Question 1

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 2

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 3

The figure given below shows the cost and revenue curves of a monopolist. Figure 10.9   D: Average revenue
MR: Marginal revenue
ATC: Average total cost
MC: Marginal cost
Refer to Figure 10.9.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 4

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, 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 5

When practicing price discrimination, a firm can increase its revenue by:

Accepted Answer

A) charging a higher price to the customers with a more inelastic demand. 
B) charging a higher price to the customers with a perfectly elastic demand. 
C) supplying more in a market with a more inelastic demand. 
D) supplying less in a market with lower elasticity of demand. 
E) charging a lower price in a market dominated by wealthy consumers. 
A) charging a higher price to the customers with a more inelastic demand. 
B) charging a higher price to the customers with a perfectly elastic demand. 
C) supplying more in a market with a more inelastic demand. 
D) supplying less in a market with lower elasticity of demand. 
E) charging a lower price in a market dominated by wealthy consumers.

Question 6

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 7

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

Accepted Answer

A) True 
 B)False

Question 8

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
  What is the profit-maximizing output level for the monopoly firm described in Table 10.2 if the firm is earning a positive economic profit?

Accepted Answer

A) 1 unit 
B) 2 units 
C) 3 units 
D) 5 units 
E) 6 units 
A) 1 unit 
B) 2 units 
C) 3 units 
D) 5 units 
E) 6 units

Question 9

The efficiency loss that occurs when a market is monopolized is known as:

Accepted Answer

A) a deadweight loss. 
B) a monopoly loss. 
C) an economic loss. 
D) an X-loss. 
E) a capital loss. 
A) a deadweight loss. 
B) a monopoly loss. 
C) an economic loss. 
D) an X-loss. 
E) a capital loss.

Question 10

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 11

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, the profit maximizing price of the monopolist is:

Accepted Answer

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

Question 12

Barriers to entry do not occur when:

Accepted Answer

A) economies of scale in production exist in an industry. 
B) the government requires a professional license or franchise agreement. 
C) the firm that introduces a product is granted a patent. 
D) a firm controls a scarce resource. 
E) diseconomies of scale in production exist in an industry. 
A) economies of scale in production exist in an industry. 
B) the government requires a professional license or franchise agreement. 
C) the firm that introduces a product is granted a patent. 
D) a firm controls a scarce resource. 
E) diseconomies of scale in production exist in an industry.

Question 13

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

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is true of the demand curve faced by a monopolist?

Accepted Answer

A) A monopolist's demand curve is infinitely elastic. 
B) A monopolist's demand curve is more elastic than a competitive firm's demand curve. 
C) A monopolist faces a relatively inelastic demand curve. 
D) A monoplist's demand curve coincides with its marginal revenue curve. 
E) A monopolist faces a positively sloped demand curve. 
A) A monopolist's demand curve is infinitely elastic. 
B) A monopolist's demand curve is more elastic than a competitive firm's demand curve. 
C) A monopolist faces a relatively inelastic demand curve. 
D) A monoplist's demand curve coincides with its marginal revenue curve. 
E) A monopolist faces a positively sloped demand curve.

Question 15

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
Assume that in Figure 10.5, the market is originally perfectly competitive but then becomes a monopoly.Compared with perfect competition, a monopoly would have:

Accepted Answer

A) a price lower than PPC. 
B) a quantity more than QPC. 
C) a greater consumer surplus. 
D) a deadweight loss. 
E) a lower producer surplus. 
A) a price lower than PPC. 
B) a quantity more than QPC. 
C) a greater consumer surplus. 
D) a deadweight loss. 
E) a lower producer surplus.

Question 16

Which of the following is an assumption of the monopoly model?

Accepted Answer

A) There exists a large number of buyers and sellers. 
B) There are no close substitutes of the good. 
C) The firm faces a horizontal demand curve. 
D) There is free entry and exit of firms. 
E) The firm is a price taker. 
A) There exists a large number of buyers and sellers. 
B) There are no close substitutes of the good. 
C) The firm faces a horizontal demand curve. 
D) There is free entry and exit of firms. 
E) The firm is a price taker.

Question 17

A regulated monopoly is a monopoly which can charge any arbitrary price for its product.

Accepted Answer

A) True 
 B)False

Question 18

If a firm is able to collect the entire producer surplus, it is said to have practiced perfect price discrimination.

Accepted Answer

A) True 
 B)False

Exam 16: Monopoly

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

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

The figure given below shows the cost and revenue curves of a monopolist. Figure 10.9 D: Average revenue MR: Marginal revenue ATC: Average total cost MC: Marginal cost Refer to Figure 10.9.Suppose that the market is perfectly competitive.The consumer surplus would be represented by the area _____.

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

When practicing price discrimination, a firm can increase its revenue by:

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

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

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 What is the profit-maximizing output level for the monopoly firm described in Table 10.2 if the firm is earning a positive economic profit?

The efficiency loss that occurs when a market is monopolized is known as:

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

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, the profit maximizing price of the monopolist is:

Barriers to entry do not occur when:

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

Which of the following is true of the demand curve faced by a monopolist?

Which of the following is an assumption of the monopoly model?

A regulated monopoly is a monopoly which can charge any arbitrary price for its product.

If a firm is able to collect the entire producer surplus, it is said to have practiced perfect price discrimination.

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

Filters

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