Question 1

A monopoly incurs a marginal cost of $1 for each unit produced.If the price elasticity of demand equals -2.0,the monopoly maximizes profit by charging a price of

Accepted Answer

A)  $1. 
B)  $1.50. 
C)  $2. 
D)  $3.

Question 2

If the demand curve a monopolist faces is perfectly elastic,then the ratio of the firm's price to the marginal cost is

Accepted Answer

A)  0. 
B)  1. 
C)  2. 
D)  None of the above-the answer cannot be determined.

Question 3

If a firm takes the wage as given,then the firm's marginal expenditure on labor curve is

Accepted Answer

A)  above the labor supply curve. 
B)  below the labor supply curve. 
C)  the same as the labor supply curve. 
D)  upward sloping.

Question 4

An exclusive right to sell a new and useful product,process,substance,or design for a fixed period of time is called a

Accepted Answer

A)  patent. 
B)  barrier to entry. 
C)  monopoly. 
D)  research disincentive.

Question 5

The "Sonny Bono" Copyright Term Extension Act extended the copyright terms in the U.S.by 20 years.In addition,the act was applied to already existing copyrights.
a.Discuss the advantages and/or disadvantages in terms of efficiency and monopoly power from the extension of the lifespan of new copyrights.In theory,what determines the optimal term of a copyright?
b.Discuss the advantages and/or disadvantages in terms of efficiency and monopoly power from the extension of the lifespan of existing copyrights.

Accepted Answer

The answer of The "Sonny Bono" Copyright Term Extension Act...

Question 6

For the following, please answer "True" or "False" and explain why.
-Since there are no close substitutes for the monopoly's product,the monopoly can charge any price it wishes.

Accepted Answer

A) True 
 B)False

Question 7

If the demand for a firm's output is perfectly elastic,then the firm's Lerner Index equals

Accepted Answer

A)  zero. 
B)  one. 
C)  infinity. 
D)  one-half.

Question 8

If the inverse demand curve a monopoly faces is p = 100 - 2Q,and MC is constant at 16,then profit maximization is achieved when the monopoly sets price equal to

Accepted Answer

A)  16. 
B)  21. 
C)  25. 
D)  58.

Question 9

For the following, please answer "True" or "False" and explain why.
-If the monopoly's demand curve intersects the AVC curve at minimum AVC,the firm will shut down.

Accepted Answer

A) True 
 B)False

Question 10

If a monopoly can produce a good at zero marginal cost,then its Lerner Index is

Accepted Answer

A)  zero. 
B)  one. 
C)  infinity. 
D)  undetermined.

Question 11

Which of the following is an example of the bandwagon effect?

Accepted Answer

A)  A larger cellphone consumer group makes a cellphone service more attractive. 
B)  The more people use Facebook, the more attractive it is to consumers. 
C)  With more broadband services, more high-definition webpages become available. 
D)  All of the above.

Question 12

If the inverse demand function for a monopoly's product is p = a - bQ,then the firm's marginal revenue function is

Accepted Answer

A)  a. 
B)  a - (1/2)bQ. 
C)  a - bQ. 
D)  a - 2bQ.

Question 13

If the supply of labor to a monopsonist is everywhere unit elastic,and the marginal expenditure equals $1,then the wage will equal

Accepted Answer

A)  50¢. 
B)  75¢. 
C)  $1. 
D)  $2.

Question 14

If a monopoly is operating on the demand curve where price elasticity is equal to -3,and price equals 3,then MR is equal to

Accepted Answer

A)  -1. 
B)  1. 
C)  -2. 
D)  2.

Question 15

A flour mill holding exclusive contracts to 95% of the wheat in a large geographic area may operate as a flour producing monopoly locally because

Accepted Answer

A)  the mill has a very inelastic supply curve. 
B)  the mill is a natural monopoly. 
C)  the mill controls a key input. 
D)  the government will declare it a monopoly.

Question 16

The gap between the value a monopsony places on the last worker hired and the wage paid will increase when

Accepted Answer

A)  the supply curve becomes more elastic at the optimum. 
B)  the supply curve becomes less elastic at the optimum. 
C)  the supply curve becomes horizontal. 
D)  the value of the last unit of labor hired is greater than the cost.

Question 17

When a monopoly is maximizing its profits,

Accepted Answer

A)  MR > MC 
B)  MR  dMC/dQ 
D)  dMR/dQ < dMC/dQ

Question 18

For the following, please answer "True" or "False" and explain why.
-A monopoly always operates in the inelastic portion of its demand curve.

Accepted Answer

A) True 
 B)False

Question 19

Suppose a monopoly producer is also a monopsonist in the labor market.Demand for the output is ?p = 100 - Q.The production function is Q = L,and the labor supply curve is w = 10 + L.How much labor does the firm hire? What wage is paid?

Accepted Answer

The answer of Suppose a monopoly producer is also a...

Question 20

Why does a monopsonist's marginal expenditure curve lie above the labor supply curve?

Accepted Answer

The answer of Why does a monopsonist's marginal expenditure curve...

Exam 11: Monopoly and Monopsony

A monopoly incurs a marginal cost of $1 for each unit produced.If the price elasticity of demand equals -2.0,the monopoly maximizes profit by charging a price of

If the demand curve a monopolist faces is perfectly elastic,then the ratio of the firm's price to the marginal cost is

If a firm takes the wage as given,then the firm's marginal expenditure on labor curve is

An exclusive right to sell a new and useful product,process,substance,or design for a fixed period of time is called a

For the following, please answer "True" or "False" and explain why. -Since there are no close substitutes for the monopoly's product,the monopoly can charge any price it wishes.

If the demand for a firm's output is perfectly elastic,then the firm's Lerner Index equals

If the inverse demand curve a monopoly faces is p = 100 - 2Q,and MC is constant at 16,then profit maximization is achieved when the monopoly sets price equal to

For the following, please answer "True" or "False" and explain why. -If the monopoly's demand curve intersects the AVC curve at minimum AVC,the firm will shut down.

If a monopoly can produce a good at zero marginal cost,then its Lerner Index is

Which of the following is an example of the bandwagon effect?

If the inverse demand function for a monopoly's product is p = a - bQ,then the firm's marginal revenue function is

If the supply of labor to a monopsonist is everywhere unit elastic,and the marginal expenditure equals $1,then the wage will equal

If a monopoly is operating on the demand curve where price elasticity is equal to -3,and price equals 3,then MR is equal to

A flour mill holding exclusive contracts to 95% of the wheat in a large geographic area may operate as a flour producing monopoly locally because

The gap between the value a monopsony places on the last worker hired and the wage paid will increase when

When a monopoly is maximizing its profits,

For the following, please answer "True" or "False" and explain why. -A monopoly always operates in the inelastic portion of its demand curve.

Suppose a monopoly producer is also a monopsonist in the labor market.Demand for the output is ?p = 100 - Q.The production function is Q = L,and the labor supply curve is w = 10 + L.How much labor does the firm hire? What wage is paid?

Why does a monopsonist's marginal expenditure curve lie above the labor supply curve?