Question 1

How do the price, output, consumer surplus, economic profit, and total surplus for a single-price monopoly compare to that of a competitive industry?

Accepted Answer

The answer of How do the price, output, consumer surplus,...

Question 2

-If a marginal cost pricing rule is imposed on the natural monopoly shown in the figure above, then the deadweight loss will equal

Accepted Answer

A)  $0. 
B)  $4 million. 
C)  $8 million. 
D)  $12 million.

Question 3

If an industry is a natural monopoly and regulators decide that the firm must price at marginal cost, then consumers will be ________ off than if the firm was unregulated and the firm's owners will be ________ off than if it was unregulated.

Accepted Answer

A)  better; better 
B)  better; worse 
C)  worse; better 
D)  worse; worse

Question 4

-The above table gives a monopolist's demand schedule. Complete the table by calculating the total revenue and the marginal revenue.

Accepted Answer

The answer of 
-The above table gives a monopolist's demand...

Question 5

If a monopolist can perfectly price discriminate, then

Accepted Answer

A)  price equals average cost for each unit sold. 
B)  price equals marginal cost for each unit sold. 
C)  price equals marginal cost for the last unit sold. 
D)  the firm can ignore the marginal cost curve.

Question 6

-The figure above shows a monopoly firm's demand curve. At point u in the figure, the demand facing the monopoly is

Accepted Answer

A)  elastic. 
B)  unit elastic. 
C)  inelastic. 
D)  less than the supply.

Question 7

Which of the following statements about a monopoly is FALSE?

Accepted Answer

A)  Monopolies have no barriers to entry or exit. 
B)  The good produced by a monopoly has no close substitutes. 
C)  A monopoly is the only producer of the good. 
D)  None of the above; that is, all of the above answers are true statements about a monopoly.

Question 8

In July 2008, the Federal Communications Commission approved the merger of satellite radio providers XM Satellite and Sirius Satellite Radio, establishing a single satellite radio company in America. Under the terms of the deal, the companies agreed not to raise prices for the next three years. Why would the FTC require prices not to increase for three years?

Accepted Answer

A)  Compared to competition, monopolies are always worse for consumers. 
B)  Compared to competition, monopolies restrict output and charge higher prices. 
C)  Compared to competition, monopolies increase prices and output. 
D)  Compared to competition, monopolies restrict output and charge lower prices.

Question 9

The demand curve facing the monopolist is

Accepted Answer

A)  the same as the market demand curve. 
B)  more elastic than the market demand curve. 
C)  less elastic than the market demand curve. 
D)  upward sloping.

Question 10

-Natural gas is a natural monopoly. The figure shows the market for natural gas in the city of Lucknow. When an average cost price rule regulation is imposed, the price per household per month is ________.

Accepted Answer

A)  $30 and 20,000 household are served 
B)  $10 and 40,000 household are served 
C)  $25 and 20,000 household are served 
D)  $20 and 30,000 households are served

Question 11

A single-price monopoly charges the same price

Accepted Answer

A)  even if the demand curve shifts. 
B)  even if its cost curves shift. 
C)  to all customers for each unit of output they buy. 
D)  at all times, and that price equals the firm's marginal revenue.

Question 12

-The figure above shows the costs and demand curves for the Bigshow Cable Company. If the firm is required to set its price according to an average cost pricing rule, the price is ________ and the quantity produced is ________ million.

Accepted Answer

A)  $8; 1 
B)  $6; 1 
C)  $6; 2 
D)  $4; 3

Question 13

-The above figure represents a perfectly competitive industry that is taken over by a single firm and operated as a monopoly.
a) What was the competitive price and quantity?
b) What is the monopoly price and quantity?
c) What area represents consumer surplus under perfect competition?
d) What area represents consumer surplus under monopoly?
e) What area represents the deadweight loss of monopoly?

Accepted Answer

The answer of 
-The above figure represents a perfectly competitive...

Question 14

The social interest theory of regulation assumes that

Accepted Answer

A)  regulations promote the attainment of efficiency. 
B)  regulations promote the attainment of the maximum economic profit. 
C)  regulators will seek to maximize consumer surplus. 
D)  public officials seek their own gain through regulation.

Question 15

"A single-price monopolist will always charge a price that is on the elastic range of its demand." Explain why the previous statement is correct or incorrect.

Accepted Answer

The answer of "A single-price monopolist will always charge a...

Question 16

-If the above figure illustrated a perfectly competitive industry, the equilibrium market output would be equal to

Accepted Answer

A)  7. 
B)  11. 
C)  13. 
D)  22.

Question 17

-If a marginal cost pricing rule is imposed on the natural monopoly in the figure above, then the price will be

Accepted Answer

A)  $2. 
B)  $4. 
C)  $5. 
D)  $6.

Question 18

For a monopoly able to practice perfect price discrimination, the market

Accepted Answer

A)  supply curve is the same as the marginal cost curve. 
B)  supply curve is the same as the marginal revenue curve. 
C)  demand curve is the same as the marginal cost curve. 
D)  demand curve is the same as the marginal revenue curve.

Question 19

-The figure above shows a monopoly firm's demand curve. If the price and quantity of haircuts move from point t to point u, the monopoly's

Accepted Answer

A)  total revenue will rise. 
B)  total revenue will fall. 
C)  total revenue will remain the same. 
D)  marginal revenue will increase.

Question 20

-In the above figure, if the natural monopoly is regulated with an average cost pricing rule and the firm does not inflate its costs, then the firm will produce

Accepted Answer

A)  8 million units and set a price of $21 per unit. 
B)  12 million units and set a price of $18 per unit. 
C)  16 million units and set a price of $16 per unit. 
D)  nothing unless the government provides subsidies to cover its losses.

Exam 13: Monopoly