Question 1

When a certain monopoly sets its price at $8 it sells 64 units.When the monopoly sets its price at $10 it sells 60 units.The marginal revenue for the firm over this range is

Accepted Answer

A)  $11.
B)  $22.
C)  $33.
D)  $44.E) B) and C)
F) A) and C)

Question 2

Figure 15-6
 
-Refer to Figure 15-6.The deadweight loss caused by a profit-maximizing monopoly amounts to

Accepted Answer

A)  $150.
B)  $200.
C)  $250.
D)  $300.E) C) and D)
F) None of the above

Question 3

It is not uncommon to find that prescription drugs sell for more in the United States than they do in other countries.Which of the following statements about this issue is most likely to be true?

Accepted Answer

A)  Drug companies are engaging in price discrimination, and this practice certainly reduces global social welfare.
B)  Global social welfare could be improved if the price in the United States were reduced to the price charged in other countries.
C)  Global social welfare could be improved if the price in the other countries were increased to the price charged in the United States.
D)  Drug companies are engaging in price discrimination, but this might improve global social welfare if it gives more people access to the drugs.E) A) and B)
F) A) and C)

Question 4

Figure 15-2
The figure below illustrates the cost and revenue structure for a monopoly firm.
 
-Which of the following statements is true of a monopoly firm?

Accepted Answer

A)  A monopoly firm is a price taker and has no supply curve.
B)  A monopoly firm is a price maker and has no supply curve
C)  A monopoly firm is a price maker and has a downward-sloping supply curve.
D)  A monopoly firm is a price maker and has an upward-sloping supply curve.E) C) and D)
F) B) and D)

Question 5

When a firm has a natural monopoly,the firm's

Accepted Answer

A)  marginal cost always exceeds its average total cost.
B)  total cost curve is horizontal.
C)  average total cost curve is downward sloping.
D)  marginal cost curve must lie above the firm's average total cost curve.E) B) and D)
F) A) and B)

Question 6

Economists assume that monopolists behave as

Accepted Answer

A)  cost minimizers.
B)  profit maximizers.
C)  price maximizers.
D)  maximizers of social welfare.E) C) and D)
F) All of the above

Question 7

A monopolist faces the following demand curve: 
The monopolist has fixed costs of $1,000 and has a constant marginal cost of $2 per unit.If the monopolist were able to perfectly price discriminate,how many units would it sell?

Accepted Answer

A)  400
B)  500
C)  900
D)  4,200E) B) and C)
F) None of the above

Question 8

Sizable economic profits can persist over time under monopoly if the monopolist

Accepted Answer

A)  produces that output where average total cost is at a maximum.
B)  is protected by barriers to entry.
C)  operates as a price taker rather than a price maker.
D)  realizes revenues that exceed variable costs.E) B) and D)
F) All of the above

Question 9

A natural monopolist's ability to price its product is

Accepted Answer

A)  constrained by the market demand curve.
B)  constrained by market supply.
C)  not affected by market demand.
D)  enhanced by regulatory control of the government.E) B) and C)
F) C) and D)

Question 10

The defining characteristic of a natural monopoly is

Accepted Answer

A)  constant marginal cost over the relevant range of output.
B)  economies of scale over the relevant range of output.
C)  constant returns to scale over the relevant range of output.
D)  diseconomies of scale over the relevant range of output.E) A) and B)
F) A) and C)

Question 11

The key difference between a competitive firm and a monopoly firm is the ability to select

Accepted Answer

A)  the level of competition in the market.
B)  the level of production.
C)  inputs in the production process.
D)  the price of its output.E) B) and C)
F) C) and D)

Question 12

When a monopolist increases the number of units it sells,there are two effects on revenue.They are the

Accepted Answer

A)  demand effect and the supply effect.
B)  competition effect and the cost effect.
C)  competitive effect and the monopoly effect.
D)  output effect and the price effect.E) None of the above
F) B) and D)

Question 13

Round-trip airline tickets are usually cheaper if you stay over a Saturday night before you fly back.What is the reason for this price discrepancy?

Accepted Answer

A)  Airlines are practicing imperfect price discrimination to raise their profits.
B)  Airlines charge a different rate based on the different nature of peoples' travel needs.
C)  Airlines are attempting to charge people based on their willingness to pay.
D)  All of the above are correct.E) B) and D)
F) A) and C)

Question 14

A firm that is a natural monopoly

Accepted Answer

A)  is not likely to be concerned about new entrants eroding its monopoly power.
B)  is taking advantage of economies of scale.
C)  would experience a higher average total cost if more firms entered the market.
D)  All of the above are correct.E) None of the above
F) All of the above

Question 15

The practice of selling the same goods to different customers at different prices,but with the same marginal cost,is known as

Accepted Answer

A)  price segregation.
B)  price discrimination.
C)  arbitrage.
D)  monopoly pricing.E) B) and D)
F) A) and D)

Question 16

The first major piece of antitrust legislation was the

Accepted Answer

A)  Clayton Act.
B)  Celler-Kefauver Act.
C)  Sherman Act.
D)  Robinson-Patman Act.E) A) and B)
F) B) and C)

Question 17

Scenario 15-2
A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $30, its average revenue is $60, and its average total cost is $34.
-Refer to Scenario 15-2.At Q = 500,the firm's marginal cost is

Accepted Answer

A)  less than $30.
B)  $30.
C)  $34.
D)  greater than $34.E) B) and C)
F) A) and D)

Question 18

Which of the following statements is true about patents and copyrights? (i) 	They both have benefits and costs.
(ii) 	They lead to higher prices.
(iii) 	They enhance the ability of monopolists to earn above-average profits.

Accepted Answer

A)  (i)  and (ii) 
B)  (ii)  and (iii) 
C)  (ii)  only
D)  (i) , (ii) , and (iii) E) All of the above
F) B) and C)

Question 19

Table 15-1
 
-Refer to Table 15-1.Assume this monopolist's marginal cost is constant at $12.What quantity of output (Q) will it produce and what price (P) will it charge?

Accepted Answer

A)  Q = 4, P = $29
B)  Q = 4, P = $26
C)  Q = 5, P = $23
D)  Q = 7, P = $17E) A) and B)
F) A) and C)

Question 20

Which of the following statements is (are) true of a monopoly? (i) 	A monopoly has the ability to set the price of its product at whatever level it desires.
(ii) 	A monopoly's total revenue will always increase when it increases the price of its product.
(iii) 	A monopoly can earn unlimited profits.

Accepted Answer

A)  (i)  only
B)  (ii)  only
C)  (i)  and (ii) 
D)  (ii)  and (iii) E) B) and D)
F) A) and C)

Exam 15: Monopoly

It is not uncommon to find that prescription drugs sell for more in the United States than they do in other countries.Which of the following statements about this issue is most likely to be true?

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A firm that is a natural monopoly

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Round-trip airline tickets are usually cheaper if you stay over a Saturday night before you fly back.What is the reason for this price discrepancy?

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Figure 15-2 The figure below illustrates the cost and revenue structure for a monopoly firm. -Which of the following statements is true of a monopoly firm?

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When a monopolist increases the number of units it sells,there are two effects on revenue.They are the

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Sizable economic profits can persist over time under monopoly if the monopolist

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Table 15-1 -Refer to Table 15-1.Assume this monopolist's marginal cost is constant at $12.What quantity of output (Q) will it produce and what price (P) will it charge?

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Scenario 15-2 A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $30, its average revenue is $60, and its average total cost is $34. -Refer to Scenario 15-2.At Q = 500,the firm's marginal cost is

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Which of the following statements is true about patents and copyrights? (i) They both have benefits and costs. (ii) They lead to higher prices. (iii) They enhance the ability of monopolists to earn above-average profits.

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Economists assume that monopolists behave as

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The first major piece of antitrust legislation was the

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A natural monopolist's ability to price its product is

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A monopolist faces the following demand curve: The monopolist has fixed costs of $1,000 and has a constant marginal cost of $2 per unit.If the monopolist were able to perfectly price discriminate,how many units would it sell?

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When a firm has a natural monopoly,the firm's

Correct AnswerverifiedShow Answer

The practice of selling the same goods to different customers at different prices,but with the same marginal cost,is known as

Correct AnswerverifiedShow Answer

The defining characteristic of a natural monopoly is

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When a certain monopoly sets its price at $8 it sells 64 units.When the monopoly sets its price at $10 it sells 60 units.The marginal revenue for the firm over this range is

Correct AnswerverifiedShow Answer

The key difference between a competitive firm and a monopoly firm is the ability to select

Correct AnswerverifiedShow Answer

Which of the following statements is (are) true of a monopoly? (i) A monopoly has the ability to set the price of its product at whatever level it desires. (ii) A monopoly's total revenue will always increase when it increases the price of its product. (iii) A monopoly can earn unlimited profits.

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Figure 15-6 -Refer to Figure 15-6.The deadweight loss caused by a profit-maximizing monopoly amounts to

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