Question 1

The deadweight loss associated with a monopoly occurs because the monopolist

Accepted Answer

A)  maximizes profits. 
B)  produces an output level less than the socially optimal level. 
C)  produces an output level greater than the socially optimal level. 
D)  equates marginal revenue with marginal cost. 
A)  maximizes profits. 
B)  produces an output level less than the socially optimal level. 
C)  produces an output level greater than the socially optimal level. 
D)  equates marginal revenue with marginal cost.

Question 2

Figure 15-12  
-Refer to Figure 15-12. Which area represents the deadweight loss from monopoly?

Accepted Answer

A)  A+B 
B)  C+F 
C)  G 
D)  A+B+C+F 
A)  A+B 
B)  C+F 
C)  G 
D)  A+B+C+F

Question 3

Table 15-1  
-Refer to Table 15-1. Assume this monopolist's marginal cost is constant at $12. What quantity of output (Q) will it produce and what price (P) will it charge?

Accepted Answer

A)  Q = 4, P = $29 
B)  Q = 4, P = $26 
C)  Q = 5, P = $23 
D)  Q = 7, P = $17 
A)  Q = 4, P = $29 
B)  Q = 4, P = $26 
C)  Q = 5, P = $23 
D)  Q = 7, P = $17

Question 4

Figure 15-18  
-Refer to Figure 15-18. If the monopoly firm perfectly price discriminates, then consumer surplus amounts to

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 5

Some prescription drugs sell for more in the United States than they do in other countries. Which of the following statements about this issue is most likely to be true?

Accepted Answer

A)  Drug companies are engaging in price discrimination, and this practice certainly reduces global social welfare. 
B)  Global social welfare could be improved if the price in the United States were reduced to the price charged in other countries. 
C)  Global social welfare could be improved if the price in the other countries were increased to the price charged in the United States. 
D)  Drug companies are engaging in price discrimination, but this might improve global social welfare if it gives more people access to the drugs. 
A)  Drug companies are engaging in price discrimination, and this practice certainly reduces global social welfare. 
B)  Global social welfare could be improved if the price in the United States were reduced to the price charged in other countries. 
C)  Global social welfare could be improved if the price in the other countries were increased to the price charged in the United States. 
D)  Drug companies are engaging in price discrimination, but this might improve global social welfare if it gives more people access to the drugs.

Question 6

In a market characterized by monopoly, the market demand curve is

Accepted Answer

A)  upward sloping. 
B)  horizontal. 
C)  downward sloping. 
D)  vertical. 
A)  upward sloping. 
B)  horizontal. 
C)  downward sloping. 
D)  vertical.

Question 7

Table 15-6
A monopolist faces the following demand curve:  
-Refer to Table 15-6. If the monopolist has a constant marginal cost for her product equal to $7, what is her profit- maximizing price?

Accepted Answer

A)  $6 
B)  $9 
C)  $12 
D)  $15 
A)  $6 
B)  $9 
C)  $12 
D)  $15

Question 8

Table 15-8
The following table provides information on the price, quantity, and average total cost for a monopoly.  
-Refer to Table 15-8. How much extra revenue does the monopolist earn when he lowers the price from $18 to $12?

Accepted Answer

A)  $10 
B)  $12 
C)  $30 
D)  $41 
A)  $10 
B)  $12 
C)  $30 
D)  $41

Question 9

Most markets are not monopolies in the real world because

Accepted Answer

A)  firms usually face downward-sloping demand curves. 
B)  supply curves slope upward. 
C)  firms usually equate price with marginal cost. 
D)  there are reasonable substitutes for most goods. 
A)  firms usually face downward-sloping demand curves. 
B)  supply curves slope upward. 
C)  firms usually equate price with marginal cost. 
D)  there are reasonable substitutes for most goods.

Question 10

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

Accepted Answer

A)  increase the availability of expensive but useful medications. 
B)  increase the overall welfare of society through better health because drug companies continually produce better medications. 
C)  encourage research. 
D)  All of the above are correct. 
A)  increase the availability of expensive but useful medications. 
B)  increase the overall welfare of society through better health because drug companies continually produce better medications. 
C)  encourage research. 
D)  All of the above are correct.

Question 11

Table 15-21
Tommy's Tie Company, a monopolist, has the following cost and revenue information. Assume that Tommy's is
able to engage in perfect price discrimination.  
-Refer to Table 15-21. What are Tommy's Ties Company's fixed costs?

Accepted Answer

A)  $100 
B)  $150 
C)  $354 
D)  $654 
A)  $100 
B)  $150 
C)  $354 
D)  $654

Question 12

Figure 15-23  
-Refer to Figure 15-23. If the firm profit-maximizes, what price will it charge?

Accepted Answer

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

Question 13

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 pharmaceutical company obtains a patent for a specific high blood pressure medication. 
C)  A musician obtains a copyright for her original song. 
D)  An entrepreneur opens a popular new restaurant. 
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 pharmaceutical company obtains a patent for a specific high blood pressure medication. 
C)  A musician obtains a copyright for her original song. 
D)  An entrepreneur opens a popular new restaurant.

Question 14

Like competitive firms, monopolies charge a price equal to marginal cost.

Accepted Answer

A) True 
 B)False

Question 15

One problem with government operation of monopolies is that

Accepted Answer

A)  a benevolent government is likely to be interested in generating profits for political gain. 
B)  monopolies typically have rising average costs. 
C)  the government typically has little incentive to reduce costs. 
D)  a government-regulated outcome will increase the profitability of the monopoly. 
A)  a benevolent government is likely to be interested in generating profits for political gain. 
B)  monopolies typically have rising average costs. 
C)  the government typically has little incentive to reduce costs. 
D)  a government-regulated outcome will increase the profitability of the monopoly.

Question 16

Table 15-7
Sally owns the only shoe store in town. She has the following cost and revenue information.  
-Refer to Table 15-7. What is the marginal cost of the 8th pair of shoes?

Accepted Answer

A)  $50 
B)  $60 
C)  $90 
D)  $110 
A)  $50 
B)  $60 
C)  $90 
D)  $110

Question 17

A monopolist does not have a supply curve because the firm's decision about how much to supply is impossible to separate from the demand curve it faces.

Accepted Answer

A) True 
 B)False

Question 18

The amount of power that a monopoly has depends on whether there are close substitutes for its product.

Accepted Answer

A) True 
 B)False

Question 19

Suppose a profit-maximizing monopolist faces a constant marginal cost of $10, 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 $2,000.

Accepted Answer

A) True 
 B)False

Question 20

Scenario 15-9
Suppose executives at an art museum know that 100 adults are willing to pay $12 for admission to the museum on a weekday. Suppose the executives also know that 200 students are willing to pay $8 for admission on a weekday. The cost of operating the museum on a weekday is $2,000.
-Refer to Scenario 15-9. How much profit will the museum earn if it charges all customers $8 for admission?

Accepted Answer

A)  $200 
B)  $400 
C)  $800 
D)  $2,400 
A)  $200 
B)  $400 
C)  $800 
D)  $2,400

Exam 15: Monopoly

The deadweight loss associated with a monopoly occurs because the monopolist

Figure 15-12 -Refer to Figure 15-12. Which area represents the deadweight loss from monopoly?

Table 15-1 -Refer to Table 15-1. Assume this monopolist's marginal cost is constant at $12. What quantity of output (Q) will it produce and what price (P) will it charge?

Figure 15-18 -Refer to Figure 15-18. If the monopoly firm perfectly price discriminates, then consumer surplus amounts to

Some prescription drugs sell for more in the United States than they do in other countries. Which of the following statements about this issue is most likely to be true?

In a market characterized by monopoly, the market demand curve is

Table 15-6 A monopolist faces the following demand curve: -Refer to Table 15-6. If the monopolist has a constant marginal cost for her product equal to $7, what is her profit- maximizing price?

Table 15-8 The following table provides information on the price, quantity, and average total cost for a monopoly. -Refer to Table 15-8. How much extra revenue does the monopolist earn when he lowers the price from $18 to $12?

Most markets are not monopolies in the real world because

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

Table 15-21 Tommy's Tie Company, a monopolist, has the following cost and revenue information. Assume that Tommy's is able to engage in perfect price discrimination. -Refer to Table 15-21. What are Tommy's Ties Company's fixed costs?

Figure 15-23 -Refer to Figure 15-23. If the firm profit-maximizes, what price will it charge?

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

Like competitive firms, monopolies charge a price equal to marginal cost.

One problem with government operation of monopolies is that

Table 15-7 Sally owns the only shoe store in town. She has the following cost and revenue information. -Refer to Table 15-7. What is the marginal cost of the 8th pair of shoes?

A monopolist does not have a supply curve because the firm's decision about how much to supply is impossible to separate from the demand curve it faces.

The amount of power that a monopoly has depends on whether there are close substitutes for its product.

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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