Question 1

When a firm experiences continually declining average total costs,

Accepted Answer

A)  the firm is a price taker. 
B)  society is better served by having one firm supply the product. 
C)  the firm will earn higher profits than if average total costs are increasing. 
D)  All of the above are correct. 
A)  the firm is a price taker. 
B)  society is better served by having one firm supply the product. 
C)  the firm will earn higher profits than if average total costs are increasing. 
D)  All of the above are correct.

Question 2

Copyrights and patents are examples of barriers to entry that give firms monopoly pricing powers.

Accepted Answer

A) True 
 B)False

Question 3

Monopoly pricing prevents some mutually beneficial trades from taking place. These unrealized, mutually beneficial trades are

Accepted Answer

A)  less of a concern for a monopoly than competitive market. 
B)  offset by the higher profits earned by a monopolist. 
C)  a function of the reduction in the quantity produced by a monopolist in comparison to a competitive market. 
D)  All of the above are correct. 
A)  less of a concern for a monopoly than competitive market. 
B)  offset by the higher profits earned by a monopolist. 
C)  a function of the reduction in the quantity produced by a monopolist in comparison to a competitive market. 
D)  All of the above are correct.

Question 4

Most firms have

Accepted Answer

A)  no monopoly pricing power. 
B)  some monopoly pricing power. 
C)  absolute monopoly pricing power. 
D)  the ability to earn monopoly profits. 
A)  no monopoly pricing power. 
B)  some monopoly pricing power. 
C)  absolute monopoly pricing power. 
D)  the ability to earn monopoly profits.

Question 5

When a natural monopoly exists, it is

Accepted Answer

A)  always cost effective for government-owned firms to produce the product. 
B)  never cost effective for one firm to produce the product. 
C)  always cost effective for two or more private firms to produce the product. 
D)  never cost effective for two or more private firms to produce the product. 
A)  always cost effective for government-owned firms to produce the product. 
B)  never cost effective for one firm to produce the product. 
C)  always cost effective for two or more private firms to produce the product. 
D)  never cost effective for two or more private firms to produce the product.

Question 6

Natural monopolies differ from other forms of monopoly because they are

Accepted Answer

A)  not subject to barriers to entry. 
B)  not regulated by government. 
C)  unable to sustain long-run profits. 
D)  are generally not worried about competition eroding their monopoly position in the market. 
A)  not subject to barriers to entry. 
B)  not regulated by government. 
C)  unable to sustain long-run profits. 
D)  are generally not worried about competition eroding their monopoly position in the market.

Question 7

Figure 15-18  
-Refer to Figure 15-18. If there are no fixed costs of production, monopoly profit without price discrimination equals

Accepted Answer

A)  $0. 
B)  $1,000. 
C)  $2,000. 
D)  $4,000. 
A)  $0. 
B)  $1,000. 
C)  $2,000. 
D)  $4,000.

Question 8

Which of the following is the preferred strategy for the government to follow to remedy the inefficient allocation of resources associated with monopolies?

Accepted Answer

A)  preventing mergers through antitrust laws 
B)  regulating the prices that monopolies can charge 
C)  doing nothing 
D)  None of the above strategies is preferred. Each is a viable strategy. 
A)  preventing mergers through antitrust laws 
B)  regulating the prices that monopolies can charge 
C)  doing nothing 
D)  None of the above strategies is preferred. Each is a viable strategy.

Question 9

With perfect price discrimination the monopoly

Accepted Answer

A)  eliminates all price discrimination by charging each customer the same price. 
B)  charges each customer an amount equal to the monopolist's marginal cost of production. 
C)  eliminates deadweight loss. 
D)  eliminates profits and increases consumer surplus. 
A)  eliminates all price discrimination by charging each customer the same price. 
B)  charges each customer an amount equal to the monopolist's marginal cost of production. 
C)  eliminates deadweight loss. 
D)  eliminates profits and increases consumer surplus.

Question 10

Selling a good at a price determined by the intersection of the demand curve and the marginal cost curve is consistent with 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 11

Scenario 15-7
Black Box Cable TV is able to purchase an exclusive right to sell a premium movie channel (PMC) in its market area. Let's assume that Black Box Cable pays $150,000 a year for the exclusive marketing rights to PMC. Since Black Box has already installed cable to all of the homes in its market area, the marginal cost of delivering PMC to subscribers is zero. The manager of Black Box needs to know what price to charge for the PMC service to maximize her profit. Before setting price, she hires an economist to estimate demand for the PMC service. The economist discovers that there are two types of subscribers who value premium movie channels. First are the 4,000 die-hard TV viewers who will pay as much as $150 a year for the new PMC premium channel. Second, the PMC channel will appeal to 20,000 occasional TV viewers who will pay as much as $20 a year for a subscription to PMC.
-Refer to Scenario 15-7. If Black Box Cable TV is able to price discriminate, what would be the maximum amount of profit it could generate?

Accepted Answer

A)  $500,000 
B)  $600,000 
C)  $850,000 
D)  $925,000 
A)  $500,000 
B)  $600,000 
C)  $850,000 
D)  $925,000

Question 12

Some companies merge in order to lower costs through efficient joint production.

Accepted Answer

A) True 
 B)False

Question 13

Figure 15-19  
-Refer to Figure 15-19. If the monopoly firm perfectly price discriminates, then consumer surplus amounts to

Accepted Answer

A)  $0. 
B)  $1,562.50. 
C)  $3,125. 
D)  $6,250. 
A)  $0. 
B)  $1,562.50. 
C)  $3,125. 
D)  $6,250.

Question 14

Figure 15-14  
-Refer to Figure 15-14. If the monopoly operates at an output level less than Q0, then an increase in output toward (but not exceeding) Q0 would

Accepted Answer

A)  raise the price and raise total surplus. 
B)  lower the price and raise total surplus. 
C)  raise the price and lower total surplus. 
D)  lower the price and lower total surplus. 
A)  raise the price and raise total surplus. 
B)  lower the price and raise total surplus. 
C)  raise the price and lower total surplus. 
D)  lower the price and lower total surplus.

Question 15

A monopolist will choose to increase output when

Accepted Answer

A)  market price increases. 
B)  at all levels of output, marginal cost increases. 
C)  at the present level of output, marginal revenue exceeds marginal cost. 
D)  the demand curve shifts to the left. 
A)  market price increases. 
B)  at all levels of output, marginal cost increases. 
C)  at the present level of output, marginal revenue exceeds marginal cost. 
D)  the demand curve shifts to the left.

Question 16

Firms with substantial monopoly power are quite common because many goods are unique.

Accepted Answer

A) True 
 B)False

Question 17

Figure 15-23  
-Refer to Figure 15-23. If a regulator requires the firm to charge an average cost price, what quantity will the firm produce?

Accepted Answer

The answer of Figure 15-23  
-Refer to Figure 15-23....

Question 18

Granting a pharmaceutical company a patent for a new medicine will lead to

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 19

Table 15-19
A monopolist faces the following demand curve:  
-Refer to Table 15-19. If a monopolist faces a constant marginal cost of $5, how much output should the firm produce in order to equate marginal revenue with marginal cost?

Accepted Answer

A)  3 units 
B)  4 units 
C)  5 units 
D)  6 units 
A)  3 units 
B)  4 units 
C)  5 units 
D)  6 units

Question 20

A monopoly can earn positive profits because it

Accepted Answer

A)  can sell unlimited quantities at any price it chooses. 
B)  takes the market price as given and can sell unlimited quantities. 
C)  can set the price it charges for its output but faces a horizontal demand curve. 
D)  can maintain a price such that total revenues will exceed total costs. 
A)  can sell unlimited quantities at any price it chooses. 
B)  takes the market price as given and can sell unlimited quantities. 
C)  can set the price it charges for its output but faces a horizontal demand curve. 
D)  can maintain a price such that total revenues will exceed total costs.

Exam 15: Monopoly

When a firm experiences continually declining average total costs,

Copyrights and patents are examples of barriers to entry that give firms monopoly pricing powers.

Monopoly pricing prevents some mutually beneficial trades from taking place. These unrealized, mutually beneficial trades are

Most firms have

When a natural monopoly exists, it is

Natural monopolies differ from other forms of monopoly because they are

Figure 15-18 -Refer to Figure 15-18. If there are no fixed costs of production, monopoly profit without price discrimination equals

Which of the following is the preferred strategy for the government to follow to remedy the inefficient allocation of resources associated with monopolies?

With perfect price discrimination the monopoly

Selling a good at a price determined by the intersection of the demand curve and the marginal cost curve is consistent with the

Some companies merge in order to lower costs through efficient joint production.

Figure 15-19 -Refer to Figure 15-19. If the monopoly firm perfectly price discriminates, then consumer surplus amounts to

Figure 15-14 -Refer to Figure 15-14. If the monopoly operates at an output level less than Q0, then an increase in output toward (but not exceeding) Q0 would

A monopolist will choose to increase output when

Firms with substantial monopoly power are quite common because many goods are unique.

Figure 15-23 -Refer to Figure 15-23. If a regulator requires the firm to charge an average cost price, what quantity will the firm produce?

Granting a pharmaceutical company a patent for a new medicine will lead to

Table 15-19 A monopolist faces the following demand curve: -Refer to Table 15-19. If a monopolist faces a constant marginal cost of $5, how much output should the firm produce in order to equate marginal revenue with marginal cost?

A monopoly can earn positive profits because it

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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