Question 1

A monopolist maximizes profits by

Accepted Answer

A)  producing an output level where marginal revenue equals marginal cost. 
B)  charging a price that is greater than marginal revenue. 
C)  earning a profit of (P - M
C)  x Q. 
D)  Both a and b are correct. 
A)  producing an output level where marginal revenue equals marginal cost. 
B)  charging a price that is greater than marginal revenue. 
C)  earning a profit of (P - M
C)  x Q. 
D)  Both a and b are correct.

Question 2

Figure 15-15  
-Refer to Figure 15-15. To maximize total surplus, a benevolent social planner would choose which of the following outcomes?

Accepted Answer

A)  Q = 30 and P = 30 
B)  Q = 30 and P = 60 
C)  Q = 45 and P = 45 
D)  Q = 60 and P = 30 
A)  Q = 30 and P = 30 
B)  Q = 30 and P = 60 
C)  Q = 45 and P = 45 
D)  Q = 60 and P = 30

Question 3

The legislation passed by Congress in 1890 to reduce the market power of large and powerful "trusts" was the

Accepted Answer

A)  Morgan Act. 
B)  Sherman Act. 
C)  Clayton Act. 
D)  14th Amendment. 
A)  Morgan Act. 
B)  Sherman Act. 
C)  Clayton Act. 
D)  14th Amendment.

Question 4

If the government regulates the price that a natural monopolist can charge to be equal to the firm's marginal cost, the firm will

Accepted Answer

A)  earn zero profits. 
B)  earn positive profits, causing other firms to enter the industry. 
C)  earn negative profits, causing the firm to exit the industry. 
D)  minimize costs in order to lower the price that it charges. 
A)  earn zero profits. 
B)  earn positive profits, causing other firms to enter the industry. 
C)  earn negative profits, causing the firm to exit the industry. 
D)  minimize costs in order to lower the price that it charges.

Question 5

Figure 15-7  
-Refer to Figure 15-7. A profit-maximizing monopolist would earn profits of

Accepted Answer

A)  $96. 
B)  $117. 
C)  $120. 
D)  $126. 
A)  $96. 
B)  $117. 
C)  $120. 
D)  $126.

Question 6

A firm that is a natural monopoly

Accepted Answer

A)  is not likely to be concerned about new entrants eroding its monopoly power. 
B)  is taking advantage of diseconomies of scale. 
C)  would experience a lower average total cost if more firms entered the market. 
D)  All of the above are correct. 
A)  is not likely to be concerned about new entrants eroding its monopoly power. 
B)  is taking advantage of diseconomies of scale. 
C)  would experience a lower average total cost if more firms entered the market. 
D)  All of the above are correct.

Question 7

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 $4,000.

Accepted Answer

A) True 
 B)False

Question 8

With no price discrimination, the monopolist sells every unit at the same price. Therefore

Accepted Answer

A)  marginal revenue is equal to price. 
B)  marginal revenue is equal to average revenue. 
C)  price is greater than marginal revenue. 
D)  Both a and b are correct. 
A)  marginal revenue is equal to price. 
B)  marginal revenue is equal to average revenue. 
C)  price is greater than marginal revenue. 
D)  Both a and b are correct.

Question 9

A fundamental source of monopoly market power arises from

Accepted Answer

A)  perfectly elastic demand. 
B)  perfectly inelastic demand. 
C)  barriers to entry. 
D)  availability of "free" natural resources, such as water or air. 
A)  perfectly elastic demand. 
B)  perfectly inelastic demand. 
C)  barriers to entry. 
D)  availability of "free" natural resources, such as water or air.

Question 10

When a single firm can supply a product to an entire market at a lower cost than could two or more firms, the industry is called a

Accepted Answer

A)  resource industry. 
B)  exclusive industry. 
C)  government monopoly. 
D)  natural monopoly. 
A)  resource industry. 
B)  exclusive industry. 
C)  government monopoly. 
D)  natural monopoly.

Question 11

Table 15-18
A monopolist faces the following demand curve:   Suppose marginal cost is constant at $8 per unit.
-Refer to Table 15-18. The monopolist's total revenue from selling 4 units of output is

Accepted Answer

A)  $4. 
B)  $16. 
C)  $32. 
D)  $48. 
A)  $4. 
B)  $16. 
C)  $32. 
D)  $48.

Question 12

Economic welfare is generally measured by

Accepted Answer

A)  (i) and (ii) only 
B)  (ii) and (iii) only 
C)  (ii) only 
D)  (i), (ii), and (iii) 
A)  (i) and (ii) only 
B)  (ii) and (iii) only 
C)  (ii) only 
D)  (i), (ii), and (iii)

Question 13

Which of the following is an example of a barrier to entry?

Accepted Answer

A)  Crystal charges a higher price than her competitors for her hair-styling services. 
B)  Dan charges a lower price than his competitors for his dry-walling services. 
C)  Jackie offers free samples of her loose-meat sandwiches to attract new customers. 
D)  Roseanne obtains a copyright for a short story that she wrote and published. 
A)  Crystal charges a higher price than her competitors for her hair-styling services. 
B)  Dan charges a lower price than his competitors for his dry-walling services. 
C)  Jackie offers free samples of her loose-meat sandwiches to attract new customers. 
D)  Roseanne obtains a copyright for a short story that she wrote and published.

Question 14

Which of the following statements is not correct?

Accepted Answer

A)  Part of the deadweight loss associated with monopoly is measured by the monopolist's economic profit. 
B)  Marginal cost is always less than average total cost in a natural monopoly. 
C)  Discount coupons available free to the public are a type of price discrimination. 
D)  Anti-trust laws make it harder for firms to create synergies. 
A)  Part of the deadweight loss associated with monopoly is measured by the monopolist's economic profit. 
B)  Marginal cost is always less than average total cost in a natural monopoly. 
C)  Discount coupons available free to the public are a type of price discrimination. 
D)  Anti-trust laws make it harder for firms to create synergies.

Question 15

If a pharmaceutical company discovers a new drug and successfully patents it, patent law gives the firm

Accepted Answer

A)  partial ownership of the right to sell the drug for a limited number of years. 
B)  partial ownership of the right to sell the drug for an unlimited number of years. 
C)  sole ownership of the right to sell the drug for a limited number of years. 
D)  sole ownership of the right to sell the drug for an unlimited number of years. 
A)  partial ownership of the right to sell the drug for a limited number of years. 
B)  partial ownership of the right to sell the drug for an unlimited number of years. 
C)  sole ownership of the right to sell the drug for a limited number of years. 
D)  sole ownership of the right to sell the drug for an unlimited number of years.

Question 16

Figure 15-7  
-Refer to Figure 15-7. A profit-maximizing monopolist would incur total costs of

Accepted Answer

A)  $81. 
B)  $120. 
C)  $144. 
D)  $240. 
A)  $81. 
B)  $120. 
C)  $144. 
D)  $240.

Question 17

Perfect price discrimination describes a situation in which the monopolist

Accepted Answer

A)  knows the exact willingness to pay of each of its customers. 
B)  charges exactly two different prices to exactly two different groups of customers. 
C)  maximizes consumer surplus. 
D)  experiences a zero economic profit. 
A)  knows the exact willingness to pay of each of its customers. 
B)  charges exactly two different prices to exactly two different groups of customers. 
C)  maximizes consumer surplus. 
D)  experiences a zero economic profit.

Question 18

A competitive firm

Accepted Answer

A)  and a monopolist are price takers. 
B)  and a monopolist are price makers. 
C)  is a price taker, whereas a monopolist is a price maker. 
D)  is a price maker, whereas a monopolist is a price taker. 
A)  and a monopolist are price takers. 
B)  and a monopolist are price makers. 
C)  is a price taker, whereas a monopolist is a price maker. 
D)  is a price maker, whereas a monopolist is a price taker.

Question 19

If the monopolist's linear demand curve intersects the quantity axis at Q = 30, then the monopolist's marginal revenue will be equal to zero at

Accepted Answer

A)  Q = 10. 
B)  Q = 15. 
C)  Q = 20. 
D)  Q = 30. 
A)  Q = 10. 
B)  Q = 15. 
C)  Q = 20. 
D)  Q = 30.

Question 20

Which type of public policy toward monopolies is much more common in Europe than in the United States?

Accepted Answer

A)  antitrust laws 
B)  regulation 
C)  public ownership 
D)  "do nothing" 
A)  antitrust laws 
B)  regulation 
C)  public ownership 
D)  "do nothing"

Exam 15: Monopoly

A monopolist maximizes profits by

Figure 15-15 -Refer to Figure 15-15. To maximize total surplus, a benevolent social planner would choose which of the following outcomes?

The legislation passed by Congress in 1890 to reduce the market power of large and powerful "trusts" was the

If the government regulates the price that a natural monopolist can charge to be equal to the firm's marginal cost, the firm will

Figure 15-7 -Refer to Figure 15-7. A profit-maximizing monopolist would earn profits of

A firm that is a natural monopoly

With no price discrimination, the monopolist sells every unit at the same price. Therefore

A fundamental source of monopoly market power arises from

When a single firm can supply a product to an entire market at a lower cost than could two or more firms, the industry is called a

Table 15-18 A monopolist faces the following demand curve: Suppose marginal cost is constant at $8 per unit. -Refer to Table 15-18. The monopolist's total revenue from selling 4 units of output is

Economic welfare is generally measured by

Which of the following is an example of a barrier to entry?

Which of the following statements is not correct?

If a pharmaceutical company discovers a new drug and successfully patents it, patent law gives the firm

Figure 15-7 -Refer to Figure 15-7. A profit-maximizing monopolist would incur total costs of

Perfect price discrimination describes a situation in which the monopolist

A competitive firm

If the monopolist's linear demand curve intersects the quantity axis at Q = 30, then the monopolist's marginal revenue will be equal to zero at

Which type of public policy toward monopolies is much more common in Europe than in the United States?

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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