Question 1

Figure 15-2 
-Refer to Figure 15-2. If a regulator requires the firm to charge an average cost price, what price will the firm charge?

Accepted Answer

The answer of Figure 15-2 
-Refer to Figure 15-2. If...

Question 2

Suppose when a monopolist produces 50 units its average revenue is $8 per unit, its marginal revenue is $4 per unit, its marginal cost is $4 per unit, and its average total cost is $3 per unit. What can we conclude about this monopolist?

Accepted Answer

A) The monopolist is currently maximizing profits, and its total profits are $200. 
B) The monopolist is currently maximizing profits, and its total profits are $250. 
C) The monopolist is not currently maximizing its profits; it should produce more units and charge a lower price to maximize profit. 
D) The monopolist is not currently maximizing its profits; it should produce fewer units and charger a higher price to maximize profit.

Question 3

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.

Question 4

Monopolies are inefficient because they (i)
Eliminate barriers to entry.
(ii)
Price their product at a level where marginal revenue exceeds marginal cost.
(iii)
Restrict output below the socially efficient level of production.

Accepted Answer

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

Question 5

Scenario 15-1
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 15-1. What is Vincent's profit on a typical day?

Accepted Answer

The answer of Scenario 15-1
Vincent operates a scenic tour business...

Question 6

Table 15-19
A monopolist faces the following demand curve: 
-Refer to Table 15-19. If a monopolist faces a constant marginal cost of $9, how much output should the firm produce?

Accepted Answer

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

Question 7

In a natural monopoly,

Accepted Answer

A) society would be better off if antitrust laws were used to create many different firms in the market. 
B) the marginal cost curve is positively sloped. 
C) if the government requires marginal cost pricing, it will likely have to subsidize the firm. 
D) the marginal revenue curve is horizontal.

Question 8

Figure 15-17 
-Refer to Figure 15-17. Which of the following areas represents the profit earned by this profit-maximizing monopolist?

Accepted Answer

A) BCFE 
B) ABE 
C) EFG 
D) CFIH

Question 9

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.

Question 10

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.

Question 11

Figure 15-14 
-Refer to Figure 15-14. If the monopoly operates at an output level less than Q0, then an increase in output toward (but not exceeding) Q0 would

Accepted Answer

A) raise the price and raise total surplus. 
B) lower the price and raise total surplus. 
C) raise the price and lower total surplus. 
D) lower the price and lower total surplus.

Question 12

A monopoly firm can sell 150 units of output for $10 per unit. Alternatively, it can sell 151 units of output for $9.90 per unit. The marginal revenue of the 151st unit of output is

Accepted Answer

A) -$5.10. 
B) -$0.10. 
C) $2.45. 
D) $5.10.

Question 13

For a monopoly firm,

Accepted Answer

A) price always exceeds average revenue. 
B) price always exceeds marginal revenue. 
C) any price-quantity combination will maximize profits. 
D) All of the above are correct.

Question 14

What are the four ways that government policymakers can respond to the problem of monopoly?

Accepted Answer

The answer of What are the four ways that government...

Question 15

Which of the following is not an example of a barrier to entry?

Accepted Answer

A) Mighty Mitch's Mining Company owns a unique plot of land in Tanzania, under which lies the only large deposit of Tanzanite in the world. 
B) A pharmaceutical company obtains a patent for a specific high blood pressure medication. 
C) A musician obtains a copyright for her original song. 
D) An entrepreneur opens a popular new restaurant.

Question 16

Some prescription drugs sell for more in the United States than they do in other countries. Which of the following statements about this issue is most likely to be true?

Accepted Answer

A) Drug companies are engaging in price discrimination, and this practice certainly reduces global social welfare. 
B) Global social welfare could be improved if the price in the United States were reduced to the price charged in other countries. 
C) Global social welfare could be improved if the price in the other countries were increased to the price charged in the United States. 
D) Drug companies are engaging in price discrimination, but this might improve global social welfare if it gives more people access to the drugs.

Question 17

Figure 15-2 
-Refer to Figure 15-2. Which of the following reasons describes the fundamental barrier to entry for the monopoly in the figure?

Accepted Answer

A) monopoly resources 
B) government regulation 
C) the production process 
D) Both a and b are correct.

Question 18

The George Stigler quote, "...the degree of 'market failure' for the American economy is much smaller than the 'political failure' arising from the imperfections of economic policies ..." illustrates the advantage of which type of public policy toward monopolies?

Accepted Answer

A) antitrust laws 
B) regulation 
C) public ownership 
D) "do nothing"

Question 19

Which of the following can eliminate the inefficiency inherent in monopoly pricing?

Accepted Answer

A) arbitrage 
B) cost-plus pricing 
C) price discrimination 
D) regulations that force monopolies to reduce their levels of output

Question 20

When an industry is a natural monopoly,

Accepted Answer

A) it is characterized by constant returns to scale. 
B) it is characterized by diseconomies of scale. 
C) a larger number of firms may lead to a lower average cost. 
D) a larger number of firms will lead to a higher average cost.

Exam 15: Monopoly

Figure 15-2 -Refer to Figure 15-2. If a regulator requires the firm to charge an average cost price, what price will the firm charge?

Suppose when a monopolist produces 50 units its average revenue is $8 per unit, its marginal revenue is $4 per unit, its marginal cost is $4 per unit, and its average total cost is $3 per unit. What can we conclude about this monopolist?

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

Monopolies are inefficient because they (i) Eliminate barriers to entry. (ii) Price their product at a level where marginal revenue exceeds marginal cost. (iii) Restrict output below the socially efficient level of production.

Table 15-19 A monopolist faces the following demand curve: -Refer to Table 15-19. If a monopolist faces a constant marginal cost of $9, how much output should the firm produce?