Question 1

Which of the following is NOT a characteristic of a monopoly?

Accepted Answer

A)  a single firm 
B)  no close substitutes for the product produced 
C)  barriers to entry 
D)  easy entry and exit

Question 2

The figure above shows the marginal revenue, marginal cost, and demand curves for an airline offering daily flights between Los Angeles and Toronto. If the airline is regulated using a marginal cost pricing rule total surplus will be ________.

Accepted Answer

A)  $100,000 
B)  $60,000 
C)  $80,000 
D)  $20,000

Question 3

-In a small town, Marilyn's Christmas Tree Lot has a monopoly on sales of Christmas trees. In order to increase her sales from 100 trees to 101 trees, she must drop the price of all of her trees from $20 to $19. What is the marginal revenue?

Accepted Answer

A)  $2000 
B)  $20 
C)  $19 
D)  negative $81

Question 4

A monopoly that sells every unit of its output at the same price is a ________.

Accepted Answer

A)  unit-price monopoly 
B)  legal monopoly 
C)  natural monopoly 
D)  single-price monopoly

Question 5

A natural monopoly that is regulated to set its price equal to its marginal cost

Accepted Answer

A)  incurs an economic loss. 
B)  makes zero economic profit. 
C)  makes an economic profit. 
D)  creates the maximum deadweight loss.

Question 6

-In the above figure, if the natural monopoly is regulated using an average cost pricing rule, but the firm can pad its costs and make the regulator believe its costs are LRAC (inflated), then the price the firm charges will increase from

Accepted Answer

A)  $18 to $24. 
B)  $12 to $24. 
C)  $12 to $18. 
D)  $18 to $36.

Question 7

Which of the following is definitely NOT an example of a natural monopoly?

Accepted Answer

A)  local water distribution companies 
B)  urban rail services 
C)  local electric power and gas distribution companies 
D)  urban retail stores

Question 8

-The figure above shows the demand and cost curves for a single-price monopoly. The firm's economic profit equals

Accepted Answer

A)  $0. 
B)  $300. 
C)  $100. 
D)  $50.

Question 9

monopoly has two key features, which are ________.

Accepted Answer

A)  barriers to entry and no close substitutes 
B)  franchises and barriers to entry 
C)  barriers to entry and close substitutes 
D)  close substitutes and no barriers to entry

Question 10

-Mountain Water is a natural monopoly. The government decides to regulate Mountain Water by imposing a marginal cost pricing rule. The figure above shows the demand for Mountain Water. Marginal cost is $0.20 per bottle. The price of a bottle of Mountain Water is ________, and ________ thousand bottles are sold per month.

Accepted Answer

A)  $0.20; 400 
B)  $0.50; 250 
C)  $0.20; 500 
D)  $1.00; 500

Question 11

Tris owns the only auto repair shop on Lonely Island. Tris is a single-price monopoly, so Tris operates on the ________ part of the ________ curve.

Accepted Answer

A)  elastic; supply 
B)  inelastic; supply 
C)  inelastic; demand 
D)  elastic; demand

Question 12

-A monopolist has the demand and marginal cost schedules given in the above table. If the monopoly can perfectly price discriminate, what is the profit-maximizing level of output and price?

Accepted Answer

The answer of 
-A monopolist has the demand and marginal...

Question 13

The United States Mint is the only legal entity to produce circulating coinage for the United States. Michael Jackson's estate owns the copyrights to many of the Beatles songs. Xcel Energy is a public utility company who is the sole provider of electricity and natural gas in some states such as Colorado, New Mexico and Minnesota. Which of these entities, if any, is a natural monopoly?

Accepted Answer

A)  United States Mint 
B)  Xcel Energy 
C)  Michael Jackson's estate 
D)  None of these are natural monopolies.

Question 14

Any attempt to capture a consumer surplus, a producer surplus, or an economic profit is called

Accepted Answer

A)  profit-maximizing. 
B)  rent-seeking. 
C)  price discriminating. 
D)  efficiency gain.

Question 15

-Rate of return regulation is typically imposed on

Accepted Answer

A)  monopolistically competitive firms. 
B)  an oligopoly. 
C)  a natural monopoly. 
D)  perfectly competitive firms.

Question 16

A single-price monopolist will produce at the point where

Accepted Answer

A)  MR = 0. 
B)  MR = P. 
C)  MR = MC. 
D)  P = MC.

Question 17

-The figure above shows the costs and demand curves for the Bigshow Cable Company. If the regulator wants to set the price so that Bigshow earns the same normal profit as a perfectly competitive firm, what price should be set?

Accepted Answer

A)  $8 
B)  $6 
C)  $4 
D)  $2

Question 18

For a monopoly, the demand for its product is perfectly elastic at the market price.

Accepted Answer

A) True 
 B)False

Question 19

Give an example of price discrimination.

Accepted Answer

The answer of Give an example of price discrimination....

Question 20

When a natural monopoly is regulated using an average cost pricing rule, what can you say about the firm's profit and the market's efficiency?

Accepted Answer

The answer of When a natural monopoly is regulated using...

Exam 13: Monopoly