Question 1

Deadweight loss

Accepted Answer

A)  measures monopoly inefficiency. 
B)  exceeds monopoly profits. 
C)  equals monopoly profits. 
D)  equals monopoly revenues minus profits. 
A)  measures monopoly inefficiency. 
B)  exceeds monopoly profits. 
C)  equals monopoly profits. 
D)  equals monopoly revenues minus profits.

Question 2

Figure 15-13  
-Refer to Figure 15-13. A profit-maximizing monopolist would create a deadweight loss to society valued at

Accepted Answer

A)  $12. 
B)  $24. 
C)  $42. 
D)  $84. 
A)  $12. 
B)  $24. 
C)  $42. 
D)  $84.

Question 3

Scenario 15-7
Black Box Cable TV is able to purchase an exclusive right to sell a premium movie channel (PMC) in its market area. Let's assume that Black Box Cable pays $150,000 a year for the exclusive marketing rights to PMC. Since Black Box has already installed cable to all of the homes in its market area, the marginal cost of delivering PMC to subscribers is zero. The manager of Black Box needs to know what price to charge for the PMC service to maximize her profit. Before setting price, she hires an economist to estimate demand for the PMC service. The economist discovers that there are two types of subscribers who value premium movie channels. First are the 4,000 die-hard TV viewers who will pay as much as $150 a year for the new PMC premium channel. Second, the PMC channel will appeal to 20,000 occasional TV viewers who will pay as much as $20 a year for a subscription to PMC.
-Refer to Scenario 15-7. If Black Box Cable TV is unable to price discriminate, what price will it choose to maximize its profit, and what is the amount of the profit?

Accepted Answer

A)  price = $20; profit = $400,000 
B)  price = $20; profit = $330,000 
C)  price = $150; profit = $450,000 
D)  price = $150; profit = $600,000 
A)  price = $20; profit = $400,000 
B)  price = $20; profit = $330,000 
C)  price = $150; profit = $450,000 
D)  price = $150; profit = $600,000

Question 4

Figure 15-19  
-Refer to Figure 15-19. If the monopoly firm is not allowed to price discriminate, 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 5

Drug companies are allowed to be monopolists in the drugs they discover in order to

Accepted Answer

A)  allow drug companies to charge a price that is equal to their marginal cost. 
B)  discourage new firms from entering the drug market. 
C)  encourage research. 
D)  allow the government to earn patent revenue. 
A)  allow drug companies to charge a price that is equal to their marginal cost. 
B)  discourage new firms from entering the drug market. 
C)  encourage research. 
D)  allow the government to earn patent revenue.

Question 6

When we compare economic welfare in a monopoly market to a competitive market, the profits earned by the monopolist represent

Accepted Answer

A)  a transfer of benefits from the consumer to the producer. 
B)  a loss in total welfare. 
C)  the higher marginal costs incurred by the monopolists in comparison to competitive firms. 
D)  the higher marginal revenues gained by the monopolists in comparison to competitive firms. 
A)  a transfer of benefits from the consumer to the producer. 
B)  a loss in total welfare. 
C)  the higher marginal costs incurred by the monopolists in comparison to competitive firms. 
D)  the higher marginal revenues gained by the monopolists in comparison to competitive firms.

Question 7

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

Accepted Answer

A)  Tom charges a higher price than his competitors for his golf lessons. 
B)  Dick charges a lower price than his competitors for his lawn-mowing services. 
C)  Harry offers free concerts on Sunday afternoons as a form of advertising. 
D)  Larry obtains a copyright for the new computer game that he invented. 
A)  Tom charges a higher price than his competitors for his golf lessons. 
B)  Dick charges a lower price than his competitors for his lawn-mowing services. 
C)  Harry offers free concerts on Sunday afternoons as a form of advertising. 
D)  Larry obtains a copyright for the new computer game that he invented.

Question 8

A benefit of a monopoly is

Accepted Answer

A)  lower prices. 
B)  a wide variety of similar products. 
C)  decreasing long-run average total costs. 
D)  greater creativity by authors who can copyright their novels. 
A)  lower prices. 
B)  a wide variety of similar products. 
C)  decreasing long-run average total costs. 
D)  greater creativity by authors who can copyright their novels.

Question 9

A monopoly

Accepted Answer

A)  can set the price it charges for its output and earn unlimited profits. 
B)  takes the market price as given and earns small but positive profits. 
C)  can set the price it charges for its output but faces a downward-sloping demand curve so it cannot earn unlimited profits. 
D)  can set the price it charges for its output but faces a horizontal demand curve so it can earn unlimited profits. 
A)  can set the price it charges for its output and earn unlimited profits. 
B)  takes the market price as given and earns small but positive profits. 
C)  can set the price it charges for its output but faces a downward-sloping demand curve so it cannot earn unlimited profits. 
D)  can set the price it charges for its output but faces a horizontal demand curve so it can earn unlimited profits.

Question 10

Figure 15-4  
-Refer to Figure 15-4. Profit will be maximized by charging a price equal to

Accepted Answer

A)  P5. 
B)  P4. 
C)  P3. 
D)  P1. 
A)  P5. 
B)  P4. 
C)  P3. 
D)  P1.

Question 11

Table 15-13
The following table gives information on the price, quantity, and total cost of production for a monopolist.  
-Refer to Table 15-13. If the monopolist maximizes profits, he will charge a price of

Accepted Answer

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

Question 12

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 profit­maximizing level of output is

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 13

Sizable economic profits can persist over time under monopoly if the monopolist

Accepted Answer

A)  produces that output where average total cost is at a maximum. 
B)  is protected by barriers to entry. 
C)  operates as a price taker rather than a price maker. 
D)  earns revenues that exceed variable costs. 
A)  produces that output where average total cost is at a maximum. 
B)  is protected by barriers to entry. 
C)  operates as a price taker rather than a price maker. 
D)  earns revenues that exceed variable costs.

Question 14

If a monopolist's marginal costs increase by $1 for all levels of output, then the monopoly price will

Accepted Answer

A)  rise by $1. 
B)  rise by more than $1. 
C)  rise by less than $1. 
D)  not change, but profits will decrease. 
A)  rise by $1. 
B)  rise by more than $1. 
C)  rise by less than $1. 
D)  not change, but profits will decrease.

Question 15

In order for antitrust laws to raise social welfare, the government must

Accepted Answer

A)  disallow synergy benefits from accruing to monopolists. 
B)  disallow any mergers from taking place. 
C)  be able to determine which mergers are desirable and which are not. 
D)  always attempt to keep markets in their most competitive form. 
A)  disallow synergy benefits from accruing to monopolists. 
B)  disallow any mergers from taking place. 
C)  be able to determine which mergers are desirable and which are not. 
D)  always attempt to keep markets in their most competitive form.

Question 16

The fundamental source of monopoly power is

Accepted Answer

A)  many buyers and sellers. 
B)  low fixed costs. 
C)  rising average total costs. 
D)  barriers to entry. 
A)  many buyers and sellers. 
B)  low fixed costs. 
C)  rising average total costs. 
D)  barriers to entry.

Question 17

Table 15-3
Consider the following demand and cost information for a monopoly.  
-Refer to Table 15-3. The marginal cost of the 4th unit is

Accepted Answer

A)  $7. 
B)  $12. 
C)  $25. 
D)  $60. 
A)  $7. 
B)  $12. 
C)  $25. 
D)  $60.

Question 18

Figure 15-10  
-Refer to Figure 15-10. What area measures the deadweight loss?

Accepted Answer

A)  (B-F)*K 
B)  0.5[(P-O)*(L-O)] 
C)  0.5[(A-H)*(L-J)] 
D)  0.5[(B-F)*(L-K)] 
A)  (B-F)*K 
B)  0.5[(P-O)*(L-O)] 
C)  0.5[(A-H)*(L-J)] 
D)  0.5[(B-F)*(L-K)]

Question 19

The distribution of water to residents of a town and an infrequently used bridge are examples of

Accepted Answer

The answer of The distribution of water to residents of...

Question 20

For a monopolist, when the price effect is greater than the output effect, marginal revenue is

Accepted Answer

A)  positive. 
B)  negative. 
C)  zero. 
D)  maximized. 
A)  positive. 
B)  negative. 
C)  zero. 
D)  maximized.

Exam 15: Monopoly

Deadweight loss

Figure 15-13 -Refer to Figure 15-13. A profit-maximizing monopolist would create a deadweight loss to society valued at

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

Drug companies are allowed to be monopolists in the drugs they discover in order to

When we compare economic welfare in a monopoly market to a competitive market, the profits earned by the monopolist represent

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

A benefit of a monopoly is

A monopoly

Figure 15-4 -Refer to Figure 15-4. Profit will be maximized by charging a price equal to

Table 15-13 The following table gives information on the price, quantity, and total cost of production for a monopolist. -Refer to Table 15-13. If the monopolist maximizes profits, he will charge a price of

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 profit­maximizing level of output is

Sizable economic profits can persist over time under monopoly if the monopolist

If a monopolist's marginal costs increase by $1 for all levels of output, then the monopoly price will

In order for antitrust laws to raise social welfare, the government must

The fundamental source of monopoly power is

Table 15-3 Consider the following demand and cost information for a monopoly. -Refer to Table 15-3. The marginal cost of the 4th unit is

Figure 15-10 -Refer to Figure 15-10. What area measures the deadweight loss?

The distribution of water to residents of a town and an infrequently used bridge are examples of

For a monopolist, when the price effect is greater than the output effect, marginal revenue is

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 15-18 A monopolist faces the following demand curve: Suppose marginal cost is constant at $8 per unit. -Refer to Table 15-18 The monopolist's profitmaximizing level of output is