Question 1

Antitrust laws

Accepted Answer

A)  prevent firms from maximizing profits. 
B)  allow the government to prevent mergers, even ones that would benefit consumers. 
C)  require the government to measure both the benefits and costs of a potential merger. 
D)  All of the above are correct. 
A)  prevent firms from maximizing profits. 
B)  allow the government to prevent mergers, even ones that would benefit consumers. 
C)  require the government to measure both the benefits and costs of a potential merger. 
D)  All of the above are correct.

Question 2

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

Accepted Answer

A)  of little concern to society. 
B)  a deadweight loss to society. 
C)  a sunk cost to society. 
D)  also observed in competitive markets. 
A)  of little concern to society. 
B)  a deadweight loss to society. 
C)  a sunk cost to society. 
D)  also observed in competitive markets.

Question 3

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. If the monopolist can engage in perfect price discrimination, what is the total revenue when 3 ties are sold?

Accepted Answer

A)  $140 
B)  $420 
C)  $450 
D)  $620 
A)  $140 
B)  $420 
C)  $450 
D)  $620

Question 4

Antitrust laws have economic benefits that outweigh the costs if they

Accepted Answer

A)  prevent mergers that would decrease competition and lower the costs of production. 
B)  prevent mergers that would decrease competition and raise the costs of production. 
C)  allow mergers that would decrease competition and raise the costs of production. 
D)  None of the above is correct because antitrust laws never have economic benefits that outweigh the costs. 
A)  prevent mergers that would decrease competition and lower the costs of production. 
B)  prevent mergers that would decrease competition and raise the costs of production. 
C)  allow mergers that would decrease competition and raise the costs of production. 
D)  None of the above is correct because antitrust laws never have economic benefits that outweigh the costs.

Question 5

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 marginal revenue is

Accepted Answer

A)  always more than the price of its good. 
B)  always equal to the price of its good. 
C)  always less than the price of its good. 
D)  sometimes more and sometimes less than the price of its good. 
A)  always more than the price of its good. 
B)  always equal to the price of its good. 
C)  always less than the price of its good. 
D)  sometimes more and sometimes less than the price of its good.

Question 6

Which of the following is a characteristic of a natural monopoly?

Accepted Answer

A)  Average cost exceeds marginal cost over large regions of output. 
B)  Increasing the number of firms increases each firm's average total cost. 
C)  One firm can supply output at a lower cost than two firms. 
D)  All of the above are correct. 
A)  Average cost exceeds marginal cost over large regions of output. 
B)  Increasing the number of firms increases each firm's average total cost. 
C)  One firm can supply output at a lower cost than two firms. 
D)  All of the above are correct.

Question 7

Table 15-11
The following table shows quantity, price, and marginal cost information for a monopoly:  
-Refer to Table 15-11. What price should the firm charge to maximize its profit?

Accepted Answer

A)  $4 
B)  $5 
C)  $6 
D)  $7 
A)  $4 
B)  $5 
C)  $6 
D)  $7

Question 8

When an industry is a natural monopoly,

Accepted Answer

A)  it is characterized by constant returns to scale. 
B)  it is characterized by diseconomies of scale. 
C)  a larger number of firms may lead to a lower average cost. 
D)  a larger number of firms will lead to a higher average cost. 
A)  it is characterized by constant returns to scale. 
B)  it is characterized by diseconomies of scale. 
C)  a larger number of firms may lead to a lower average cost. 
D)  a larger number of firms will lead to a higher average cost.

Question 9

Table 15-12
The following table provides information on the price, quantity, and average total cost for a monopoly.  
-Refer to Table 15-12. In order to maximize profits, the firm should produce

Accepted Answer

A)  4 units of output. 
B)  8 units of output. 
C)  12 units of output. 
D)  16 units of output. 
A)  4 units of output. 
B)  8 units of output. 
C)  12 units of output. 
D)  16 units of output.

Question 10

The socially efficient quantity is found where the demand curve intersects the marginal cost curve.

Accepted Answer

A) True 
 B)False

Question 11

Scenario 15-11
Vincent operates a scenic tour business in Boston. He has one bus which can fit 50 people per tour and each tour lasts 2 hours. His total cost of operating one tour is fixed at $450. Vincent's cost is not reduced if he runs a tour with a partially full bus. While his cost is the same for all tours, Vincent charges each passenger his/her willingness to pay: adults $18 per trip, children $10 per trip, and senior citizens $12 per trip. At those rates, on a typical day Vincent's demand is:   Assume that Vincent's customers are always available for the tour; therefore, he can fill his bus for each tour as long as there is sufficient total demand for the day.
-Refer to Scenario 15-11. Vincent uses a pricing practice called

Accepted Answer

price disc

Question 12

The deadweight loss that arises from a monopoly is a consequence of the fact that the monopoly

Accepted Answer

A)  quantity is lower than the socially-optimal quantity. 
B)  price equals marginal revenue. 
C)  price is the same as average revenue. 
D)  earns positive profits. 
A)  quantity is lower than the socially-optimal quantity. 
B)  price equals marginal revenue. 
C)  price is the same as average revenue. 
D)  earns positive profits.

Question 13

Figure 15-18  
-Refer to Figure 15-18. If the monopoly firm is not allowed to price discriminate, then the deadweight loss 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 14

One example of price discrimination occurs in the publishing industry when a publisher initially releases an expensive hardcover edition of a popular novel and later releases a cheaper paperback edition. Use this example to demonstrate the benefits and potential pitfalls of a price discrimination pricing strategy.

Accepted Answer

The answer should address the three basi

Question 15

Figure 15-5  
-Refer to Figure 15-5. Profit on a typical unit sold for a profit-maximizing monopoly would equal

Accepted Answer

A)  P1-P6. 
B)  P2-P4. 
C)  P2-P5. 
D)  P2-P3. 
A)  P1-P6. 
B)  P2-P4. 
C)  P2-P5. 
D)  P2-P3.

Question 16

Policymakers are discussing various proposals regarding how to deal with natural monopolies. Senator Huff wants to regulate natural monopolies by equating price with average total cost. Huff contends that such a policy will ensure that monopolies make every effort to reduce costs. Senator Puff wants the government to own natural monopolies. Puff argues that government-owned monopolies usually do a better job of holding down costs than privately owned monopolies. Which senator's argument is correct?

Accepted Answer

A)  Senator Huff 
B)  Senator Puff 
C)  both senators 
D)  neither senator 
A)  Senator Huff 
B)  Senator Puff 
C)  both senators 
D)  neither senator

Question 17

To maximize total surplus with a monopoly firm, a benevolent social planner would choose the level of output where

Accepted Answer

A)  MR = MC. 
B)  MR intersects the demand curve. 
C)  MC intersects the demand curve. 
D)  MR exceeds MC by the greatest amount. 
A)  MR = MC. 
B)  MR intersects the demand curve. 
C)  MC intersects the demand curve. 
D)  MR exceeds MC by the greatest amount.

Question 18

Figure 15-8  
-Refer to Figure 15-8. What is the monopoly price and quantity?

Accepted Answer

A)  price = A; quantity = X 
B)  price = B; quantity = Y 
C)  price = B; quantity = X 
D)  price = C; quantity = X 
A)  price = A; quantity = X 
B)  price = B; quantity = Y 
C)  price = B; quantity = X 
D)  price = C; quantity = X

Question 19

Table 15-5
A monopolist faces the following demand curve:  
-Refer to Table 15-5. The monopolist has total fixed costs of $60 and has a constant marginal cost of $15. What is the profit-maximizing price?

Accepted Answer

A)  $4 
B)  $39 
C)  $36 
D)  $42 
A)  $4 
B)  $39 
C)  $36 
D)  $42

Question 20

Suppose when a monopolist produces 75 units its average revenue is $10 per unit, its marginal revenue is $5 per unit, its marginal cost is $6 per unit, and its average total cost is $5 per unit. What can we conclude about this monopolist?

Accepted Answer

A)  The monopolist is currently maximizing profits, and its total profits are $375. 
B)  The monopolist is currently maximizing profits, and its total profits are $300. 
C)  The monopolist is not currently maximizing profits; it should produce more units and charge a lower price to maximize profits. 
D)  The monopolist is not currently maximizing profits; it should produce fewer units and charge a higher price to maximize profits. 
A)  The monopolist is currently maximizing profits, and its total profits are $375. 
B)  The monopolist is currently maximizing profits, and its total profits are $300. 
C)  The monopolist is not currently maximizing profits; it should produce more units and charge a lower price to maximize profits. 
D)  The monopolist is not currently maximizing profits; it should produce fewer units and charge a higher price to maximize profits.

Exam 15: Monopoly

Antitrust laws

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

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. If the monopolist can engage in perfect price discrimination, what is the total revenue when 3 ties are sold?

Antitrust laws have economic benefits that outweigh the costs if they

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 marginal revenue is

Which of the following is a characteristic of a natural monopoly?

Table 15-11 The following table shows quantity, price, and marginal cost information for a monopoly: -Refer to Table 15-11. What price should the firm charge to maximize its profit?

When an industry is a natural monopoly,

Table 15-12 The following table provides information on the price, quantity, and average total cost for a monopoly. -Refer to Table 15-12. In order to maximize profits, the firm should produce

The socially efficient quantity is found where the demand curve intersects the marginal cost curve.

The deadweight loss that arises from a monopoly is a consequence of the fact that the monopoly

Figure 15-18 -Refer to Figure 15-18. If the monopoly firm is not allowed to price discriminate, then the deadweight loss amounts to

Figure 15-5 -Refer to Figure 15-5. Profit on a typical unit sold for a profit-maximizing monopoly would equal

To maximize total surplus with a monopoly firm, a benevolent social planner would choose the level of output where

Figure 15-8 -Refer to Figure 15-8. What is the monopoly price and quantity?

Table 15-5 A monopolist faces the following demand curve: -Refer to Table 15-5. The monopolist has total fixed costs of $60 and has a constant marginal cost of $15. What is the profit-maximizing price?

Suppose when a monopolist produces 75 units its average revenue is $10 per unit, its marginal revenue is $5 per unit, its marginal cost is $6 per unit, and its average total cost is $5 per unit. What can we conclude about this monopolist?

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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