Question 1

A monopoly definitely incurs an economic loss if

Accepted Answer

A)  it produces where its marginal revenue equals its marginal cost. 
B)  its average total cost is greater than price. 
C)  it cannot perfectly price discriminate. 
D)  it price discriminates. 
E)  The statement errs because a monopoly cannot incur an economic loss. 
A)  it produces where its marginal revenue equals its marginal cost. 
B)  its average total cost is greater than price. 
C)  it cannot perfectly price discriminate. 
D)  it price discriminates. 
E)  The statement errs because a monopoly cannot incur an economic loss.

Question 2

The capture theory of regulation is that regulations

Accepted Answer

A)  help producers to maximize economic profits. 
B)  mean producers suffer losses. 
C)  result in diseconomies of scale. 
D)  benefit society, not producers. 
E)  benefit the regulators, not the producers or the consumers. 
A)  help producers to maximize economic profits. 
B)  mean producers suffer losses. 
C)  result in diseconomies of scale. 
D)  benefit society, not producers. 
E)  benefit the regulators, not the producers or the consumers.

Question 3

If a firm is able to convert every dollar of consumer surplus to economic profit,the firm has achieved

Accepted Answer

A)  discrimination among units of a good. 
B)  discrimination between groups of buyers. 
C)  perfect price discrimination. 
D)  perfect cost minimization. 
E)  the normal amount of economic profit. 
A)  discrimination among units of a good. 
B)  discrimination between groups of buyers. 
C)  perfect price discrimination. 
D)  perfect cost minimization. 
E)  the normal amount of economic profit.

Question 4

We define a monopoly as a market with

Accepted Answer

A)  one supplier and no barriers to entry. 
B)  one supplier with barriers to entry. 
C)  many suppliers with no barriers to entry. 
D)  many suppliers with barriers to entry. 
E)  a few suppliers and barriers to entry. 
A)  one supplier and no barriers to entry. 
B)  one supplier with barriers to entry. 
C)  many suppliers with no barriers to entry. 
D)  many suppliers with barriers to entry. 
E)  a few suppliers and barriers to entry.

Question 5

-The above figure represents the market for cable television in Oakland,Florida.Time Warner Communications (TWC)is the sole provider of cable television to the residents of this Central Florida community.If TWC operated under a marginal cost pricing rule,how many households in Oakland are served?

Accepted Answer

A)  20,000 
B)  30,000 
C)  40,000 
D)  50,000 
E)  10,000 
A)  20,000 
B)  30,000 
C)  40,000 
D)  50,000 
E)  10,000

Question 6

-The figure above shows the demand,marginal revenue,and marginal cost curves for Paul's Parrot Pillows,a single-price monopoly producer of pillows stuffed with parrot feathers.When Paul maximizes his profit,the price per pillow is

Accepted Answer

A)  $70. 
B)  $60. 
C)  $40. 
D)  $100. 
E)  $30. 
A)  $70. 
B)  $60. 
C)  $40. 
D)  $100. 
E)  $30.

Question 7

A natural monopoly

Accepted Answer

A)  sells to a single buyer. 
B)  sets price equal to marginal revenue. 
C)  is a firm than can supply the market at lower average total cost than two or more firms. 
D)  produces a natural resource. 
E)  faces a horizontal demand curve. 
A)  sells to a single buyer. 
B)  sets price equal to marginal revenue. 
C)  is a firm than can supply the market at lower average total cost than two or more firms. 
D)  produces a natural resource. 
E)  faces a horizontal demand curve.

Question 8

Why can a monopoly make an economic profit in the long run?

Accepted Answer

A)  because there are close substitutes for the firm's product 
B)  because the firm is protected by barriers to entry 
C)  because the firm produces where MR=MC 
D)  because P > MR 
E)  All of the above are reasons why a monopoly can make an economic profit in the long run. 
A)  because there are close substitutes for the firm's product 
B)  because the firm is protected by barriers to entry 
C)  because the firm produces where MR=MC 
D)  because P > MR 
E)  All of the above are reasons why a monopoly can make an economic profit in the long run.

Question 9

-The above table gives the demand schedule for a single-price monopoly.If the marginal cost is $3,the profit maximizing output for the monopoly will be between

Accepted Answer

A)  1 to 2 units. 
B)  2 to 3 units. 
C)  3 to 4 units. 
D)  4 to 5 units. 
E)  Exactly 5 units. 
A)  1 to 2 units. 
B)  2 to 3 units. 
C)  3 to 4 units. 
D)  4 to 5 units. 
E)  Exactly 5 units.

Question 10

Which of the following best describes the capture theory of regulation?
i.Regulation seeks an efficient use of resources.
ii.Regulation is aimed at keeping prices as low as possible.
iii.Regulation helps firms maximize economic profit.

Accepted Answer

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

Question 11

Under a marginal cost pricing rule,a natural monopoly

Accepted Answer

A)  makes a reasonable profit. 
B)  makes an economic profit. 
C)  earns accounting profits, but breaks even in economic terms. 
D)  incurs an economic loss. 
E)  makes a normal profit, but it cannot be determined whether or not it makes an accounting profit. 
A)  makes a reasonable profit. 
B)  makes an economic profit. 
C)  earns accounting profits, but breaks even in economic terms. 
D)  incurs an economic loss. 
E)  makes a normal profit, but it cannot be determined whether or not it makes an accounting profit.

Question 12

If a perfectly competitive industry is taken over by a single firm that operates as a single-price monopoly,the price will ________ and the quantity will ________.

Accepted Answer

A)  fall; decrease 
B)  fall; increase 
C)  rise; decrease 
D)  rise; increase 
E)  not change; decrease 
A)  fall; decrease 
B)  fall; increase 
C)  rise; decrease 
D)  rise; increase 
E)  not change; decrease

Question 13

-Suppose the Busy Bee Café is the monopoly producer of hamburgers in Hugo,Oklahoma.The above figure represents the demand,marginal revenue,and marginal cost curves for this establishment.What quantity will the Busy Bee produce to maximize its profit?

Accepted Answer

A)  20 hamburgers per hour 
B)  30 hamburgers per hour 
C)  50 hamburgers per hour 
D)  0 hamburgers per hour. 
E)  10 hamburgers per hour 
A)  20 hamburgers per hour 
B)  30 hamburgers per hour 
C)  50 hamburgers per hour 
D)  0 hamburgers per hour. 
E)  10 hamburgers per hour

Question 14

The U.S.Postal Service's monopoly on first-class mail service is the result of

Accepted Answer

A)  a natural monopoly. 
B)  a patent. 
C)  a public franchise. 
D)  a government license. 
E)  an ownership barrier to entry. 
A)  a natural monopoly. 
B)  a patent. 
C)  a public franchise. 
D)  a government license. 
E)  an ownership barrier to entry.

Question 15

When a rent-seeking equilibrium is reached,the

Accepted Answer

A)  economic profit is maximized. 
B)  economic profit is eliminated by legislation. 
C)  economic profit is eliminated. 
D)  consumer surplus is greater than without rent seeking. 
E)  consumer surplus is eliminated. 
A)  economic profit is maximized. 
B)  economic profit is eliminated by legislation. 
C)  economic profit is eliminated. 
D)  consumer surplus is greater than without rent seeking. 
E)  consumer surplus is eliminated.

Question 16

-"A single-price monopoly charges a higher price and produces more output than a perfectly competitive industry." Is the previous statement correct or incorrect? Explain your answer.

Accepted Answer

The statement is partially correct becau

Question 17

Several firms want to be the only horse carriage service in a small tourist town and must pay the city for a license to operate as a monopoly.Competition among the potential firms will result in

Accepted Answer

A)  bidding up the price of the license so that the winning firm makes $0 economic profit. 
B)  the winning firm making an economic profit because it will be a price maker. 
C)  the winning firm making an economic profit because it will have no competition. 
D)  the winning firm making an economic profit because rent seeking cannot occur. 
E)  a $0 economic profit because monopolies are illegal. 
A)  bidding up the price of the license so that the winning firm makes $0 economic profit. 
B)  the winning firm making an economic profit because it will be a price maker. 
C)  the winning firm making an economic profit because it will have no competition. 
D)  the winning firm making an economic profit because rent seeking cannot occur. 
E)  a $0 economic profit because monopolies are illegal.

Question 18

Assume someone organizes all farms in the nation into a monopoly.As a result,consumer surplus will

Accepted Answer

A)  not change. 
B)  increase. 
C)  decrease. 
D)  either increase, decrease, or not change depending if the monopoly's marginal revenue curve lies below, above, or is the same as its demand curve. 
E)  None of the above answers is correct because the effect on consumer surplus depends on whether the monopoly is a single-price or a price-discriminating monopoly. 
A)  not change. 
B)  increase. 
C)  decrease. 
D)  either increase, decrease, or not change depending if the monopoly's marginal revenue curve lies below, above, or is the same as its demand curve. 
E)  None of the above answers is correct because the effect on consumer surplus depends on whether the monopoly is a single-price or a price-discriminating monopoly.

Question 19

For a single-price monopoly,

Accepted Answer

A)  if marginal cost exceeds marginal revenue, profits will increase if output decreases. 
B)  if marginal revenue exceeds marginal cost, profits will increase if output decreases. 
C)  there are several different price and output combinations that maximize profit. 
D)  marginal revenue will be greater than price if demand is elastic. 
E)  marginal revenue will be greater than price if demand is inelastic. 
A)  if marginal cost exceeds marginal revenue, profits will increase if output decreases. 
B)  if marginal revenue exceeds marginal cost, profits will increase if output decreases. 
C)  there are several different price and output combinations that maximize profit. 
D)  marginal revenue will be greater than price if demand is elastic. 
E)  marginal revenue will be greater than price if demand is inelastic.

Question 20

The above figure shows a market.
-If the market in the figure above is a profit-maximizing single-price monopoly,the producer surplus is the area ________.

Accepted Answer

A)  ABH 
B)  BFGH 
C)  ACG 
D)  BDEH 
E)  ACE 
A)  ABH 
B)  BFGH 
C)  ACG 
D)  BDEH 
E)  ACE

A monopoly definitely incurs an economic loss if

The capture theory of regulation is that regulations

If a firm is able to convert every dollar of consumer surplus to economic profit,the firm has achieved

We define a monopoly as a market with

-The above figure represents the market for cable television in Oakland,Florida.Time Warner Communications (TWC)is the sole provider of cable television to the residents of this Central Florida community.If TWC operated under a marginal cost pricing rule,how many households in Oakland are served?

-The figure above shows the demand,marginal revenue,and marginal cost curves for Paul's Parrot Pillows,a single-price monopoly producer of pillows stuffed with parrot feathers.When Paul maximizes his profit,the price per pillow is

A natural monopoly

Why can a monopoly make an economic profit in the long run?

-The above table gives the demand schedule for a single-price monopoly.If the marginal cost is $3,the profit maximizing output for the monopoly will be between

Which of the following best describes the capture theory of regulation? i.Regulation seeks an efficient use of resources. ii.Regulation is aimed at keeping prices as low as possible. iii.Regulation helps firms maximize economic profit.

Under a marginal cost pricing rule,a natural monopoly

If a perfectly competitive industry is taken over by a single firm that operates as a single-price monopoly,the price will and the quantity will .

-Suppose the Busy Bee Café is the monopoly producer of hamburgers in Hugo,Oklahoma.The above figure represents the demand,marginal revenue,and marginal cost curves for this establishment.What quantity will the Busy Bee produce to maximize its profit?

The U.S.Postal Service's monopoly on first-class mail service is the result of

When a rent-seeking equilibrium is reached,the

-"A single-price monopoly charges a higher price and produces more output than a perfectly competitive industry." Is the previous statement correct or incorrect? Explain your answer.

Several firms want to be the only horse carriage service in a small tourist town and must pay the city for a license to operate as a monopoly.Competition among the potential firms will result in

Assume someone organizes all farms in the nation into a monopoly.As a result,consumer surplus will

For a single-price monopoly,

The above figure shows a market. -If the market in the figure above is a profit-maximizing single-price monopoly,the producer surplus is the area ________.

Getting Started

The U.S.and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets with Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

Exam 16: Monopoly

A monopoly definitely incurs an economic loss if

The capture theory of regulation is that regulations

If a firm is able to convert every dollar of consumer surplus to economic profit,the firm has achieved

We define a monopoly as a market with

-The above figure represents the market for cable television in Oakland,Florida.Time Warner Communications (TWC)is the sole provider of cable television to the residents of this Central Florida community.If TWC operated under a marginal cost pricing rule,how many households in Oakland are served?

-The figure above shows the demand,marginal revenue,and marginal cost curves for Paul's Parrot Pillows,a single-price monopoly producer of pillows stuffed with parrot feathers.When Paul maximizes his profit,the price per pillow is

A natural monopoly

Why can a monopoly make an economic profit in the long run?

-The above table gives the demand schedule for a single-price monopoly.If the marginal cost is $3,the profit maximizing output for the monopoly will be between

Which of the following best describes the capture theory of regulation? i.Regulation seeks an efficient use of resources. ii.Regulation is aimed at keeping prices as low as possible. iii.Regulation helps firms maximize economic profit.

Under a marginal cost pricing rule,a natural monopoly

If a perfectly competitive industry is taken over by a single firm that operates as a single-price monopoly,the price will ________ and the quantity will ________.

-Suppose the Busy Bee Café is the monopoly producer of hamburgers in Hugo,Oklahoma.The above figure represents the demand,marginal revenue,and marginal cost curves for this establishment.What quantity will the Busy Bee produce to maximize its profit?

The U.S.Postal Service's monopoly on first-class mail service is the result of

When a rent-seeking equilibrium is reached,the

-"A single-price monopoly charges a higher price and produces more output than a perfectly competitive industry." Is the previous statement correct or incorrect? Explain your answer.

Several firms want to be the only horse carriage service in a small tourist town and must pay the city for a license to operate as a monopoly.Competition among the potential firms will result in

Assume someone organizes all farms in the nation into a monopoly.As a result,consumer surplus will

For a single-price monopoly,

The above figure shows a market. -If the market in the figure above is a profit-maximizing single-price monopoly,the producer surplus is the area ________.

Getting Started

The U.S.and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Markets with Private Information

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

If a perfectly competitive industry is taken over by a single firm that operates as a single-price monopoly,the price will and the quantity will .