Question 1

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

Accepted Answer

A)  Matthew offers free samples of his latest flavored coffee drink to entice customers to buy a cup. 
B)  Mark charges a lower price to students than to faculty for his tattoo services. 
C)  Luke charges a higher hourly price to business students than to liberal arts students for his economics tutoring. 
D)  John obtained a copyright for the song he wrote and recorded. 
A)  Matthew offers free samples of his latest flavored coffee drink to entice customers to buy a cup. 
B)  Mark charges a lower price to students than to faculty for his tattoo services. 
C)  Luke charges a higher hourly price to business students than to liberal arts students for his economics tutoring. 
D)  John obtained a copyright for the song he wrote and recorded.

Question 2

Even with market power, monopolists cannot achieve any level of profit they desire because they will sell lower quantities at higher prices.

Accepted Answer

A) True 
 B)False

Question 3

If government officials break up a natural monopoly into four smaller firms, then

Accepted Answer

A)  each firm will be unable to maximize profits due to increased competition. 
B)  competition will force firms to produce surplus output, which drives up price. 
C)  the average cost of production will increase. 
D)  consumers will benefit from lower average total costs. 
A)  each firm will be unable to maximize profits due to increased competition. 
B)  competition will force firms to produce surplus output, which drives up price. 
C)  the average cost of production will increase. 
D)  consumers will benefit from lower average total costs.

Question 4

Perfect price discrimination

Accepted Answer

A)  eliminates deadweight loss. 
B)  reduces profits to the monopolist. 
C)  decreases the total quantity sold by the monopolist. 
D)  requires arbitrage in order for the monopolist to maximize profits. 
A)  eliminates deadweight loss. 
B)  reduces profits to the monopolist. 
C)  decreases the total quantity sold by the monopolist. 
D)  requires arbitrage in order for the monopolist to maximize profits.

Question 5

Table 15-14
The following table gives information on the price, quantity, and total cost of production for a monopolist.  
-Refer to Table 15-14. At what price does marginal revenue equal marginal cost?

Accepted Answer

A)  $5 
B)  $4 
C)  $3 
D)  $2 
A)  $5 
B)  $4 
C)  $3 
D)  $2

Question 6

Which of the following statements is not correct?

Accepted Answer

A)  The government may use antitrust laws to prevent a merger if the government believes the merger will reduce competition and increase prices. 
B)  By regulating a natural monopoly where price equals average total cost, the monopoly earns zero profits. 
C)  An advantage of private ownership over public ownership is that private business owners tend to fire inefficient managers. 
D)  The government should always intervene to improve monopoly inefficiency. 
A)  The government may use antitrust laws to prevent a merger if the government believes the merger will reduce competition and increase prices. 
B)  By regulating a natural monopoly where price equals average total cost, the monopoly earns zero profits. 
C)  An advantage of private ownership over public ownership is that private business owners tend to fire inefficient managers. 
D)  The government should always intervene to improve monopoly inefficiency.

Question 7

One characteristic of a monopoly market is that the product is virtually identical to products produced by competing firms.

Accepted Answer

A) True 
 B)False

Question 8

Figure 15-18  
-Refer to Figure 15-18. If the monopoly firm perfectly price discriminates, 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 9

Which of the following strategies is not an effective strategy to reduce monopoly inefficiency?

Accepted Answer

A)  antitrust laws 
B)  price discrimination 
C)  doing nothing 
D)  breaking up a natural monopoly into more than one firm 
A)  antitrust laws 
B)  price discrimination 
C)  doing nothing 
D)  breaking up a natural monopoly into more than one firm

Question 10

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 engages in price discrimination?

Accepted Answer

A)  $800 
B)  $1,200 
C)  $1,600 
D)  $2,800 
A)  $800 
B)  $1,200 
C)  $1,600 
D)  $2,800

Question 11

Table 15-11
The following table shows quantity, price, and marginal cost information for a monopoly:  
-Refer to Table 15-11. What would be the firm's marginal revenue at the profit­maximizing level of output?

Accepted Answer

A)  $7 
B)  $6 
C)  $5 
D)  $1 
A)  $7 
B)  $6 
C)  $5 
D)  $1

Question 12

If a monopolist has zero marginal costs, it will produce

Accepted Answer

A)  the output at which total revenue is maximized. 
B)  in the range in which marginal revenue is still increasing. 
C)  at the point at which marginal revenue is at a maximum. 
D)  in the range in which marginal revenue is negative. 
A)  the output at which total revenue is maximized. 
B)  in the range in which marginal revenue is still increasing. 
C)  at the point at which marginal revenue is at a maximum. 
D)  in the range in which marginal revenue is negative.

Question 13

Scenario 15-3
A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $30, its average revenue is $60, and its average total cost is $34.
-Refer to Scenario 15-3. At Q = 500, the firm's marginal cost is

Accepted Answer

A)  $34. 
B)  less than $30. 
C)  $30. 
D)  greater than $34. 
A)  $34. 
B)  less than $30. 
C)  $30. 
D)  greater than $34.

Question 14

Table 15-19
A monopolist faces the following demand curve:  
-Refer to Table 15-19. If a monopolist faces a constant marginal cost of $1, how much output should the firm produce in order to equate marginal revenue with marginal cost?

Accepted Answer

A)  3 units 
B)  4 units 
C)  5 units 
D)  6 units 
A)  3 units 
B)  4 units 
C)  5 units 
D)  6 units

Question 15

Scenario 15-10
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 15-10. What is Vincent's total revenue on a typical day?

Accepted Answer

A)  $1,500 
B)  $1,800 
C)  $2,170 
D)  $2,700 
A)  $1,500 
B)  $1,800 
C)  $2,170 
D)  $2,700

Question 16

Table 15-1  
-Refer to Table 15-1. When 4 units of output are produced and sold, what is average revenue?

Accepted Answer

A)  $17 
B)  $21 
C)  $23 
D)  $26 
A)  $17 
B)  $21 
C)  $23 
D)  $26

Question 17

Figure 15-4  
-Refer to Figure 15-4. The demand 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 18

Financial aid to college students, quantity discounts, and senior citizen discounts are all examples of

Accepted Answer

A)  consumer surplus. 
B)  deadweight loss. 
C)  price discrimination. 
D)  nonprofit pricing strategies. 
A)  consumer surplus. 
B)  deadweight loss. 
C)  price discrimination. 
D)  nonprofit pricing strategies.

Question 19

Monopoly profit is not a social problem because

Accepted Answer

A)  the size of the economic pie grows when monopoly profits increase. 
B)  producers are more efficient than consumers. 
C)  the profit represents a transfer from the consumer to the producer with no loss in total surplus. 
D)  None of the above are correct. 
A)  the size of the economic pie grows when monopoly profits increase. 
B)  producers are more efficient than consumers. 
C)  the profit represents a transfer from the consumer to the producer with no loss in total surplus. 
D)  None of the above are correct.

Question 20

Price discrimination is prohibited by antitrust laws.

Accepted Answer

A) True 
 B)False

Exam 15: Monopoly

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

Even with market power, monopolists cannot achieve any level of profit they desire because they will sell lower quantities at higher prices.

If government officials break up a natural monopoly into four smaller firms, then

Perfect price discrimination

Table 15-14 The following table gives information on the price, quantity, and total cost of production for a monopolist. -Refer to Table 15-14. At what price does marginal revenue equal marginal cost?

Which of the following statements is not correct?

One characteristic of a monopoly market is that the product is virtually identical to products produced by competing firms.

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

Which of the following strategies is not an effective strategy to reduce monopoly inefficiency?

Table 15-11 The following table shows quantity, price, and marginal cost information for a monopoly: -Refer to Table 15-11. What would be the firm's marginal revenue at the profit­maximizing level of output?

If a monopolist has zero marginal costs, it will produce

Scenario 15-3 A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $30, its average revenue is $60, and its average total cost is $34. -Refer to Scenario 15-3. At Q = 500, the firm's marginal cost is

Table 15-19 A monopolist faces the following demand curve: -Refer to Table 15-19. If a monopolist faces a constant marginal cost of $1, how much output should the firm produce in order to equate marginal revenue with marginal cost?

Table 15-1 -Refer to Table 15-1. When 4 units of output are produced and sold, what is average revenue?

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

Financial aid to college students, quantity discounts, and senior citizen discounts are all examples of

Monopoly profit is not a social problem because

Price discrimination is prohibited by antitrust laws.

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

Table 15-11 The following table shows quantity, price, and marginal cost information for a monopoly: -Refer to Table 15-11. What would be the firm's marginal revenue at the profitmaximizing level of output?