Question 1

Which of the following is not a necessary condition for price discrimination?

Accepted Answer

A) The firm must be a price maker. 
B) The firm must be able to distinguish between customers. 
C) The firm must be able to prevent resale between customers. 
D) The firm must be able to product homogenous products. 
E) The firm must be facing a downward-sloping demand curve. 
A) The firm must be a price maker. 
B) The firm must be able to distinguish between customers. 
C) The firm must be able to prevent resale between customers. 
D) The firm must be able to product homogenous products. 
E) The firm must be facing a downward-sloping demand curve.

Question 2

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 3

Perfect price discrimination occurs when:

Accepted Answer

A) each customer is charged the maximum price that each is willing and able to pay. 
B) two classes of customers are charged different prices as they have different elasticities of demand. 
C) senior citizens are offered restaurant discounts. 
D) the firm sets MR < MC for each class of customers. 
E) the firm charges same price to different customers so that it is equal to the equilibrium price. 
A) each customer is charged the maximum price that each is willing and able to pay. 
B) two classes of customers are charged different prices as they have different elasticities of demand. 
C) senior citizens are offered restaurant discounts. 
D) the firm sets MR < MC for each class of customers. 
E) the firm charges same price to different customers so that it is equal to the equilibrium price.

Question 4

The following table shows the units of the output sold at different price levels by Gizmo's Inc. Table 10.1
  According to Table 10.1, at what level of output is marginal revenue equal to $14?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
E) 5 
A) 1 
B) 2 
C) 3 
D) 4 
E) 5

Question 5

If at the profit-maximizing level of output, a monopolist's average-total-cost curve lies above its demand curve, then:

Accepted Answer

A) the firm should shut down in the short run. 
B) the firm is earning economic losses. 
C) the firm is earning economic profits. 
D) the firm should increase its output. 
E) the firm should decrease its output. 
A) the firm should shut down in the short run. 
B) the firm is earning economic losses. 
C) the firm is earning economic profits. 
D) the firm should increase its output. 
E) the firm should decrease its output.

Question 6

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 7

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 8

One of the popular myths about monopoly is that:

Accepted Answer

A) a monopolist is the single seller of a particular commodity. 
B) a monopolist can charge any price for his/her good. 
C) a monopolist is a price maker. 
D) a monopolist may earn positive profits even in the long run. 
E) a monopolist faces the market demand curve. 
A) a monopolist is the single seller of a particular commodity. 
B) a monopolist can charge any price for his/her good. 
C) a monopolist is a price maker. 
D) a monopolist may earn positive profits even in the long run. 
E) a monopolist faces the market demand curve.

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 10.4
  In Table 10.4, assume that total fixed costs are $20.What is the maximum profit the firm can earn at equilibrium?

Accepted Answer

A) $0 
B) $4 
C) $16 
D) $30 
E) $52 
A) $0 
B) $4 
C) $16 
D) $30 
E) $52

Question 10

The following table shows the units of the output sold at different price levels by Gizmo's Inc. Table 10.1
  According to Table 10.1, 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 11

A monopoly is a market model in which just one firm sells a product with no close substitutes.

Accepted Answer

A) True 
 B)False

Question 12

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 13

Which of the following refers to a natural monopoly?

Accepted Answer

A) A monopoly resulting from government control. 
B) A monopoly resulting from economies of scale. 
C) A monopoly resulting from output leadership. 
D) A monopoly resulting from a large advertising budget. 
E) A monopoly resulting from trade restrictions. 
A) A monopoly resulting from government control. 
B) A monopoly resulting from economies of scale. 
C) A monopoly resulting from output leadership. 
D) A monopoly resulting from a large advertising budget. 
E) A monopoly resulting from trade restrictions.

Question 14

A clothing store can sell two shirts for $20 each or three shirts for $18 each.At a quantity of three shirts sold, marginal revenue is _____.

Accepted Answer

A) $18 
B) $14 
C) $54 
D) $20 
E) $44 
A) $18 
B) $14 
C) $54 
D) $20 
E) $44

Question 15

By discriminating between the consumers, the monopolist actually takes away a portion of the consumer surplus.

Accepted Answer

A) True 
 B)False

Question 16

The following figure shows revenue and cost curves of a monopolist. Figure 10.8   AR: Average revenue curve
MR: Marginal revenue curve
MC: Marginal cost curve
According to Figure 10.7, 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 17

The figure given below shows the demand curve faced by a firm. Figure 10.1   Refer to Figure 10.1 and calculate the revenue lost when the firm lowers the price of its product from $8 to $4.

Accepted Answer

A) $20 
B) $18 
C) $24 
D) $16 
E) $28 
A) $20 
B) $18 
C) $24 
D) $16 
E) $28

Question 18

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 19

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 10.4
  Refer to Table 10.4.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 20

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

Accepted Answer

A) True 
 B)False

Exam 16: Monopoly

Which of the following is not a necessary condition for price discrimination?

Identify the correct statement.

Perfect price discrimination occurs when:

The following table shows the units of the output sold at different price levels by Gizmo's Inc. Table 10.1 According to Table 10.1, at what level of output is marginal revenue equal to $14?

If at the profit-maximizing level of output, a monopolist's average-total-cost curve lies above its demand curve, then:

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:

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

One of the popular myths about monopoly is that:

The following table shows the units of the output sold at different price levels by Gizmo's Inc. Table 10.1 According to Table 10.1, Gizmo's cannot be:

A monopoly is a market model in which just one firm sells a product with no close substitutes.

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

Which of the following refers to a natural monopoly?

A clothing store can sell two shirts for $20 each or three shirts for $18 each.At a quantity of three shirts sold, marginal revenue is _____.

By discriminating between the consumers, the monopolist actually takes away a portion of the consumer surplus.

The following figure shows revenue and cost curves of a monopolist. Figure 10.8 AR: Average revenue curve MR: Marginal revenue curve MC: Marginal cost curve According to Figure 10.7, what will be the price charged by a perfectly competitive firm?

The figure given below shows the demand curve faced by a firm. Figure 10.1 Refer to Figure 10.1 and calculate the revenue lost when the firm lowers the price of its product from $8 to $4.

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

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

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

Monopoly

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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