Question 1

A monopoly is

Accepted Answer

A)  a price taker. 
B)  able to ignore the demand for its product when setting its price. 
C)  able to set the price for its product. 
D)  able to earn only a normal profit in the long run. 
E)  a firm with no marginal revenue curve. 
A)  a price taker. 
B)  able to ignore the demand for its product when setting its price. 
C)  able to set the price for its product. 
D)  able to earn only a normal profit in the long run. 
E)  a firm with no marginal revenue curve.

Question 2

Suppose a monopoly can sell 10 units of output for $21.In order to sell 11 units of output,the price must fall to $20.What is the marginal revenue of the 11th unit?

Accepted Answer

A)  $41 
B)  $20 
C)  $10 
D)  $1 
E)  $220 
A)  $41 
B)  $20 
C)  $10 
D)  $1 
E)  $220

Question 3

-In order to maximize its profit,a single-price monopoly produces the amount of output so that

Accepted Answer

A)  P = MC. 
B)  MR = MC. 
C)  P = MC - MR. 
D)  P = MR. 
E)  P = ATC. 
A)  P = MC. 
B)  MR = MC. 
C)  P = MC - MR. 
D)  P = MR. 
E)  P = ATC.

Question 4

If a monopoly can perfectly price discriminate,

Accepted Answer

A)  all the demanders pay one price. 
B)  it minimizes its profit. 
C)  it produces the same amount of output as would be produced if the market was a perfectly competitive industry. 
D)  it produces less output than would be produced if the market was a perfectly competitive industry. 
E)  it creates the same amount of consumer surplus as would be created if the market was a perfectly competitive industry. 
A)  all the demanders pay one price. 
B)  it minimizes its profit. 
C)  it produces the same amount of output as would be produced if the market was a perfectly competitive industry. 
D)  it produces less output than would be produced if the market was a perfectly competitive industry. 
E)  it creates the same amount of consumer surplus as would be created if the market was a perfectly competitive industry.

Question 5

A natural monopoly

Accepted Answer

A)  arises as a result of legal barriers to entry. 
B)  occurs when one firm controls a natural resource. 
C)  arises when one firm can meet the entire market demand at a lower average total cost than two or more firms. 
D)  Both answers A and B are correct. 
E)  Both answers A and C are correct. 
A)  arises as a result of legal barriers to entry. 
B)  occurs when one firm controls a natural resource. 
C)  arises when one firm can meet the entire market demand at a lower average total cost than two or more firms. 
D)  Both answers A and B are correct. 
E)  Both answers A and C are correct.

Question 6

Monopolies arise when there are

Accepted Answer

A)  many substitutes but there are no barriers to entry. 
B)  no close substitutes and there are no barriers to entry. 
C)  no close substitutes and there are barriers to entry. 
D)  many substitutes and there barriers to entry. 
E)  None of the above answers are correct because the existence of a monopoly has nothing to do with the presence or absence of barriers to entry. 
A)  many substitutes but there are no barriers to entry. 
B)  no close substitutes and there are no barriers to entry. 
C)  no close substitutes and there are barriers to entry. 
D)  many substitutes and there barriers to entry. 
E)  None of the above answers are correct because the existence of a monopoly has nothing to do with the presence or absence of barriers to entry.

Question 7

-Suppose the grocery store market in Kansas City is perfectly competitive.Then one store buys all the others and becomes a single-price monopoly.The figure above shows the relevant demand and cost curves.When the market is a monopoly,the quantity of steak is

Accepted Answer

A)  2,000 pounds. 
B)  3,000 pounds. 
C)  4,000 pounds. 
D)  5,000 pounds. 
E)  less than 2,000 pounds. 
A)  2,000 pounds. 
B)  3,000 pounds. 
C)  4,000 pounds. 
D)  5,000 pounds. 
E)  less than 2,000 pounds.

Question 8

The capture theory of regulation predicts that

Accepted Answer

A)  regulation helps producers to maximize profits. 
B)  regulators capture the firm's economic profit and transfer it to consumers as consumer surplus. 
C)  regulators eliminate the deadweight loss a monopoly can create. 
D)  resources are used efficiently. 
E)  regulators capture the firm's economic profit and transfer it to themselves. 
A)  regulation helps producers to maximize profits. 
B)  regulators capture the firm's economic profit and transfer it to consumers as consumer surplus. 
C)  regulators eliminate the deadweight loss a monopoly can create. 
D)  resources are used efficiently. 
E)  regulators capture the firm's economic profit and transfer it to themselves.

Question 9

Gene's Car Wash is a natural monopoly.To wash 100 cars a week,if Gene is unregulated,he would charge a price of $10.Gene's average total cost for washing 100 cars is $8,his average variable cost is $6,and his marginal cost is $4.If Gene is regulated using an average cost pricing rule,the price he is allowed to charge to wash 100 cars is

Accepted Answer

A)  $10. 
B)  $8. 
C)  $6. 
D)  $4. 
E)  $400. 
A)  $10. 
B)  $8. 
C)  $6. 
D)  $4. 
E)  $400.

Question 10

-The above figure illustrates the market for electric power that is served by the one utility in Alberta,Canada.
a.If the government did not regulate this utility,what would be the price of a kilowatt hour in this region and how much power would be generated?
b.If the government regulates the utility and chooses an average cost pricing rule,what would be the price of a kilowatt hour and how much power would be generated?
c.If the government regulates the utility and chooses a marginal cost pricing rule,what would be the price of a kilowatt hour and how much power would be generated?

Accepted Answer

a.The price would be 12¢ a kilowatt hour

Question 11

Which of the following statements about price discrimination is false?

Accepted Answer

A)  Price discrimination is a method for a seller to capture some consumer surplus. 
B)  Compared to a single-price monopoly, the number of units sold increases when a monopoly price discriminates. 
C)  Charging less for a second pizza that is identical to the first is an example of price discrimination. 
D)  Price discrimination increases a monopoly's profit. 
E)  All forms of price discrimination are illegal. 
A)  Price discrimination is a method for a seller to capture some consumer surplus. 
B)  Compared to a single-price monopoly, the number of units sold increases when a monopoly price discriminates. 
C)  Charging less for a second pizza that is identical to the first is an example of price discrimination. 
D)  Price discrimination increases a monopoly's profit. 
E)  All forms of price discrimination are illegal.

Question 12

-The figure above shows the demand,marginal revenue,and marginal cost curves for Paul's Parrot pillows,a monopoly producer of pillows stuffed with parrot feathers.When the pillow market is a monopoly,the price of a pillow is ________,and if the pillow market is perfectly competitive,the price of a pillow is ________.

Accepted Answer

A)  $40; $20 
B)  $70; $60 
C)  $40; $60 
D)  $60; $40 
E)  $100; $40 
A)  $40; $20 
B)  $70; $60 
C)  $40; $60 
D)  $60; $40 
E)  $100; $40

Question 13

Which of the following is an example of a person or firm that is most likely to have been granted a public franchise?

Accepted Answer

A)  medical doctor 
B)  taxi cab driver 
C)  the local pizza parlor 
D)  the local telephone company 
E)  the local Honda dealership 
A)  medical doctor 
B)  taxi cab driver 
C)  the local pizza parlor 
D)  the local telephone company 
E)  the local Honda dealership

Question 14

When a perfectly competitive industry is taken over by a monopoly,some consumer surplus is transferred to the monopolist in the form of

Accepted Answer

A)  marginal cost. 
B)  economic profit. 
C)  deadweight loss. 
D)  taxes. 
E)  average variable cost. 
A)  marginal cost. 
B)  economic profit. 
C)  deadweight loss. 
D)  taxes. 
E)  average variable cost.

Question 15

For a single-price monopoly,price is

Accepted Answer

A)  greater than marginal revenue. 
B)  one half of marginal revenue. 
C)  equal to marginal revenue. 
D)  unrelated to marginal revenue. 
E)  always less than average total cost when the firm maximizes its profit. 
A)  greater than marginal revenue. 
B)  one half of marginal revenue. 
C)  equal to marginal revenue. 
D)  unrelated to marginal revenue. 
E)  always less than average total cost when the firm maximizes its profit.

Question 16

Once a monopoly has determined how much it produces,it will charge a price that

Accepted Answer

A)  is determined by the intersection of the marginal cost and average total cost curves. 
B)  minimizes marginal cost. 
C)  is determined by its demand curve. 
D)  is independent of the amount produced. 
E)  is equal to its average total cost. 
A)  is determined by the intersection of the marginal cost and average total cost curves. 
B)  minimizes marginal cost. 
C)  is determined by its demand curve. 
D)  is independent of the amount produced. 
E)  is equal to its average total cost.

Question 17

-What is rent seeking? How does rent seeking affect the deadweight loss from monopoly?

Accepted Answer

Rent seeking is the act of obtaining spe

Question 18

-In the above figure,for a single-price monopoly the deadweight loss is equal to the area

Accepted Answer

A)  abP?. 
B)  acP?. 
C)  bce. 
D)  bed. 
E)  P?beP?. 
A)  abP?. 
B)  acP?. 
C)  bce. 
D)  bed. 
E)  P?beP?.

Question 19

"If Michigan's electric utilities were allowed to use marginal cost pricing,it would lead to economic profits for these utilities." Is the previous statement correct or incorrect?

Accepted Answer

The statement is incorrect.Imp

Question 20

Which of the following is an example of a natural monopoly?

Accepted Answer

A)  the Pittsburgh Penguins hockey team, a National Hockey League team 
B)  Ford Motors, the large automobile producing company 
C)  Florida Power and Light, an electric utility in Florida 
D)  Sony, the Japanese producer of the Playstation III 
E)  JCPenney, the large department store chain 
A)  the Pittsburgh Penguins hockey team, a National Hockey League team 
B)  Ford Motors, the large automobile producing company 
C)  Florida Power and Light, an electric utility in Florida 
D)  Sony, the Japanese producer of the Playstation III 
E)  JCPenney, the large department store chain

A monopoly is

Suppose a monopoly can sell 10 units of output for $21.In order to sell 11 units of output,the price must fall to $20.What is the marginal revenue of the 11th unit?

-In order to maximize its profit,a single-price monopoly produces the amount of output so that

If a monopoly can perfectly price discriminate,

A natural monopoly

Monopolies arise when there are

-Suppose the grocery store market in Kansas City is perfectly competitive.Then one store buys all the others and becomes a single-price monopoly.The figure above shows the relevant demand and cost curves.When the market is a monopoly,the quantity of steak is

The capture theory of regulation predicts that

Which of the following statements about price discrimination is false?

Which of the following is an example of a person or firm that is most likely to have been granted a public franchise?

When a perfectly competitive industry is taken over by a monopoly,some consumer surplus is transferred to the monopolist in the form of

For a single-price monopoly,price is

Once a monopoly has determined how much it produces,it will charge a price that

-What is rent seeking? How does rent seeking affect the deadweight loss from monopoly?

-In the above figure,for a single-price monopoly the deadweight loss is equal to the area

"If Michigan's electric utilities were allowed to use marginal cost pricing,it would lead to economic profits for these utilities." Is the previous statement correct or incorrect?

Which of the following is an example of a natural monopoly?

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 is

Suppose a monopoly can sell 10 units of output for $21.In order to sell 11 units of output,the price must fall to $20.What is the marginal revenue of the 11th unit?

-In order to maximize its profit,a single-price monopoly produces the amount of output so that

If a monopoly can perfectly price discriminate,

A natural monopoly

Monopolies arise when there are

-Suppose the grocery store market in Kansas City is perfectly competitive.Then one store buys all the others and becomes a single-price monopoly.The figure above shows the relevant demand and cost curves.When the market is a monopoly,the quantity of steak is

The capture theory of regulation predicts that

Which of the following statements about price discrimination is false?

Which of the following is an example of a person or firm that is most likely to have been granted a public franchise?

When a perfectly competitive industry is taken over by a monopoly,some consumer surplus is transferred to the monopolist in the form of

For a single-price monopoly,price is

Once a monopoly has determined how much it produces,it will charge a price that

-What is rent seeking? How does rent seeking affect the deadweight loss from monopoly?

-In the above figure,for a single-price monopoly the deadweight loss is equal to the area

"If Michigan's electric utilities were allowed to use marginal cost pricing,it would lead to economic profits for these utilities." Is the previous statement correct or incorrect?

Which of the following is an example of a natural monopoly?

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