Question 1

Which of the following describes a barrier to entry?

Accepted Answer

A)  something that establishes a barrier to expanding output 
B)  anything that protects a firm from the arrival of new competitors 
C)  a government regulation that bars a monopoly from earning an economic profit 
D)  firms already in the market incurring economic losses so that no new firm wants to enter the market 
E)  Firms are legally prohibited from exiting the market in order to enter another market. 
A)  something that establishes a barrier to expanding output 
B)  anything that protects a firm from the arrival of new competitors 
C)  a government regulation that bars a monopoly from earning an economic profit 
D)  firms already in the market incurring economic losses so that no new firm wants to enter the market 
E)  Firms are legally prohibited from exiting the market in order to enter another market.

Question 2

Which of the following would create a natural monopoly?

Accepted Answer

A)  ownership of all the available units of a necessary input 
B)  an exclusive right granted to supply a good or service 
C)  requirement of a government license before the firm can sell the good or service 
D)  technology enabling a single firm to produce at a lower average total cost than two or more firms 
E)  a patent granted the producer of the good or service 
A)  ownership of all the available units of a necessary input 
B)  an exclusive right granted to supply a good or service 
C)  requirement of a government license before the firm can sell the good or service 
D)  technology enabling a single firm to produce at a lower average total cost than two or more firms 
E)  a patent granted the producer of the good or service

Question 3

Which of the following statements is FALSE?

Accepted Answer

A)  A perfectly competitive market produces more output and charges a lower price than a monopoly. 
B)  A perfectly competitive firm produces where MR = MC but a monopoly produces where MR > MC. 
C)  In a perfectly competitive market, the price is equal to the marginal cost, but in a market with a single-price monopoly, price exceeds marginal cost. 
D)  The consumer surplus is smaller for a market with a monopoly than for a perfectly competitive market. 
E)  In the long run, a monopoly can earn a larger economic profit than can a perfectly competitive firm. 
A)  A perfectly competitive market produces more output and charges a lower price than a monopoly. 
B)  A perfectly competitive firm produces where MR = MC but a monopoly produces where MR > MC. 
C)  In a perfectly competitive market, the price is equal to the marginal cost, but in a market with a single-price monopoly, price exceeds marginal cost. 
D)  The consumer surplus is smaller for a market with a monopoly than for a perfectly competitive market. 
E)  In the long run, a monopoly can earn a larger economic profit than can a perfectly competitive firm.

Question 4

To be able to price discriminate,a firm must

Accepted Answer

A)  have a public franchise. 
B)  be a natural monopoly. 
C)  be able to prevent resales of its good. 
D)  have a patent. 
E)  have an ownership barrier to entry. 
A)  have a public franchise. 
B)  be a natural monopoly. 
C)  be able to prevent resales of its good. 
D)  have a patent. 
E)  have an ownership barrier to entry.

Question 5

If a monopoly is able to perfectly price discriminate,then consumer surplus is

Accepted Answer

A)  equal to zero. 
B)  maximized. 
C)  unchanged from what it is with a single-price monopoly. 
D)  unchanged from what it is in a perfectly competitive industry. 
E)  not zero but is less than with a single-price monopoly. 
A)  equal to zero. 
B)  maximized. 
C)  unchanged from what it is with a single-price monopoly. 
D)  unchanged from what it is in a perfectly competitive industry. 
E)  not zero but is less than with a single-price monopoly.

Question 6

Which of the following is always true for a single-price monopolist?

Accepted Answer

A) P > MR B) P < MR C) P = MR D) P = elasticity of demand E) None of the above answers is correct because none of them is always true. A) P > MR B) P < MR C) P = MR D) P = elasticity of demand E) None of the above answers is correct because none of them is always true.

Question 7

A monopoly

Accepted Answer

A)  must determine the price it will charge. 
B)  faces extensive competition from firms making close substitutes. 
C)  cannot price discriminate because such a pricing strategy is illegal in the United States. 
D)  has no control over the price it can charge. 
E)  Both answers B and C are correct. 
A)  must determine the price it will charge. 
B)  faces extensive competition from firms making close substitutes. 
C)  cannot price discriminate because such a pricing strategy is illegal in the United States. 
D)  has no control over the price it can charge. 
E)  Both answers B and C are correct.

Question 8

A single-price monopoly can sell 10 units of its product at a price of $45 each but to sell 11 units,the monopoly must cut the price to $44.What is the marginal revenue of the extra unit sold?

Accepted Answer

A)  $484 
B)  $450 
C)  $44 
D)  $34 
E)  -$1 
A)  $484 
B)  $450 
C)  $44 
D)  $34 
E)  -$1

Question 9

A monopolist can make an economic profit in the long run because of

Accepted Answer

A)  the relatively elastic demand for its product. 
B)  the relatively inelastic demand for its product. 
C)  the firm's price setting behavior. 
D)  barriers to entry. 
E)  the fact that the firm produces where MR = MC. 
A)  the relatively elastic demand for its product. 
B)  the relatively inelastic demand for its product. 
C)  the firm's price setting behavior. 
D)  barriers to entry. 
E)  the fact that the firm produces where MR = MC.

Question 10

The U.S.Postal Service has a monopoly over first-class mail service because

Accepted Answer

A)  the government has granted this agency a public franchise. 
B)  stamps are copyrighted. 
C)  stamps are trademarked. 
D)  stamps are patented. 
E)  it owns a vital resource, namely all mailboxes. 
A)  the government has granted this agency a public franchise. 
B)  stamps are copyrighted. 
C)  stamps are trademarked. 
D)  stamps are patented. 
E)  it owns a vital resource, namely all mailboxes.

Question 11

Which of the following is NOT correct about a single-price monopoly?

Accepted Answer

A)  Maximum profit is found where demand is the most inelastic. 
B)  Marginal revenue is negative when demand is inelastic. 
C)  Marginal revenue is positive when demand is elastic. 
D)  To sell more output, the firm must lower its price. 
E)  To maximize its profit, the firm produces so that marginal revenue equals marginal cost. 
A)  Maximum profit is found where demand is the most inelastic. 
B)  Marginal revenue is negative when demand is inelastic. 
C)  Marginal revenue is positive when demand is elastic. 
D)  To sell more output, the firm must lower its price. 
E)  To maximize its profit, the firm produces so that marginal revenue equals marginal cost.

Question 12

A monopoly is a market with

Accepted Answer

A)  many suppliers each producing an identical product. 
B)  no barriers to entry. 
C)  many substitutes. 
D)  one supplier. 
E)  many suppliers each producing a slightly different product. 
A)  many suppliers each producing an identical product. 
B)  no barriers to entry. 
C)  many substitutes. 
D)  one supplier. 
E)  many suppliers each producing a slightly different product.

Question 13

-The figure above shows the demand curve,marginal revenue curve,and marginal cost curve.The amount of consumer surplus when the market has a monopoly producer is ________ and the amount of consumer surplus when the market is perfectly competitive is ________.

Accepted Answer

A)  abf; ace 
B)  abf; bcd 
C)  ace; bcd 
D)  ace; abf 
E)  bcd; ace 
A)  abf; ace 
B)  abf; bcd 
C)  ace; bcd 
D)  ace; abf 
E)  bcd; ace

Question 14

When used with a natural monopoly,an average cost pricing rule results in

Accepted Answer

A)  the efficient level of output. 
B)  economic losses for the firm. 
C)  the need for government to subsidize the natural monopoly. 
D)  zero economic profit for the firm. 
E)  the firm making an economic profit. 
A)  the efficient level of output. 
B)  economic losses for the firm. 
C)  the need for government to subsidize the natural monopoly. 
D)  zero economic profit for the firm. 
E)  the firm making an economic profit.

Question 15

If we compare a perfectly competitive market to a single-price monopoly with the same costs,the monopoly sells

Accepted Answer

A)  the same quantity at a higher price. 
B)  a smaller quantity at a higher price. 
C)  a larger quantity at a lower price. 
D)  a larger quantity at a higher price. 
E)  a smaller quantity at the same price. 
A)  the same quantity at a higher price. 
B)  a smaller quantity at a higher price. 
C)  a larger quantity at a lower price. 
D)  a larger quantity at a higher price. 
E)  a smaller quantity at the same price.

Question 16

With perfect price discrimination ________,and production is expanded until marginal revenue equals ________.

Accepted Answer

A)  the firm's demand curve becomes its marginal revenue curve; marginal cost 
B)  the firm's demand curve becomes its marginal revenue curve; average total cost 
C)  the firm's marginal revenue curve bisects the angle with which demand intersects the price-axis; marginal cost 
D)  the firm's marginal revenue curve bisects the angle with which demand intersects the price-axis; average total cost 
E)  economic profit is maximized when the lowest price equals marginal cost; average total cost. 
A)  the firm's demand curve becomes its marginal revenue curve; marginal cost 
B)  the firm's demand curve becomes its marginal revenue curve; average total cost 
C)  the firm's marginal revenue curve bisects the angle with which demand intersects the price-axis; marginal cost 
D)  the firm's marginal revenue curve bisects the angle with which demand intersects the price-axis; average total cost 
E)  economic profit is maximized when the lowest price equals marginal cost; average total cost.

Question 17

Patents
i.encourage the invention of new products and production methods.
ii.generally discourage innovation.
iii.are exclusive rights granted to the inventor of a product or service.

Accepted Answer

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

Question 18

The figure above shows a monopoly's total revenue and total cost curves.
-Using the figure above,which of the following statements are correct?
i.When 3 haircuts are produced,the firm's ATC is $10.
ii.If the firm charges each customer the same price for a haircut,the price of a haircut is $14.
iii.The firm is NOT a perfect competitor.

Accepted Answer

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

Question 19

A natural monopoly exists when

Accepted Answer

A)  diseconomies of scale exist in an industry. 
B)  one firm can supply an entire market at a lower average total cost than can two or more firms. 
C)  a firm can engage in price discrimination. 
D)  the producers in an industry have formed a cartel. 
E)  a monopoly firm faces a horizontal demand curve. 
A)  diseconomies of scale exist in an industry. 
B)  one firm can supply an entire market at a lower average total cost than can two or more firms. 
C)  a firm can engage in price discrimination. 
D)  the producers in an industry have formed a cartel. 
E)  a monopoly firm faces a horizontal demand curve.

Question 20

If a regulatory agency sets the price equal to marginal cost for a natural monopoly,the

Accepted Answer

A)  government might have to provide a subsidy to the firm to keep it in business. 
B)  price is the same as the unregulated monopoly price. 
C)  firm makes an economic profit, though not the maximum economic profit. 
D)  firm makes the maximum economic profit. 
E)  firm makes zero economic profit. 
A)  government might have to provide a subsidy to the firm to keep it in business. 
B)  price is the same as the unregulated monopoly price. 
C)  firm makes an economic profit, though not the maximum economic profit. 
D)  firm makes the maximum economic profit. 
E)  firm makes zero economic profit.

Which of the following describes a barrier to entry?

Which of the following would create a natural monopoly?

Which of the following statements is FALSE?

To be able to price discriminate,a firm must

If a monopoly is able to perfectly price discriminate,then consumer surplus is

Which of the following is always true for a single-price monopolist?

A monopoly

A single-price monopoly can sell 10 units of its product at a price of $45 each but to sell 11 units,the monopoly must cut the price to $44.What is the marginal revenue of the extra unit sold?

A monopolist can make an economic profit in the long run because of

The U.S.Postal Service has a monopoly over first-class mail service because

Which of the following is NOT correct about a single-price monopoly?

A monopoly is a market with

-The figure above shows the demand curve,marginal revenue curve,and marginal cost curve.The amount of consumer surplus when the market has a monopoly producer is and the amount of consumer surplus when the market is perfectly competitive is .

When used with a natural monopoly,an average cost pricing rule results in

If we compare a perfectly competitive market to a single-price monopoly with the same costs,the monopoly sells

With perfect price discrimination ,and production is expanded until marginal revenue equals .

Patents i.encourage the invention of new products and production methods. ii.generally discourage innovation. iii.are exclusive rights granted to the inventor of a product or service.

A natural monopoly exists when

If a regulatory agency sets the price equal to marginal cost for a natural monopoly,the

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

Which of the following describes a barrier to entry?

Which of the following would create a natural monopoly?

Which of the following statements is FALSE?

To be able to price discriminate,a firm must

If a monopoly is able to perfectly price discriminate,then consumer surplus is

Which of the following is always true for a single-price monopolist?

A monopoly

A single-price monopoly can sell 10 units of its product at a price of $45 each but to sell 11 units,the monopoly must cut the price to $44.What is the marginal revenue of the extra unit sold?

A monopolist can make an economic profit in the long run because of

The U.S.Postal Service has a monopoly over first-class mail service because

Which of the following is NOT correct about a single-price monopoly?

A monopoly is a market with

-The figure above shows the demand curve,marginal revenue curve,and marginal cost curve.The amount of consumer surplus when the market has a monopoly producer is ________ and the amount of consumer surplus when the market is perfectly competitive is ________.

When used with a natural monopoly,an average cost pricing rule results in

If we compare a perfectly competitive market to a single-price monopoly with the same costs,the monopoly sells

With perfect price discrimination ________,and production is expanded until marginal revenue equals ________.

Patents i.encourage the invention of new products and production methods. ii.generally discourage innovation. iii.are exclusive rights granted to the inventor of a product or service.

A natural monopoly exists when

If a regulatory agency sets the price equal to marginal cost for a natural monopoly,the

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

-The figure above shows the demand curve,marginal revenue curve,and marginal cost curve.The amount of consumer surplus when the market has a monopoly producer is and the amount of consumer surplus when the market is perfectly competitive is .

With perfect price discrimination ,and production is expanded until marginal revenue equals .