Question 1

Figure 15-4  
-Refer to Figure 15-4. The marginal cost curve for a monopoly firm is depicted by curve

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  D. 
A)  A. 
B)  B. 
C)  C. 
D)  D.

Question 2

Figure 15-4  
-Refer to Figure 15-4. The average total cost curve for a monopoly firm is depicted by curve

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  D. 
A)  A. 
B)  B. 
C)  C. 
D)  D.

Question 3

Figure 15-19  
-Refer to Figure 15-19. If the monopoly firm is not allowed to price discriminate, then consumer surplus amounts to

Accepted Answer

A)  $0. 
B)  $1,562.50. 
C)  $3,125. 
D)  $6,250. 
A)  $0. 
B)  $1,562.50. 
C)  $3,125. 
D)  $6,250.

Question 4

Figure 15-21  
-Refer to Figure 15-21. What is the price and quantity for this natural monopolist under fair return pricing?

Accepted Answer

A)  A and J 
B)  E and J 
C)  F and K 
D)  H and L 
A)  A and J 
B)  E and J 
C)  F and K 
D)  H and L

Question 5

Scenario 15-6
The concert promoters of a heavy-metal band, WeR2Loud, know that there are two types of concert-goers: die- hard fans and casual fans. For a particular WeR2Loud concert, there are 1,000 die-hard fans who will pay $150 for a ticket and 500 casual fans who will pay $50 for a ticket. There are 1,500 seats available at the concert venue. Suppose the cost of putting on the concert is $50,000, which includes the cost of the band, lighting, security, etc.
-Refer to Scenario 15-6. How much profit will the concert promoters earn if they set the price of each ticket at $50?

Accepted Answer

A)  $25,000 
B)  $75,000 
C)  $100,000 
D)  $150,000 
A)  $25,000 
B)  $75,000 
C)  $100,000 
D)  $150,000

Question 6

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 able to price discriminate, what would be the maximum amount of profit it could generate?

Accepted Answer

A)  $950,000 
B)  $850,000 
C)  $400,000 
D)  $350,000 
A)  $950,000 
B)  $850,000 
C)  $400,000 
D)  $350,000

Question 7

Figure 15-3  
-Refer to Figure 15-3. Which panel could represent the demand curve facing the soybean industry?

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 8

Table 15-12
The following table provides information on the price, quantity, and average total cost for a monopoly.  
-Refer to Table 15-12. At what price will the firm maximize its profit?

Accepted Answer

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

Question 9

Figure 15-19  
-Refer to Figure 15-19. If the monopoly firm perfectly price discriminates, then the deadweight loss amounts to

Accepted Answer

A)  $0. 
B)  $1,562.50. 
C)  $3,125. 
D)  $6,250. 
A)  $0. 
B)  $1,562.50. 
C)  $3,125. 
D)  $6,250.

Question 10

The De Beers Diamond company advertises heavily to promote the sale of all diamonds, not just its own. This is evidence that it has a monopoly position to some degree.

Accepted Answer

A) True 
 B)False

Question 11

Encouraging firms to invest in research and development and individuals to engage in creative endeavors such as writing novels is one justification for

Accepted Answer

A)  resource monopolies. 
B)  natural monopolies. 
C)  government-created monopolies. 
D)  breaking up monopolies into smaller firms. 
A)  resource monopolies. 
B)  natural monopolies. 
C)  government-created monopolies. 
D)  breaking up monopolies into smaller firms.

Question 12

State two examples of government-created monopolies.

Accepted Answer

patents
co

Question 13

For a long while, electricity producers were thought to be a classic example of a natural monopoly. People held this view because

Accepted Answer

A)  the average cost of producing units of electricity by one producer in a specific region was lower than if the same quantity were produced by two or more producers in the same region. 
B)  the average cost of producing units of electricity by one producer in a specific region was higher than if the same quantity were produced by two or more produced in the same region. 
C)  the marginal cost of producing units of electricity by one producer in a specific region was higher than if the same quantity were produced by two or more producers in the same region. 
D)  electricity is a special non-excludable good that could never be sold in a competitive market. 
A)  the average cost of producing units of electricity by one producer in a specific region was lower than if the same quantity were produced by two or more producers in the same region. 
B)  the average cost of producing units of electricity by one producer in a specific region was higher than if the same quantity were produced by two or more produced in the same region. 
C)  the marginal cost of producing units of electricity by one producer in a specific region was higher than if the same quantity were produced by two or more producers in the same region. 
D)  electricity is a special non-excludable good that could never be sold in a competitive market.

Question 14

Which of the following would be most likely to have monopoly power?

Accepted Answer

A)  a long-distance telephone service provider 
B)  a local cable TV provider 
C)  a large department store 
D)  a gas station 
A)  a long-distance telephone service provider 
B)  a local cable TV provider 
C)  a large department store 
D)  a gas station

Question 15

In many countries, the government chooses to "internalize" the monopoly by owning monopoly providers of goods and services. (In some cases these firms are "nationalized," and the government actually buys or confiscates firms that operate in monopoly markets). What would be the advantages and disadvantages of such an approach to ensure that the "best interest of society" is promoted in these markets? Explain your answer.

Accepted Answer

As long as the government "owner" pursue

Question 16

Suppose when a monopolist produces 50 units its average revenue is $8 per unit, its marginal revenue is $4 per unit, its marginal cost is $4 per unit, and its average total cost is $3 per unit. What can we conclude about this monopolist?

Accepted Answer

A)  The monopolist is currently maximizing profits, and its total profits are $200. 
B)  The monopolist is currently maximizing profits, and its total profits are $250. 
C)  The monopolist is not currently maximizing its profits; it should produce more units and charge a lower price to maximize profit. 
D)  The monopolist is not currently maximizing its profits; it should produce fewer units and charger a higher price to maximize profit. 
A)  The monopolist is currently maximizing profits, and its total profits are $200. 
B)  The monopolist is currently maximizing profits, and its total profits are $250. 
C)  The monopolist is not currently maximizing its profits; it should produce more units and charge a lower price to maximize profit. 
D)  The monopolist is not currently maximizing its profits; it should produce fewer units and charger a higher price to maximize profit.

Question 17

Which of the following is not a reason for the existence of a monopoly?

Accepted Answer

A)  patents 
B)  marginal-cost pricing 
C)  economies of scale 
D)  trademarks 
A)  patents 
B)  marginal-cost pricing 
C)  economies of scale 
D)  trademarks

Question 18

After the patent runs out on a brand name drug, generic drugs enter the market. What happens next in the market?

Accepted Answer

A)  Price increases, and total surplus decreases. 
B)  Price decreases, and total surplus decreases. 
C)  Price decreases, and total surplus increases. 
D)  Price increases, and total surplus increases. 
A)  Price increases, and total surplus decreases. 
B)  Price decreases, and total surplus decreases. 
C)  Price decreases, and total surplus increases. 
D)  Price increases, and total surplus increases.

Question 19

Comparing firms in perfectly competitive markets to monopoly firms, which can earn economic profits in the long run?

Accepted Answer

The answer of Comparing firms in perfectly competitive markets to...

Question 20

For a monopoly firm, which of the following equalities is always true?

Accepted Answer

A)  price = marginal revenue 
B)  price = average revenue 
C)  price = total revenue 
D)  marginal revenue = marginal cost 
A)  price = marginal revenue 
B)  price = average revenue 
C)  price = total revenue 
D)  marginal revenue = marginal cost

Exam 15: Monopoly

Figure 15-4 -Refer to Figure 15-4. The marginal cost curve for a monopoly firm is depicted by curve

Figure 15-4 -Refer to Figure 15-4. The average total cost curve for a monopoly firm is depicted by curve

Figure 15-19 -Refer to Figure 15-19. If the monopoly firm is not allowed to price discriminate, then consumer surplus amounts to

Figure 15-21 -Refer to Figure 15-21. What is the price and quantity for this natural monopolist under fair return pricing?

Figure 15-3 -Refer to Figure 15-3. Which panel could represent the demand curve facing the soybean industry?

Table 15-12 The following table provides information on the price, quantity, and average total cost for a monopoly. -Refer to Table 15-12. At what price will the firm maximize its profit?

Figure 15-19 -Refer to Figure 15-19. If the monopoly firm perfectly price discriminates, then the deadweight loss amounts to

The De Beers Diamond company advertises heavily to promote the sale of all diamonds, not just its own. This is evidence that it has a monopoly position to some degree.

Encouraging firms to invest in research and development and individuals to engage in creative endeavors such as writing novels is one justification for

State two examples of government-created monopolies.

For a long while, electricity producers were thought to be a classic example of a natural monopoly. People held this view because

Which of the following would be most likely to have monopoly power?

Suppose when a monopolist produces 50 units its average revenue is $8 per unit, its marginal revenue is $4 per unit, its marginal cost is $4 per unit, and its average total cost is $3 per unit. What can we conclude about this monopolist?

Which of the following is not a reason for the existence of a monopoly?

After the patent runs out on a brand name drug, generic drugs enter the market. What happens next in the market?

Comparing firms in perfectly competitive markets to monopoly firms, which can earn economic profits in the long run?

For a monopoly firm, which of the following equalities is always true?

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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