Question 1

FIGURE 9-5
 
-Refer to Figure 9-5. Assuming the firm maximizes profits, what will the marginal cost of the last unit produced be?

Accepted Answer

A)  $11 
B)  $14 
C)  $15 
D)  $18

Question 2

FIGURE 9-4
 
-Refer to Figure 9-4. What area indicates the welfare loss due to monopoly pricing and output practices?

Accepted Answer

A)  DCB 
B)  DAP1P4 
C)  ACB 
D)  ADB

Question 3

Which of the following best describes average cost regulation of a natural monopoly?

Accepted Answer

A)  It necessitates a subsidy payment to the firm. 
B)  It imposes a price that is less than marginal cost and less than marginal revenue. 
C)  It creates incentives that tend to shift average total cost curves in an upward direction. 
D)  It generates economic losses for the seller.

Question 4

A profit-maximizing monopolist will never choose to produce at a level of output that generates negative marginal revenue.

Accepted Answer

A) True 
 B)False

Question 5

Why does the government allow some markets to be monopolized by granting patents?

Accepted Answer

A)  to promote a more equal distribution of income 
B)  to correct for negative externalities 
C)  to ensure lower prices for consumers in the short run 
D)  to promote technological progress

Question 6

Which of the following best describes a monopolist in the long run?

Accepted Answer

A)  It may make an economic loss, an economic profit, or zero economic profits. 
B)  It always earns an economic profit. 
C)  It always earns a normal rate of return. 
D)  It always suffers an economic loss.

Question 7

When a monopolist is producing at the profit-maximizing output level, what can we conclude about the value to consumers of one additional unit of output?

Accepted Answer

A)  The value will exceed the price of the additional unit. 
B)  The values will equal the monopolist's marginal cost. 
C)  The value will be less than the monopolist's marginal cost. 
D)  The value will exceed the monopolist's marginal cost.

Question 8

Which of the following does a profit-maximizing monopolist set?

Accepted Answer

A)  the product price where marginal revenue is greater than the price 
B)  the output where marginal cost equals average revenue 
C)  the output where marginal cost equals marginal revenue 
D)  the product price where marginal cost equals marginal revenue

Question 9

What is the term for the practice of selling a product to different customers at different prices when marginal cost is the same?

Accepted Answer

A)  price discrimination 
B)  arbitrage 
C)  price segregation 
D)  monopoly pricing

Question 10

What is the definition of a natural monopoly?

Accepted Answer

A)  an industry in which one firm is very large relative to other firms that could enter the industry 
B)  an industry in which a single firm controls crucial inputs to the production process 
C)  an industry in which a single seller exists as a result of patent protection 
D)  an industry in which one firm can produce the entire industry output at a lower average cost than can a larger number of firms

Question 11

Figure 9-2
 
-Refer to Figure 9-2. What does the region bounded by CBAP* represent?

Accepted Answer

A)  total profits 
B)  total losses 
C)  total costs 
D)  total consumer surplus

Question 12

At his current level of output, a monopolist has an MR of $10, an MC of $6, and an economic profit of zero. If the market demand curve is downward sloping and his marginal cost curve is upward sloping, what can we conclude about the monopolist?

Accepted Answer

A)  It could increase profit by increasing his price. 
B)  It is producing at the profit-maximizing level of output. 
C)  It should exit the market if significant fixed costs have been incurred. 
D)  It could increase profit by increasing output.

Question 13

What is the term for a market structure in which only one firm survives because of economies of scale?

Accepted Answer

A)  a structural monopoly 
B)  a government monopoly 
C)  a patented monopoly 
D)  a natural monopoly

Question 14

Which of the following statements regarding price best describes a profit-maximizing monopolist?

Accepted Answer

A)  Price is always equal to marginal revenue. 
B)  Price is always equal to the average total cost of production. 
C)  Price is always less than marginal revenue. 
D)  Price is always greater than marginal revenue.

Question 15

How do profit-maximizing monopolists choose a level of output?

Accepted Answer

A)  such that marginal revenue equals marginal cost and price exceeds average variable cost 
B)  such that price equals marginal cost but exceeds average variable cost 
C)  such that price equals marginal revenue but exceeds average variable cost 
D)  such that average total cost is minimized

Question 16

TABLE 9-2
 
-Refer to Table 9-2. What is marginal revenue at the profit-maximizing level of output?

Accepted Answer

A)  $5 
B)  $7 
C)  $8 
D)  $9

Question 17

Many communities have granted monopoly rights to cable companies. How have these monopolies been created?

Accepted Answer

A)  through government licensing 
B)  through smart business practices by entrepreneurs 
C)  through patent protection 
D)  through ownership of the cable resources

Question 18

Even before the tragedy of 9/11, airlines required identification that matched the name on the ticket. What was this likely because of?

Accepted Answer

A)  The airlines wanted to prevent the resale of tickets. 
B)  There were problems arising due to welfare losses. 
C)  There were security concerns. 
D)  There was a problem with counterfeit tickets.

Question 19

Which of the following best describes the role of the Canadian government in the monopoly market?

Accepted Answer

A)  It encourages the permanent monopolization of all markets in which the monopolist has technical superiority over potential competitors. 
B)  It forbids the creation of legal impediments to entry into any market. 
C)  It intervenes to prevent the monopolization of any market. 
D)  It intervenes to prevent the monopolization of some markets and actively encourages the monopolization of others.

Question 20

Figure 9-1
 
-Refer to Figure 9-1. What area indicates the profit-maximizing firm's total revenue?

Accepted Answer

A)  0BGQ2 
B)  0AEQ1 
C)  DAEF 
D)  0DFQ1

Exam 9: Monopoly

FIGURE 9-5 -Refer to Figure 9-5. Assuming the firm maximizes profits, what will the marginal cost of the last unit produced be?

FIGURE 9-4 -Refer to Figure 9-4. What area indicates the welfare loss due to monopoly pricing and output practices?