Question 1

Monopolies are inefficient because they

Accepted Answer

A)  (i) and (ii) only 
B)  (ii) and (iii) only 
C)  (iii) only 
D)  (i), (ii), and (iii) 
A)  (i) and (ii) only 
B)  (ii) and (iii) only 
C)  (iii) only 
D)  (i), (ii), and (iii) C

Question 2

A benefit of a monopoly is

Accepted Answer

A)  efficient production. 
B)  decreasing long-run marginal costs. 
C)  profit that can be invested in research and development. 
D)  All of the above are correct. 
A)  efficient production. 
B)  decreasing long-run marginal costs. 
C)  profit that can be invested in research and development. 
D)  All of the above are correct. C

Question 3

A market structure with barriers to entry is

Accepted Answer

A)  a monopoly. 
B)  oligopolistically competitive. 
C)  monopolistically competitive. 
D)  perfectly competitive. 
A)  a monopoly. 
B)  oligopolistically competitive. 
C)  monopolistically competitive. 
D)  perfectly competitive. A

Question 4

Which of the following statements is not correct?

Accepted Answer

A)  Two examples of early antitrust laws are the Sherman and Clayton Antitrust Acts. 
B)  Antitrust laws automatically prevent mergers between companies that produce similar products. 
C)  Antitrust laws give the government power to increase competition. 
D)  Antitrust laws can reduce social welfare if they prevent mergers that would lower costs through more efficient joint production. 
A)  Two examples of early antitrust laws are the Sherman and Clayton Antitrust Acts. 
B)  Antitrust laws automatically prevent mergers between companies that produce similar products. 
C)  Antitrust laws give the government power to increase competition. 
D)  Antitrust laws can reduce social welfare if they prevent mergers that would lower costs through more efficient joint production.

Question 5

Figure 15-8  
-Refer to Figure 15-8. What is the area of deadweight loss?

Accepted Answer

A)  the rectangle (A-
C) *X 
B)  the triangle 1/2[(A-
C) *(Y-X)] 
C)  the triangle 1/2[(A-
B) *(Y-X)] 
D)  the rectangle (A-
C) *X plus the triangle 1/2[(A-
C) *(Y-X)] 
A)  the rectangle (A-
C) *X 
B)  the triangle 1/2[(A-
C) *(Y-X)] 
C)  the triangle 1/2[(A-
B) *(Y-X)] 
D)  the rectangle (A-
C) *X plus the triangle 1/2[(A-
C) *(Y-X)]

Question 6

Which of the following is an example of public ownership of a monopoly?

Accepted Answer

A)  DeBeers 
B)  Microsoft 
C)  U.S. Postal Service 
D)  AT&T 
A)  DeBeers 
B)  Microsoft 
C)  U.S. Postal Service 
D)  AT&T

Question 7

Which of the following statements is not correct?

Accepted Answer

A)  Part of the deadweight loss associated with monopoly is measured by the monopolist's economic profit. 
B)  Marginal cost is always less than average total cost in a natural monopoly. 
C)  Discount coupons available free to the public are a type of price discrimination. 
D)  Anti-trust laws make it harder for firms to create synergies. 
A)  Part of the deadweight loss associated with monopoly is measured by the monopolist's economic profit. 
B)  Marginal cost is always less than average total cost in a natural monopoly. 
C)  Discount coupons available free to the public are a type of price discrimination. 
D)  Anti-trust laws make it harder for firms to create synergies.

Question 8

For a monopolist,

Accepted Answer

A)  average revenue is always greater than the price of the good. 
B)  marginal revenue is always less than the price of the good. 
C)  marginal cost is always greater than average total cost. 
D)  marginal revenue equals marginal cost at the point where total revenue is maximized. 
A)  average revenue is always greater than the price of the good. 
B)  marginal revenue is always less than the price of the good. 
C)  marginal cost is always greater than average total cost. 
D)  marginal revenue equals marginal cost at the point where total revenue is maximized.

Question 9

Suppose a monopolist chooses the price and production level that maximizes its profit. From that point, to increase society's economic welfare, output would need to be increased as long as

Accepted Answer

A)  average revenue exceeds marginal cost. 
B)  average revenue exceeds average total cost. 
C)  marginal revenue exceeds marginal cost. 
D)  marginal revenue exceeds average total cost. 
A)  average revenue exceeds marginal cost. 
B)  average revenue exceeds average total cost. 
C)  marginal revenue exceeds marginal cost. 
D)  marginal revenue exceeds average total cost.

Question 10

During the holiday season, high-end retailers frequently place a high price on merchandise on weekends and discount the price during the week. They do this because they believe that two groups of customers exist: shoppers with little free time and bargain hunters. Bargain hunters have time to shop around and frequently shop during the week. What do economists call this price strategy used by high-end retailers?

Accepted Answer

A)  oligopoly 
B)  price discrimination 
C)  compensating differential 
D)  in-kind transfers 
A)  oligopoly 
B)  price discrimination 
C)  compensating differential 
D)  in-kind transfers

Question 11

Figure 15-24  
-Refer to Figure 15-24. If this firm were able to perfectly price discriminate, which letter represents the amount of output it would produce?

Accepted Answer

The answer of Figure 15-24  
-Refer to Figure 15-24....

Question 12

Which of the following is not an example of a barrier to entry?

Accepted Answer

A)  Mighty Mitch's Mining Company owns a unique plot of land in Tanzania, under which lies the only large deposit of Tanzanite in the world. 
B)  A chemist receives a patent for a new skin cream. 
C)  An entrepreneur opens a cupcake bakery. 
D)  A taxi cab driver in New York City obtains a license to legally provide transportation in New York City. 
A)  Mighty Mitch's Mining Company owns a unique plot of land in Tanzania, under which lies the only large deposit of Tanzanite in the world. 
B)  A chemist receives a patent for a new skin cream. 
C)  An entrepreneur opens a cupcake bakery. 
D)  A taxi cab driver in New York City obtains a license to legally provide transportation in New York City.

Question 13

Figure 15-2  
-Refer to Figure 15-2. Which of the following reasons describes the fundamental barrier to entry for the monopoly in the figure?

Accepted Answer

A)  monopoly resources 
B)  government regulation 
C)  the production process 
D)  Both a and b are correct. 
A)  monopoly resources 
B)  government regulation 
C)  the production process 
D)  Both a and b are correct.

Question 14

Scenario 15-4
Suppose a monopolist has a demand curve that can be expressed as P=90-Q. The monopolist's marginal revenue curve can be expressed as MR=90-2Q. The monopolist has constant marginal costs and average total costs of $10.
-Refer to Scenario 15-4. The profit-maximizing monopolist will have a deadweight loss of

Accepted Answer

A)  $6,400. 
B)  $3,200. 
C)  $1,600. 
D)  $800. 
A)  $6,400. 
B)  $3,200. 
C)  $1,600. 
D)  $800.

Question 15

Because monopoly firms do not have to compete with other firms, the outcome in a market with a monopoly

Accepted Answer

A)  is often not in the best interest of society. 
B)  maximizes total economic well-being. 
C)  is efficient. 
D)  benefits consumers more so than the producer. 
A)  is often not in the best interest of society. 
B)  maximizes total economic well-being. 
C)  is efficient. 
D)  benefits consumers more so than the producer.

Question 16

Monopolies are socially inefficient because the price they charge is

Accepted Answer

A)  equal to marginal revenue. 
B)  above marginal cost. 
C)  equal to demand. 
D)  above demand. 
A)  equal to marginal revenue. 
B)  above marginal cost. 
C)  equal to demand. 
D)  above demand.

Question 17

For a monopoly firm, the shape and position of the demand curve play a role in determining the

Accepted Answer

A)  (i) and (ii) only 
B)  (ii) and (iii) only 
C)  (i) and (iii) only 
D)  (i), (ii), and (iii) 
A)  (i) and (ii) only 
B)  (ii) and (iii) only 
C)  (i) and (iii) only 
D)  (i), (ii), and (iii)

Question 18

Which of the following statements is correct?

Accepted Answer

A)  The benefits that accrue to a monopoly's owners are equal to the costs that are incurred by consumers of that firm's product. 
B)  The deadweight loss that arises in monopoly stems from the fact that the profit-maximizing monopoly firm produces a quantity of output that exceeds the socially-efficient quantity. 
C)  The deadweight loss caused by monopoly is similar to the deadweight loss caused by a tax on a product. 
D)  The primary social problem caused by monopoly is monopoly profit. 
A)  The benefits that accrue to a monopoly's owners are equal to the costs that are incurred by consumers of that firm's product. 
B)  The deadweight loss that arises in monopoly stems from the fact that the profit-maximizing monopoly firm produces a quantity of output that exceeds the socially-efficient quantity. 
C)  The deadweight loss caused by monopoly is similar to the deadweight loss caused by a tax on a product. 
D)  The primary social problem caused by monopoly is monopoly profit.

Question 19

If a monopolist can practice perfect price discrimination, the monopolist will

Accepted Answer

A)  eliminate consumer surplus. 
B)  eliminate deadweight loss. 
C)  maximize profits. 
D)  All of the above are correct. 
A)  eliminate consumer surplus. 
B)  eliminate deadweight loss. 
C)  maximize profits. 
D)  All of the above are correct.

Question 20

The fundamental source of monopoly power is

Accepted Answer

A)  barriers to entry. 
B)  profit. 
C)  decreasing average total cost. 
D)  a product without close substitutes. 
A)  barriers to entry. 
B)  profit. 
C)  decreasing average total cost. 
D)  a product without close substitutes.

Exam 15: Monopoly

Monopolies are inefficient because they

A benefit of a monopoly is

A market structure with barriers to entry is

Which of the following statements is not correct?

Figure 15-8 -Refer to Figure 15-8. What is the area of deadweight loss?

Which of the following is an example of public ownership of a monopoly?

Which of the following statements is not correct?

For a monopolist,

Suppose a monopolist chooses the price and production level that maximizes its profit. From that point, to increase society's economic welfare, output would need to be increased as long as

Figure 15-24 -Refer to Figure 15-24. If this firm were able to perfectly price discriminate, which letter represents the amount of output it would produce?

Which of the following is not an example of a barrier to entry?

Figure 15-2 -Refer to Figure 15-2. Which of the following reasons describes the fundamental barrier to entry for the monopoly in the figure?

Because monopoly firms do not have to compete with other firms, the outcome in a market with a monopoly

Monopolies are socially inefficient because the price they charge is

For a monopoly firm, the shape and position of the demand curve play a role in determining the

Which of the following statements is correct?

If a monopolist can practice perfect price discrimination, the monopolist will

The fundamental source of monopoly power is

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: the Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

Measuring a Nations Income

Measuring the Cost of Living

Production and Growth

Saving, Investment, and the Financial System

The Basic Tools of Finance

Unemployment

The Monetary System

Money Growth and Inflation

Open-Economy Macroeconomics: Basic Concepts

A Macroeconomic Theory of the Open Economy

Aggregate Demand and Aggregate Supply

The Influence of Monetary and Fiscal Policy on Aggregate Demand

The Short-Run Trade-Off Between Inflation and Unemployment

Six Debates Over Macroeconomic Policy

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