Question 1

A monopolist's profit is equal to (Price - Marginal Cost) × Quantity.

Accepted Answer

A) True 
 B)False

Question 2

For a firm to price discriminate,

Accepted Answer

A)  it must be a natural monopoly. 
B)  it must be regulated by the government. 
C)  it must have some market power. 
D)  consumers must tell the firm what they are willing to pay for the product. 
A)  it must be a natural monopoly. 
B)  it must be regulated by the government. 
C)  it must have some market power. 
D)  consumers must tell the firm what they are willing to pay for the product.

Question 3

Patent and copyright laws encourage

Accepted Answer

A)  creative activity. 
B)  research and development. 
C)  competition among firms. 
D)  Both a and b are correct. 
A)  creative activity. 
B)  research and development. 
C)  competition among firms. 
D)  Both a and b are correct.

Question 4

Scenario 15-8
Mega Media Cable TV is able to purchase an exclusive right to sell a premium sports channel in its market area. Let's assume that Mega Media pays $100,000 a year for the exclusive marketing rights to the sports channel. Since Mega Media has already installed cable to all of the homes in its market area, the marginal cost of delivering the sports channel to subscribers is zero. The manager of Mega Media needs to know what price to charge for the sports channel service to maximize her profit. Before setting price, she hires an economist to estimate demand for the sports channel. The economist discovers that there are two types of subscribers who value premium sporting channels. First are the 3,000 die-hard sports fans who will pay as much as $150 a year for the new channel. Second, the premium sports channel will appeal to 20,000 occasional sports viewers who will pay as much as $25 a year for a subscription to it.
-Refer to Scenario 15-8. If Mega Media Cable TV is unable to price discriminate, what price will it choose to maximize its profit, and what is the amount of the profit?

Accepted Answer

A)  price = $25; profit = $575,000 
B)  price = $25; profit = $475,000 
C)  price = $150; profit = $450,000 
D)  price = $150; profit = $350,000 
A)  price = $25; profit = $575,000 
B)  price = $25; profit = $475,000 
C)  price = $150; profit = $450,000 
D)  price = $150; profit = $350,000

Question 5

When a firm operates under conditions of monopoly, its price is

Accepted Answer

A)  not constrained. 
B)  constrained by marginal cost. 
C)  constrained by demand. 
D)  constrained only by its social agenda. 
A)  not constrained. 
B)  constrained by marginal cost. 
C)  constrained by demand. 
D)  constrained only by its social agenda.

Question 6

A firm that is the sole seller of a product without close substitutes is

Accepted Answer

A)  perfectly competitive. 
B)  monopolistically competitive. 
C)  an oligopolist. 
D)  a monopolist. 
A)  perfectly competitive. 
B)  monopolistically competitive. 
C)  an oligopolist. 
D)  a monopolist.

Question 7

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

Accepted Answer

A)  not a concern if a market is perfectly competitive. 
B)  a deadweight loss to society. 
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)  not a concern if a market is perfectly competitive. 
B)  a deadweight loss to society. 
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 8

A monopolist that practices perfect price discrimination

Accepted Answer

A)  creates no deadweight loss. 
B)  charges one group of buyers a higher price than another group, such as offering a student discount. 
C)  charges a higher price but produces the same monopoly level of output as when a single price is charged. 
D)  charges some customers a price below marginal cost because costs are covered by the high-priced buyers. 
A)  creates no deadweight loss. 
B)  charges one group of buyers a higher price than another group, such as offering a student discount. 
C)  charges a higher price but produces the same monopoly level of output as when a single price is charged. 
D)  charges some customers a price below marginal cost because costs are covered by the high-priced buyers.

Question 9

What are the four ways that government policymakers can respond to the problem of monopoly?

Accepted Answer

First, the government can try to make mo

Question 10

Government intervention always reduces monopoly deadweight loss.

Accepted Answer

A) True 
 B)False

Question 11

Suppose a profit-maximizing monopolist faces a constant marginal cost of $20, produces an output level of 100 units, and charges a price of $50. The socially efficient level of output is 200 units. Assume that the demand curve and marginal revenue curve are the typical downward-sloping straight lines. The monopoly deadweight loss equals $1,500.

Accepted Answer

A) True 
 B)False

Question 12

A monopolist produces an output level where marginal revenue equals marginal cost and charges a price where marginal cost equals average total cost.

Accepted Answer

A) True 
 B)False

Question 13

Reduced competition through merging of companies will raise social welfare

Accepted Answer

A)  if the social cost from the synergies exceeds the benefit of increased market power. 
B)  if the benefit from the synergies exceeds the social cost of increased market power. 
C)  always. 
D)  never. 
A)  if the social cost from the synergies exceeds the benefit of increased market power. 
B)  if the benefit from the synergies exceeds the social cost of increased market power. 
C)  always. 
D)  never.

Question 14

Table 15-9
Consider the following demand and cost information for a monopoly.  
-Refer to Table 15-9. What is the marginal revenue of the 3rd unit?

Accepted Answer

A)  $4 
B)  $12 
C)  $20 
D)  $28 
A)  $4 
B)  $12 
C)  $20 
D)  $28

Question 15

Table 15-2
Tanya has the following demand curve for selling taffy. Assume that Tanya has a marginal cost of $3 per unit.  
-Refer to Table 15-2. What is Tanya's profit-maximizing level of output?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 16

Scenario 15-2
Consider a local, privately-owned electrical cooperative named Poweshiek Power Company (PPCo). PPCo has just completed a clean-coal-burning electrical power plant in Iowa. Currently, PPCo can meet the electricity needs of all residents in the county. In fact, its capacity far exceeds the needs of the county. After just a few years of operation, the shareholders of PPCo experienced incredibly high rates of return on their investment due to the profitability of the corporation.
-Refer to Scenario 15-2. Which of the following statements is most likely to be true?

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 17

When a monopolist increases the number of units it sells, there are two effects on revenue. They are the

Accepted Answer

A)  demand effect and the supply effect. 
B)  competition effect and the cost effect. 
C)  competitive effect and the monopoly effect. 
D)  output effect and the price effect. 
A)  demand effect and the supply effect. 
B)  competition effect and the cost effect. 
C)  competitive effect and the monopoly effect. 
D)  output effect and the price effect.

Question 18

Which statement best describes the effect(s) that occur when a monopoly firm reduces the price of its product?

Accepted Answer

A)  The "price effect" causes total revenue to fall. 
B)  The "output effect" causes total revenue to rise. 
C)  The "revenue effect" causes total revenue to remain constant. 
D)  Both a and b are correct. 
A)  The "price effect" causes total revenue to fall. 
B)  The "output effect" causes total revenue to rise. 
C)  The "revenue effect" causes total revenue to remain constant. 
D)  Both a and b are correct.

Question 19

Economists assume that monopolists behave as

Accepted Answer

A)  cost minimizers. 
B)  profit maximizers. 
C)  price maximizers. 
D)  maximizers of social welfare. 
A)  cost minimizers. 
B)  profit maximizers. 
C)  price maximizers. 
D)  maximizers of social welfare.

Question 20

Table 15-6
A monopolist faces the following demand curve:  
-Refer to Table 15-6. Suppose the monopolist has total fixed costs equal to $5 and a variable cost equal to $4 per unit for all units produced. What is the total profit if she operates at her profit-maximizing price?

Accepted Answer

A)  $1 
B)  $7 
C)  $9 
D)  $11 
A)  $1 
B)  $7 
C)  $9 
D)  $11

Exam 15: Monopoly

A monopolist's profit is equal to (Price - Marginal Cost) × Quantity.

For a firm to price discriminate,

Patent and copyright laws encourage

When a firm operates under conditions of monopoly, its price is

A firm that is the sole seller of a product without close substitutes is

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

A monopolist that practices perfect price discrimination

What are the four ways that government policymakers can respond to the problem of monopoly?

Government intervention always reduces monopoly deadweight loss.

A monopolist produces an output level where marginal revenue equals marginal cost and charges a price where marginal cost equals average total cost.

Reduced competition through merging of companies will raise social welfare

Table 15-9 Consider the following demand and cost information for a monopoly. -Refer to Table 15-9. What is the marginal revenue of the 3rd unit?

Table 15-2 Tanya has the following demand curve for selling taffy. Assume that Tanya has a marginal cost of $3 per unit. -Refer to Table 15-2. What is Tanya's profit-maximizing level of output?

When a monopolist increases the number of units it sells, there are two effects on revenue. They are the

Which statement best describes the effect(s) that occur when a monopoly firm reduces the price of its product?

Economists assume that monopolists behave as

Table 15-6 A monopolist faces the following demand curve: -Refer to Table 15-6. Suppose the monopolist has total fixed costs equal to $5 and a variable cost equal to $4 per unit for all units produced. What is the total profit if she operates at her profit-maximizing price?

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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