Question 1

Deadweight loss in monopoly is smaller than in perfect competition.

Accepted Answer

A) True 
 B)False

Question 2

Use the following to answer questions:
Scenario: A Small-Town Monopolist
A monopolist sells cable subscriptions in a small town and finds that it can sell 100 subscriptions when the price is $15 a week and an additional 75 subscriptions when the price is $10 a week. The MC for the provision of the cable is $5 a week. There are no fixed costs.
-(Scenario: A Small-Town Monopolist) Look at the scenario A Small-Town Monopolist. If the company is allowed to offer different prices for its good, what is the maximum amount of profit this company can earn?

Accepted Answer

A)  $1,000 
B)  $750 
C)  $1,375 
D)  $1,520

Question 3

Use the following to answer questions:
Figure: The Profit-Maximizing Output and Price 
-(Figure: The Profit-Maximizing Output and Price) Look at the figure The Profit-Maximizing Output and Price. Assume that there are no fixed costs and AC = MC = $200. At the profit-maximizing output and price for a perfectly competitive industry, producer surplus is:

Accepted Answer

A)  $0. 
B)  $200. 
C)  $1,600. 
D)  $3,200.

Question 4

Use the following to answer questions: 
-(Table: Prices and Demand) The New Orleans Saints have a monopoly on Saints logo hats. The marginal cost of producing a hat is $18. If the Saints increase the number of hats they sell from four to five, marginal revenue is:

Accepted Answer

A)  $20. 
B)  $22. 
C)  $8. 
D)  $12.

Question 5

Use the following to answer questions:
Scenario: A Small-Town Monopolist
A monopolist sells cable subscriptions in a small town and finds that it can sell 100 subscriptions when the price is $15 a week and an additional 75 subscriptions when the price is $10 a week. The MC for the provision of the cable is $5 a week. There are no fixed costs.
-(Scenario: A Small-Town Monopolist) Look at the scenario A Small-Town Monopolist. Compared to charging a single price, the deadweight loss:

Accepted Answer

A)  increases when this monopolist price-discriminates. 
B)  decreases when this monopolist price-discriminates. 
C)  stays the same when this monopolist price-discriminates. 
D)  is equal to zero.

Question 6

Suppose a perfectly competitive industry is suddenly transformed into a monopoly industry. We can assume that monopoly output will be _____ than the competitive output and that _____.

Accepted Answer

A)  higher; deadweight loss will emerge 
B)  lower; consumer surplus will increase 
C)  lower; deadweight loss will emerge 
D)  higher; consumer surplus will decrease

Question 7

Wendy has a monopoly in the retailing of motor homes. She can sell five per week at $21,000 each. If she wants to sell six, she can charge only $20,000 each. The quantity effect of selling the sixth motor home is:

Accepted Answer

A)  $20,000. 
B)  $10,000. 
C)  $15,000. 
D)  $21,000.

Question 8

Because business travelers' demand for airline flights is relatively _____, small increases in price will result in relatively _____ decreases in additional business travelers.

Accepted Answer

A)  price-inelastic; small 
B)  price-elastic; large 
C)  price-inelastic; large 
D)  price-elastic; small

Question 9

Use the following to answer questions:
Figure: Water Works 
-(Figure: Water Works) Look at the figure Water Works, which describes a small town's water works, a natural monopoly. If the water works is unregulated and maximizes profit, what price will it charge to each customer?

Accepted Answer

A)  $21 
B)  $13 
C)  $6 
D)  $5

Question 10

Explain why the marginal revenue curve lies below the monopolist's demand curve.

Accepted Answer

The answer of Explain why the marginal revenue curve lies...

Question 11

Children's price elasticity of demand for hot chocolate is 0.5. Adults' price elasticity of demand for hot chocolate is 1.5. If the concession stand selling the hot chocolate wants to practice price discrimination, it should charge higher prices to adults.

Accepted Answer

A) True 
 B)False

Question 12

Use the following to answer questions: 
-(Table: Demand for Lenny's Coffee) Look at the table Demand for Lenny's Coffee. Lenny's Café is the only source of coffee for hundreds of miles in any direction. If Lenny increases the quantity sold from five cups to six, his marginal revenue will be:

Accepted Answer

A)  $4. 
B)  $24. 
C)  -$1. 
D)  $5.

Question 13

Suppose a perfectly competitive market is suddenly transformed into one that operates as a monopoly market. We would expect price to _____, output to _____, consumer surplus to _____, producer surplus to _____, and deadweight loss to _____.

Accepted Answer

A)  rise; fall; rise; rise; fall 
B)  rise; fall; fall; fall; rise 
C)  rise; fall; fall; rise; rise 
D)  fall; rise; rise; fall; fall

Question 14

Amtrak charges lower fares to students than to its other passengers. This pricing strategy increases Amtrak's profits. From this information, we can conclude that students must have a _____ demand for Amtrak train service than other passengers.

Accepted Answer

A)  more price-elastic 
B)  lower 
C)  greater 
D)  less price-elastic

Question 15

Use the following to answer question:
Figure: Perfect Competition 
-(Figure: Perfect Competition) Look at the figure Perfect Competition. A perfectly competitive industry's total output is given by the intersection of:

Accepted Answer

A)  marginal revenue and marginal cost. 
B)  demand and marginal cost. 
C)  demand and marginal revenue. 
D)  marginal revenue and average total cost.

Question 16

If a monopolist is producing a quantity that generates MC = P, then profit:

Accepted Answer

A)  is maximized. 
B)  is maximized only if MR = P. 
C)  can be increased by increasing production. 
D)  can be increased by decreasing production.

Question 17

Suppose the elasticity of demand for tickets to Broadway shows is 2.0 for men and 0.3 for women. To use price discrimination to increase profits, the producers should charge lower prices to _____ because their demand is _____.

Accepted Answer

A)  men; elastic 
B)  men; inelastic 
C)  women; elastic 
D)  women; inelastic

Question 18

Entry barriers:

Accepted Answer

A)  exist in all market structures. 
B)  exist in perfect competition and monopolistically competitive markets. 
C)  do not exist in any market structures; otherwise nothing would be produced. 
D)  exist in monopoly and oligopoly markets.

Question 19

Use the following to answer questions:
Figure: The Profit-Maximizing Output and Price 
-(Figure: The Profit-Maximizing Output and Price) Look at the figure The Profit-Maximizing Output and Price. Assume that there are no fixed costs and AC = MC = $200. At the profit-maximizing output and price for a perfectly competitive industry, profit is:

Accepted Answer

A)  $0. 
B)  $200. 
C)  $1,600. 
D)  $3,200.

Question 20

A natural monopoly is one that:

Accepted Answer

A)  monopolizes a natural resource such as a mineral spring. 
B)  is based on control of something occurring in nature (such as diamonds). 
C)  has increasing returns to scale over the entire relevant range of output. 
D)  typically has low fixed costs, making it easy and "natural" for it to shut out competitors.

Exam 13: Monopoly

Deadweight loss in monopoly is smaller than in perfect competition.

Use the following to answer questions: -(Table: Prices and Demand) The New Orleans Saints have a monopoly on Saints logo hats. The marginal cost of producing a hat is $18. If the Saints increase the number of hats they sell from four to five, marginal revenue is:

Suppose a perfectly competitive industry is suddenly transformed into a monopoly industry. We can assume that monopoly output will be _ than the competitive output and that _.

Wendy has a monopoly in the retailing of motor homes. She can sell five per week at $21,000 each. If she wants to sell six, she can charge only $20,000 each. The quantity effect of selling the sixth motor home is:

Because business travelers' demand for airline flights is relatively _, small increases in price will result in relatively _ decreases in additional business travelers.

Use the following to answer questions: Figure: Water Works -(Figure: Water Works) Look at the figure Water Works, which describes a small town's water works, a natural monopoly. If the water works is unregulated and maximizes profit, what price will it charge to each customer?

Explain why the marginal revenue curve lies below the monopolist's demand curve.

Children's price elasticity of demand for hot chocolate is 0.5. Adults' price elasticity of demand for hot chocolate is 1.5. If the concession stand selling the hot chocolate wants to practice price discrimination, it should charge higher prices to adults.

Use the following to answer questions: -(Table: Demand for Lenny's Coffee) Look at the table Demand for Lenny's Coffee. Lenny's Café is the only source of coffee for hundreds of miles in any direction. If Lenny increases the quantity sold from five cups to six, his marginal revenue will be:

Suppose a perfectly competitive market is suddenly transformed into one that operates as a monopoly market. We would expect price to ___, output to _, consumer surplus to _, producer surplus to _, and deadweight loss to ___.

Amtrak charges lower fares to students than to its other passengers. This pricing strategy increases Amtrak's profits. From this information, we can conclude that students must have a _____ demand for Amtrak train service than other passengers.

Use the following to answer question: Figure: Perfect Competition -(Figure: Perfect Competition) Look at the figure Perfect Competition. A perfectly competitive industry's total output is given by the intersection of:

If a monopolist is producing a quantity that generates MC = P, then profit:

Suppose the elasticity of demand for tickets to Broadway shows is 2.0 for men and 0.3 for women. To use price discrimination to increase profits, the producers should charge lower prices to _ because their demand is _.

Entry barriers:

A natural monopoly is one that: