 20

A monopolist always produces on the elastic portion of the demand curve.

Accepted Answer

A) True 
 B)False

Exam 45: Monopoly

Airlines can increase profits by charging higher fares to business customers because those customers have a more elastic demand for airline travel.

The figure given below shows the cost and revenue curves of a monopolist. Figure 24.9 D: Average revenue MR: Marginal revenue ATC: Average total cost MC: Marginal cost In Figure 24.9, what is the consumer surplus at the profit-maximizing levels of output and price?

A monopolist's demand curve is less elastic than a perfect competitor's demand curve.

A monopoly firm never incurs a loss as it is the sole supplier of the good in the market.

The table given below shows the prices charged and marginal cost incurred by a monopolist for different units of the output. Table 24.3 What price will the profit-maximizing firm described in Table 24.3 charge, if the firm is earning a positive economic profit?

Which of the following is true under monopoly?

Suppose you inherit the only spring of mineral water in an area and want to maximize profits from this costless product.You would ask your customers to bring their containers with them and:

A monopolist enjoys the least market power compared to the other market structures.

Which of the following would least likely be a barrier to entry into a monopoly?

Identify the correct statement.

If a monopolist is producing at a point at which marginal revenue is greater than marginal cost, it should decrease the level of production.

A patent issued by the government, gives a firm monopoly power on certain products or discoveries.

Grocery coupons and mail-in rebates are forms of price discrimination.

A firm such as a public utility, which is the sole producer in a market in which government determines prices and standards of service, is known as a(n):

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 Assume that the firm described in Table 24.2 is incurring a total cost of $25 at the profit-maximizing output level.The firm will:

The figure given below shows the cost and revenue curves of a monopolist. Figure 24.9 D: Average revenue MR: Marginal revenue ATC: Average total cost MC: Marginal cost Refer to Figure 24.9.Suppose that the market is perfectly competitive.The consumer surplus would be represented by the area _____.

If the monopolist's price happens to be greater than the average-variable cost but less than the average total cost, in the short run the monopolist will:

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.If the firm engages in profit-maximizing behavior, what price will it charge?

A monopolist always produces on the elastic portion of the demand curve.

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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