Question 1

The collection of statutes aimed at curbing monopoly power is called

Accepted Answer

A)  the 14th amendment. 
B)  the Clayton Act. 
C)  the Sherman Act. 
D)  antitrust law. 
A)  the 14th amendment. 
B)  the Clayton Act. 
C)  the Sherman Act. 
D)  antitrust law.

Question 2

Describe how government is involved in creating a monopoly. Why might the government create one? Give an example.

Accepted Answer

The government can create a monopoly by

Question 3

The market demand curve for a monopolist is typically

Accepted Answer

A)  unit price elastic. 
B)  downward sloping. 
C)  horizontal. 
D)  vertical. 
A)  unit price elastic. 
B)  downward sloping. 
C)  horizontal. 
D)  vertical.

Question 4

Table 15-4
A monopolist faces the following demand curve:  
-Refer to Table 15-4. In order to maximize total revenues, the monopolist should produce

Accepted Answer

A)  5 units. 
B)  7.5 units. 
C)  10 units. 
D)  12.5 units. 
A)  5 units. 
B)  7.5 units. 
C)  10 units. 
D)  12.5 units.

Question 5

When we compare economic welfare in a monopoly market to a competitive market, the profits earned by the monopolist represent

Accepted Answer

A)  a loss in total welfare. 
B)  a transfer of benefits from the buyer to the seller. 
C)  the higher marginal costs incurred by the monopolists in comparison to competitive firms. 
D)  All of the above are correct. 
A)  a loss in total welfare. 
B)  a transfer of benefits from the buyer to the seller. 
C)  the higher marginal costs incurred by the monopolists in comparison to competitive firms. 
D)  All of the above are correct.

Question 6

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. What is the deadweight loss associated with the nondiscriminating pricing policy compared to the price discriminating policy?

Accepted Answer

A)  $375,000 
B)  $400,000 
C)  $475,000 
D)  It cannot be determined from the information provided. 
A)  $375,000 
B)  $400,000 
C)  $475,000 
D)  It cannot be determined from the information provided.

Question 7

A common solution to monopoly in European countries is public ownership.

Accepted Answer

A) True 
 B)False

Question 8

Deadweight loss measures the loss in society's welfare that occurs because a monopolist does not produce the socially efficient level of output.

Accepted Answer

A) True 
 B)False

Question 9

Figure 15-1  
-Refer to Figure 15-1. The shape of the average total cost curve reveals information about the nature of the barrier to entry that might exist in a monopoly market. Which of the following monopoly types best coincides with the figure?

Accepted Answer

A)  ownership of a key resource by a single firm 
B)  natural monopoly 
C)  government-created monopoly 
D)  a patent or copyright monopoly 
A)  ownership of a key resource by a single firm 
B)  natural monopoly 
C)  government-created monopoly 
D)  a patent or copyright monopoly

Question 10

When a certain monopoly sets its price at $8 it sells 64 units. When the monopoly sets its price at $10 it sells 62 units. The marginal revenue for the firm over this range is

Accepted Answer

A)  $22. 
B)  $27. 
C)  $54. 
D)  $108. 
A)  $22. 
B)  $27. 
C)  $54. 
D)  $108.

Question 11

Figure 15-24  
-Refer to Figure 15-24. Use the letters in the figure to identify the area of deadweight loss for the single price monopolist.

Accepted Answer

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

Question 12

A monopolist's supply curve is vertical.

Accepted Answer

A) True 
 B)False

Question 13

Drug companies are allowed to be monopolists in the drugs they discover in order to

Accepted Answer

A)  allow drug companies to charge a price that is equal to their marginal cost. 
B)  discourage new firms from entering the drug market. 
C)  allow the government to earn patent revenue. 
D)  None of the above is correct. 
A)  allow drug companies to charge a price that is equal to their marginal cost. 
B)  discourage new firms from entering the drug market. 
C)  allow the government to earn patent revenue. 
D)  None of the above is correct.

Question 14

Figure 15-3  
-Refer to Figure 15-3. Which panel could represent the demand curve facing a local cable television provider if that firm in a monopolist?

Accepted Answer

A)  Panel A 
B)  Panel B 
C)  Panel C 
D)  Panel D 
A)  Panel A 
B)  Panel B 
C)  Panel C 
D)  Panel D

Question 15

Scenario 15-5
An airline knows that there are two types of travelers: business travelers and vacationers. For a particular flight, there are 100 business travelers who will pay $600 for a ticket while there are 50 vacationers who will pay $300 for a ticket. There are 150 seats available on the plane. Suppose the cost to the airline of providing the flight is $20,000, which includes the cost of the pilots, flight attendants, fuel, etc.
-Refer to Scenario 15-5. How much profit will the airline earn if it sets the price of each ticket at $600?

Accepted Answer

A)  -$5,000 
B)  $15,000 
C)  $40,000 
D)  $60,000 
A)  -$5,000 
B)  $15,000 
C)  $40,000 
D)  $60,000

Question 16

The three main sources of barriers to entry are monopoly resources, government regulation, and the firm's production process.

Accepted Answer

A) True 
 B)False

Question 17

In a competitive market, a firm's supply curve dictates the amount it will supply. In a monopoly market the

Accepted Answer

A)  same is true. 
B)  supply curve conceptually makes sense, but in practice is never used. 
C)  supply curve will have limited predictive capacity. 
D)  decision about how much to supply is impossible to separate from the demand curve it faces. 
A)  same is true. 
B)  supply curve conceptually makes sense, but in practice is never used. 
C)  supply curve will have limited predictive capacity. 
D)  decision about how much to supply is impossible to separate from the demand curve it faces.

Question 18

Like competitive firms, monopolies choose to produce a quantity in which marginal revenue equals marginal cost.

Accepted Answer

A) True 
 B)False

Question 19

In order to sell more of its product, a monopolist must

Accepted Answer

A)  sell to the government. 
B)  sell in international markets. 
C)  lower its price. 
D)  use its market power to force up the price of complementary products. 
A)  sell to the government. 
B)  sell in international markets. 
C)  lower its price. 
D)  use its market power to force up the price of complementary products.

Question 20

Price discrimination

Accepted Answer

A)  is illegal in the United States and Europe. 
B)  can occur in both perfectly competitive and monopoly markets. 
C)  is illogical because it does not maximize profits. 
D)  can maximize profits if the seller can prevent the resale of goods between customers. 
A)  is illegal in the United States and Europe. 
B)  can occur in both perfectly competitive and monopoly markets. 
C)  is illogical because it does not maximize profits. 
D)  can maximize profits if the seller can prevent the resale of goods between customers.

Exam 15: Monopoly

The collection of statutes aimed at curbing monopoly power is called

Describe how government is involved in creating a monopoly. Why might the government create one? Give an example.

The market demand curve for a monopolist is typically

Table 15-4 A monopolist faces the following demand curve: -Refer to Table 15-4. In order to maximize total revenues, the monopolist should produce

When we compare economic welfare in a monopoly market to a competitive market, the profits earned by the monopolist represent

A common solution to monopoly in European countries is public ownership.

Deadweight loss measures the loss in society's welfare that occurs because a monopolist does not produce the socially efficient level of output.

Figure 15-1 -Refer to Figure 15-1. The shape of the average total cost curve reveals information about the nature of the barrier to entry that might exist in a monopoly market. Which of the following monopoly types best coincides with the figure?

When a certain monopoly sets its price at $8 it sells 64 units. When the monopoly sets its price at $10 it sells 62 units. The marginal revenue for the firm over this range is

Figure 15-24 -Refer to Figure 15-24. Use the letters in the figure to identify the area of deadweight loss for the single price monopolist.

A monopolist's supply curve is vertical.

Drug companies are allowed to be monopolists in the drugs they discover in order to

Figure 15-3 -Refer to Figure 15-3. Which panel could represent the demand curve facing a local cable television provider if that firm in a monopolist?

The three main sources of barriers to entry are monopoly resources, government regulation, and the firm's production process.

In a competitive market, a firm's supply curve dictates the amount it will supply. In a monopoly market the

Like competitive firms, monopolies choose to produce a quantity in which marginal revenue equals marginal cost.

In order to sell more of its product, a monopolist must

Price discrimination

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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