Question 1

If a firm has a perfectly elastic demand curve, then:

Accepted Answer

A) it must be a monopoly firm. 
B) it can charge any price it desires. 
C) the firm has significant market power. 
D) the firm has no market power. 
E) the firm should shut down. 
A) it must be a monopoly firm. 
B) it can charge any price it desires. 
C) the firm has significant market power. 
D) the firm has no market power. 
E) the firm should shut down.

Question 2

The following table shows the units of the output sold at different price levels by Gizmo's Inc. Table 10.1
  Refer to Table 10.1.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 3

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 10.2
  The firm described in Table 10.2:

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 4

The figures given below represent the revenue curves of a monopolist. Figure 10.2   TR: Total revenue curve
AR: Average revenue curve
MR: Marginal revenue curve
According to Figure 10.2, at point C:

Accepted Answer

A) price elasticity of demand is equal to infinity. 
B) price elasticity of supply is equal to 1. 
C) price elasticity of supply is equal to 0. 
D) price elasticity of demand is equal to 0. 
E) price elasticity of demand is equal to 1. 
A) price elasticity of demand is equal to infinity. 
B) price elasticity of supply is equal to 1. 
C) price elasticity of supply is equal to 0. 
D) price elasticity of demand is equal to 0. 
E) price elasticity of demand is equal to 1.

Question 5

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 6

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

Accepted Answer

A) True 
 B)False

Question 7

If a monopolist is producing at the profit-maximizing level of output what price will it charge?

Accepted Answer

A) The price given by the marginal-revenue curve at that level of output. 
B) The price given by the marginal-cost curve at that level of output. 
C) The price given by the average-cost curve at that level of output. 
D) The price given by the average-revenue curve at that level of output. 
E) The price given by the total revenue curve at that level of output. 
A) The price given by the marginal-revenue curve at that level of output. 
B) The price given by the marginal-cost curve at that level of output. 
C) The price given by the average-cost curve at that level of output. 
D) The price given by the average-revenue curve at that level of output. 
E) The price given by the total revenue curve at that level of output.

Question 8

Movie theaters are able to offer discounts to senior citizens because:

Accepted Answer

A) the elderly deserve lower prices because of their contributions to society. 
B) senior citizens have the most inelastic demand. 
C) theaters can separate senior citizens from other customers, and it is easier to prevent resale. 
D) senior citizens cannot see the movie very well anyway because of poor eyesight. 
E) senior citizens should be given special privileges owing to their age. 
A) the elderly deserve lower prices because of their contributions to society. 
B) senior citizens have the most inelastic demand. 
C) theaters can separate senior citizens from other customers, and it is easier to prevent resale. 
D) senior citizens cannot see the movie very well anyway because of poor eyesight. 
E) senior citizens should be given special privileges owing to their age.

Question 9

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 10

The figures given below represent the revenue curves of a monopolist. Figure 10.2   TR: Total revenue curve
AR: Average revenue curve
MR: Marginal revenue curve
Refer to Figure 10.2.If the monopolist is selling a quantity between B and E, then to maximize total revenue, the monopolist should:

Accepted Answer

A) increase price because it is operating on the elastic portion of the demand curve. 
B) decrease price because it is operating on the elastic portion of the demand curve. 
C) increase price because it is operating on the inelastic portion of the demand curve. 
D) decrease price because it is operating on the inelastic portion of the demand curve. 
E) increase price because it is operating at the point at which price elasticity of demand is greater than 1. 
A) increase price because it is operating on the elastic portion of the demand curve. 
B) decrease price because it is operating on the elastic portion of the demand curve. 
C) increase price because it is operating on the inelastic portion of the demand curve. 
D) decrease price because it is operating on the inelastic portion of the demand curve. 
E) increase price because it is operating at the point at which price elasticity of demand is greater than 1.

Question 11

The figure below shows the market equilibrium (point B)at the intersection of demand and supply curves under perfect competition. Figure 10.5   D: Market demand curve
S: Market supply curve
Refer to Figure 10.5.Assume that the curve labeled S represents the monopolist's marginal-cost curve and the curve labeled D represents the monopolist's demand curve.Which of the following will represent the consumer surplus?

Accepted Answer

A) The area PPCBA 
B) The area 0BPPC 
C) The area 0BA 
D) An area that is less than PPCBA 
E) The area ABS 
A) The area PPCBA 
B) The area 0BPPC 
C) The area 0BA 
D) An area that is less than PPCBA 
E) The area ABS

Question 12

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 13

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 14

A monopolist earns only normal profits in the long run.

Accepted Answer

A) True 
 B)False

Question 15

As a perfectly competitive firm produces at the point where price equals marginal cost, it has no supply curve, only a supply point.

Accepted Answer

A) True 
 B)False

Question 16

The following figures show the demand and cost curves of a perfectly competitive and a monopoly firm respectively. Figure 10.7   D: Average Revenue
AC: Average cost
MC: Marginal cost
MR: Marginal cost
According to Figure 10.7, 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.

Question 17

The following figure shows the revenue curves of a monopolist: Figure 10.6   D: Average revenue
MR: Marginal revenue
Refer to Figure 10.6.Assume that marginal costs are constant at $2, 500 and fixed costs are zero.Under a monopoly, consumer surplus would be:

Accepted Answer

A) $100, 000. 
B) $500, 000. 
C) $300, 000. 
D) $250, 000. 
E) $200, 000. 
A) $100, 000. 
B) $500, 000. 
C) $300, 000. 
D) $250, 000. 
E) $200, 000.

Question 18

The figure given below shows the demand curves of two classes of buyers for tickets to a football match. Figure 10.4   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 10.4.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 19

A deadweight loss arises under perfect competition.

Accepted Answer

A) True 
 B)False

Question 20

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.

Exam 16: Monopoly

If a firm has a perfectly elastic demand curve, then:

The following table shows the units of the output sold at different price levels by Gizmo's Inc. Table 10.1 Refer to Table 10.1.At what level of output is total revenue maximized?

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 10.2 The firm described in Table 10.2:

The figures given below represent the revenue curves of a monopolist. Figure 10.2 TR: Total revenue curve AR: Average revenue curve MR: Marginal revenue curve According to Figure 10.2, at point C:

Firms that have downward-sloping demand curves:

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

If a monopolist is producing at the profit-maximizing level of output what price will it charge?

Movie theaters are able to offer discounts to senior citizens because:

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

The figures given below represent the revenue curves of a monopolist. Figure 10.2 TR: Total revenue curve AR: Average revenue curve MR: Marginal revenue curve Refer to Figure 10.2.If the monopolist is selling a quantity between B and E, then to maximize total revenue, the monopolist should:

Which of the following is true under monopoly?

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):

A monopolist earns only normal profits in the long run.

As a perfectly competitive firm produces at the point where price equals marginal cost, it has no supply curve, only a supply point.

The following figures show the demand and cost curves of a perfectly competitive and a monopoly firm respectively. Figure 10.7 D: Average Revenue AC: Average cost MC: Marginal cost MR: Marginal cost According to Figure 10.7, when the monopolist is maximizing profit:

The following figure shows the revenue curves of a monopolist: Figure 10.6 D: Average revenue MR: Marginal revenue Refer to Figure 10.6.Assume that marginal costs are constant at $2, 500 and fixed costs are zero.Under a monopoly, consumer surplus would be:

A deadweight loss arises under perfect competition.

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

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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