Question 1

Splitting up a monopoly is often justified on the grounds that

Accepted Answer

A)  consumers prefer dealing with small firms. 
B)  small firms have lower costs. 
C)  competition is inherently efficient. 
D)  small firms produce higher quality products. 
A)  consumers prefer dealing with small firms. 
B)  small firms have lower costs. 
C)  competition is inherently efficient. 
D)  small firms produce higher quality products.

Question 2

By selling hardcover books to die-hard fans and paperback books to less enthusiastic readers, the publisher is able to price discriminate and raise its profits.

Accepted Answer

A) True 
 B)False

Question 3

The profit-maximization problem for a monopolist differs from that of a competitive firm in which of the following ways?

Accepted Answer

A)  A competitive firm maximizes profit at the point where marginal revenue equals marginal cost; a monopolist maximizes profit at the point where marginal revenue exceeds marginal cost. 
B)  A competitive firm maximizes profit at the point where average revenue equals marginal cost; a monopolist maximizes profit at the point where average revenue exceeds marginal cost. 
C)  For a competitive firm, marginal revenue at the profit-maximizing level of output is equal to marginal revenue at all other levels of output; for a monopolist, marginal revenue at the profit-maximizing level of output is smaller than it is for larger levels of output. 
D)  For a profit-maximizing competitive firm, thinking at the margin is much more important than it is for a profit- maximizing monopolist. 
A)  A competitive firm maximizes profit at the point where marginal revenue equals marginal cost; a monopolist maximizes profit at the point where marginal revenue exceeds marginal cost. 
B)  A competitive firm maximizes profit at the point where average revenue equals marginal cost; a monopolist maximizes profit at the point where average revenue exceeds marginal cost. 
C)  For a competitive firm, marginal revenue at the profit-maximizing level of output is equal to marginal revenue at all other levels of output; for a monopolist, marginal revenue at the profit-maximizing level of output is smaller than it is for larger levels of output. 
D)  For a profit-maximizing competitive firm, thinking at the margin is much more important than it is for a profit- maximizing monopolist.

Question 4

Scenario 15-1
Consider a transportation corporation named Reading's that has just completed the development of a new light rail system in Minneapolis. Currently, there are plenty of seats on the train, and it is never crowded. Its capacity far exceeds the needs of the city. After just a few years of operation, the shareholders of Reading's experienced incredibly high rates of return on their investment due to the profitability of the corporation.
-Refer to Scenario 15-1. Which of the following statements is most likely to be true? currently has.

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 5

The practice of selling the same goods to different customers at different prices, but with the same marginal cost, is known as

Accepted Answer

A)  price segregation. 
B)  price discrimination. 
C)  arbitrage. 
D)  monopoly pricing. 
A)  price segregation. 
B)  price discrimination. 
C)  arbitrage. 
D)  monopoly pricing.

Question 6

The simplest way for a monopoly to arise is for a single firm to

Accepted Answer

A)  decrease its price below its competitors' prices. 
B)  decrease production to increase demand for its product. 
C)  make pricing decisions jointly with other firms. 
D)  own a key resource. 
A)  decrease its price below its competitors' prices. 
B)  decrease production to increase demand for its product. 
C)  make pricing decisions jointly with other firms. 
D)  own a key resource.

Question 7

Figure 15-20  
-Refer to Figure 15-20. The deadweight loss caused by a profit-maximizing monopoly amounts to

Accepted Answer

A)  $225. 
B)  $450. 
C)  $900. 
D)  $1,350. 
A)  $225. 
B)  $450. 
C)  $900. 
D)  $1,350.

Question 8

Antitrust laws allow the government to

Accepted Answer

A)  collect revenues through the antitrust tax. 
B)  break up companies. 
C)  purchase privately-held companies through eminent domain. 
D)  All of the above are correct. 
A)  collect revenues through the antitrust tax. 
B)  break up companies. 
C)  purchase privately-held companies through eminent domain. 
D)  All of the above are correct.

Question 9

Figure 15-4  
-Refer to Figure 15-4. If the monopoly firm is currently producing Q4 units of output, then a decrease in output will necessarily cause profit to

Accepted Answer

A)  remain unchanged. 
B)  decrease. 
C)  increase as long as the new level of output is at least Q2. 
D)  None of the above is correct. The monopolist currently maximizing profits at Q4. 
A)  remain unchanged. 
B)  decrease. 
C)  increase as long as the new level of output is at least Q2. 
D)  None of the above is correct. The monopolist currently maximizing profits at Q4.

Question 10

Generic drugs enter the pharmaceutical drug market once

Accepted Answer

A)  the ingredients to the name brand drug have been discovered. 
B)  10 years have passed. 
C)  they are patented. 
D)  the patent on the name brand drug expires. 
A)  the ingredients to the name brand drug have been discovered. 
B)  10 years have passed. 
C)  they are patented. 
D)  the patent on the name brand drug expires.

Question 11

In reality, perfect price discrimination is

Accepted Answer

A)  used by about 75 percent of all monopolies. 
B)  used by about 50 percent of all monopolies. 
C)  seldom used by monopolies because it leads to lower profits. 
D)  rarely possible. 
A)  used by about 75 percent of all monopolies. 
B)  used by about 50 percent of all monopolies. 
C)  seldom used by monopolies because it leads to lower profits. 
D)  rarely possible.

Question 12

The social cost of a monopoly is equal to its

Accepted Answer

A)  economic profit. 
B)  fixed cost. 
C)  dead weight loss. 
D)  variable cost. 
A)  economic profit. 
B)  fixed cost. 
C)  dead weight loss. 
D)  variable cost.

Question 13

Many economists criticize monopolists because they

Accepted Answer

A)  charge a price that equals marginal cost rather than a price that equals average cost. 
B)  do not innovate. 
C)  produce a large quantity of waste. 
D)  produce less than the socially efficient level of output. 
A)  charge a price that equals marginal cost rather than a price that equals average cost. 
B)  do not innovate. 
C)  produce a large quantity of waste. 
D)  produce less than the socially efficient level of output.

Question 14

Figure 15-22  
-Refer to Figure 15-22. If the monopolist uses perfect price discrimination, how much output does the firm produce?

Accepted Answer

The answer of Figure 15-22  
-Refer to Figure 15-22....

Question 15

The economic inefficiency of a monopolist can be measured by the

Accepted Answer

A)  deadweight loss. 
B)  value of the unrealized trades that could be made if the monopolist produced the socially-efficient output. 
C)  area above marginal cost but beneath demand from the monopoly output to the socially-efficient output. 
D)  All of the above are correct. 
A)  deadweight loss. 
B)  value of the unrealized trades that could be made if the monopolist produced the socially-efficient output. 
C)  area above marginal cost but beneath demand from the monopoly output to the socially-efficient output. 
D)  All of the above are correct.

Question 16

Because a monopolist does not face competition from other firms, the outcome in a market with a monopoly

Accepted Answer

A)  does not illustrate profit maximization. 
B)  is often not in the best interest of society. 
C)  is characterized by unlimited profits. 
D)  would be improved if the government produced the product rather than a private firm. 
A)  does not illustrate profit maximization. 
B)  is often not in the best interest of society. 
C)  is characterized by unlimited profits. 
D)  would be improved if the government produced the product rather than a private firm.

Question 17

Figure 15-9  
-Refer to Figure 15-9. The deadweight loss caused by a profit-maximizing monopoly amounts to

Accepted Answer

A)  $250. 
B)  $500. 
C)  $750. 
D)  $1,000. 
A)  $250. 
B)  $500. 
C)  $750. 
D)  $1,000.

Question 18

Table 15-17
A monopolist faces the following demand curve:  
-Refer to Table 15-17. If the marginal cost of production is constant at $18 per unit, this profit-maximizing monopolist will choose to produce

Accepted Answer

A)  20 units. 
B)  30 units. 
C)  40 units. 
D)  50 units. 
A)  20 units. 
B)  30 units. 
C)  40 units. 
D)  50 units.

Question 19

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. How much profit will Mega Media Cable TV earn if it sets the price at $25?

Accepted Answer

A)  $350,000 
B)  $450,000 
C)  $475,000 
D)  $575,000 
A)  $350,000 
B)  $450,000 
C)  $475,000 
D)  $575,000

Question 20

Price discrimination requires the firm to

Accepted Answer

A)  separate customers according to their willingnesses to pay. 
B)  differentiate between different units of its product. 
C)  engage in arbitrage. 
D)  use coupons. 
A)  separate customers according to their willingnesses to pay. 
B)  differentiate between different units of its product. 
C)  engage in arbitrage. 
D)  use coupons.

Exam 15: Monopoly

Splitting up a monopoly is often justified on the grounds that

By selling hardcover books to die-hard fans and paperback books to less enthusiastic readers, the publisher is able to price discriminate and raise its profits.

The profit-maximization problem for a monopolist differs from that of a competitive firm in which of the following ways?

The practice of selling the same goods to different customers at different prices, but with the same marginal cost, is known as

The simplest way for a monopoly to arise is for a single firm to

Figure 15-20 -Refer to Figure 15-20. The deadweight loss caused by a profit-maximizing monopoly amounts to

Antitrust laws allow the government to

Figure 15-4 -Refer to Figure 15-4. If the monopoly firm is currently producing Q4 units of output, then a decrease in output will necessarily cause profit to

Generic drugs enter the pharmaceutical drug market once

In reality, perfect price discrimination is

The social cost of a monopoly is equal to its

Many economists criticize monopolists because they

Figure 15-22 -Refer to Figure 15-22. If the monopolist uses perfect price discrimination, how much output does the firm produce?

The economic inefficiency of a monopolist can be measured by the

Because a monopolist does not face competition from other firms, the outcome in a market with a monopoly

Figure 15-9 -Refer to Figure 15-9. The deadweight loss caused by a profit-maximizing monopoly amounts to

Table 15-17 A monopolist faces the following demand curve: -Refer to Table 15-17. If the marginal cost of production is constant at $18 per unit, this profit-maximizing monopolist will choose to produce

Price discrimination requires the firm to

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

Filters