Question 1

A profit-maximizing monopolist with a less elastic demand has more pricing power than a profit-maximizing monopolist with a more elastic demand.

Accepted Answer

A) True 
 B)False

Question 2

Nobel Prize-winning economic historian Douglass North argues that:

Accepted Answer

A)  monopolies have been the leading cause of slow growth in developing nations. 
B)  economic growth was slow until patent laws were created to protect innovation. 
C)  economic growth would improve if the government created more natural monopolies. 
D)  corruption may actually lead to increases in innovation and development of new products.

Question 3

One way to take advantage of economies of scale and to avoid the market power of a natural monopoly in the short run is through:

Accepted Answer

A)  price control. 
B)  privatizing the monopoly. 
C)  breaking up the monopoly into several smaller companies. 
D)  penalty.

Question 4

If a monopolist faces a straight-line negatively sloped demand curve, the price of the units it sells is always:

Accepted Answer

A)  greater than the average revenue. 
B)  equal to marginal revenue. 
C)  greater than marginal revenue. 
D)  less than the average revenue.

Question 5

Economists believe that monopoly markets are "bad" because they raise prices for consumers.

Accepted Answer

A) True 
 B)False

Question 6

When a pharmaceutical company discovers a new drug, patent law gives it market power by guaranteeing:

Accepted Answer

A)  partial ownership of the right to sell the drug for an unlimited number of years. 
B)  partial ownership of the right to sell the drug for a limited number of years. 
C)  sole ownership of the right to sell the drug for a limited number of years. 
D)  sole ownership of the right to sell the drug for an unlimited number of years.

Question 7

All monopolies make economic profit, maintained by some sort of barrier to entry.

Accepted Answer

A) True 
 B)False

Question 8

When a monopolist faces downward-sloping demand, marginal revenue is less than the price.

Accepted Answer

A) True 
 B)False

Question 9

Using a well-labeled diagram, show:
a. the profit-maximizing price and quantity of output for a monopolist.
b. the area representing the deadweight loss.
c. the price that the government regulators would set to achieve the socially optimal level of output.

Accepted Answer

The answer of Using a well-labeled diagram, show:
a. the profit-maximizing...

Question 10

Michael Kremer's patent buyout proposal is designed to lower drug prices without decreasing the incentive to innovate and produce new drugs.

Accepted Answer

A) True 
 B)False

Question 11

One way that has been suggested to eliminate deadweight loss from monopoly power without reducing incentives to innovation is to:

Accepted Answer

A)  have government pay monopolists to reduce their output. 
B)  have government pay monopolists to acquire the patent rights. 
C)  have government eliminate the patent system. 
D)  require that the patent-owners allow competitors to use their innovations.

Question 12

Use the following to answer questions:
Figure: Regulated versus Unregulated Monopolist 
-(Figure: Regulated versus Unregulated Monopolist) Refer to the figure. Calculate consumer surplus when this monopoly is regulated.

Accepted Answer

A)  $6,400 
B)  $2,800 
C)  $3,600 
D)  $400

Question 13

When demand is relatively elastic, monopolists will charge:

Accepted Answer

A)  a higher markup. 
B)  a lower markup. 
C)  the same markup as when demand is relatively inelastic. 
D)  a price equal to marginal cost.

Exam 13: Monopoly

A profit-maximizing monopolist with a less elastic demand has more pricing power than a profit-maximizing monopolist with a more elastic demand.

Nobel Prize-winning economic historian Douglass North argues that:

One way to take advantage of economies of scale and to avoid the market power of a natural monopoly in the short run is through:

If a monopolist faces a straight-line negatively sloped demand curve, the price of the units it sells is always:

Economists believe that monopoly markets are "bad" because they raise prices for consumers.

When a pharmaceutical company discovers a new drug, patent law gives it market power by guaranteeing:

All monopolies make economic profit, maintained by some sort of barrier to entry.

When a monopolist faces downward-sloping demand, marginal revenue is less than the price.

Using a well-labeled diagram, show: a. the profit-maximizing price and quantity of output for a monopolist. b. the area representing the deadweight loss. c. the price that the government regulators would set to achieve the socially optimal level of output.

Michael Kremer's patent buyout proposal is designed to lower drug prices without decreasing the incentive to innovate and produce new drugs.

One way that has been suggested to eliminate deadweight loss from monopoly power without reducing incentives to innovation is to:

Use the following to answer questions: Figure: Regulated versus Unregulated Monopolist -(Figure: Regulated versus Unregulated Monopolist) Refer to the figure. Calculate consumer surplus when this monopoly is regulated.

When demand is relatively elastic, monopolists will charge: