Question 1

A monopolist produces where P > MC = MR.

Accepted Answer

A) True 
 B)False

Question 2

Figure 15-7 
-Refer to Figure 15-7.What area represents the total surplus lost due to monopoly pricing?

Accepted Answer

A)   the rectangle (F-
D)  xA
B)   the triangle 1/2[(F-
D)  x(B-
A)  ]
C)   the triangle 1/2[(F-G) x(B-
A)  ]
D)   the rectangle (F-
D)  xA plus the triangle 1/2[(F-
D)  x(B-
A)  ]E) A) and D)
F) B) and C)

Question 3

Which of the following statements is correct?

Accepted Answer

A)   Both a competitive firm and a monopolist are price takers.
B)   Both a competitive firm and a monopolist are price makers.
C)   A competitive firm is a price taker,whereas a monopolist is a price maker.
D)   A competitive firm is a price maker,whereas a monopolist is a price taker.E) All of the above
F) A) and D)

Question 4

"Monopolists do not worry about efficient production and minimizing costs since they can just pass along any increase in costs to their consumers." This statement is

Accepted Answer

A)   false;price increases will mean fewer sales,which may lower profits.
B)   true;this is the primary reason why economists believe that monopolies result in economic inefficiency.
C)   false;the monopolist is a price taker.
D)   true;consumers in a monopoly market have no substitutes to turn to when the monopolist raises prices.E) A) and C)
F) None of the above

Question 5

Table 15-4
Consider the following demand and cost information for a monopoly.
 
-Refer to Table 15-4.The marginal revenue of the second unit is

Accepted Answer

A)   $10.
B)   $15.
C)   $20.
D)   $25.E) B) and C)
F) A) and D)

Question 6

A profit-maximizing monopolist charges a price of $12.The intersection of the marginal revenue and marginal cost curves occurs where output is 10 units and marginal cost is $6.Average total cost for 10 units of output is $5.What is the monopolist's profit?

Accepted Answer

A)   $60
B)   $70
C)   $100
D)   $120E) All of the above
F) B) and C)

Question 7

If the government regulates the price a natural monopolist can charge to be equal to the firm's marginal cost,the government will likely need to subsidize the firm.

Accepted Answer

A) True 
 B)False

Question 8

If the government regulates the price that a natural monopolist can charge to be equal to the firm's marginal cost,the firm will

Accepted Answer

A)   earn zero profits.
B)   earn positive profits,causing other firms to enter the industry.
C)   earn negative profits,causing the firm to exit the industry.
D)   minimize costs in order to lower the price that it charges.E) A) and C)
F) C) and D)

Question 9

Which of the following is a characteristic of a natural monopoly?

Accepted Answer

A)   Marginal cost declines over large regions of output.
B)   Average total cost declines over large regions of output.
C)   The product sold is a natural resource such as diamonds or water.
D)   All of the above are correct.E) All of the above
F) A) and D)

Question 10

The key issue in determining the efficiency of public versus private ownership of a monopoly is

Accepted Answer

A)   the tendency for efficient management of publicly owned enterprises.
B)   the inability of private monopolies to get rid of managers that are doing a bad job.
C)   the propensity of private monopolies to generate excessive profits.
D)   how ownership of the firm affects the cost of production.E) None of the above
F) B) and C)

Question 11

One method used to control the ability of firms to capture monopoly profit in the United States is through

Accepted Answer

A)   government purchase of products produced by monopolists.
B)   government distribution of a monopolist's excess production.
C)   enforcement of antitrust laws.
D)   regulation of firms in highly competitive markets.E) None of the above
F) All of the above

Question 12

For a monopolist,marginal revenue is

Accepted Answer

A)   positive when the demand effect is greater than the supply effect.
B)   positive when the monopoly effect is greater than the competitive effect.
C)   negative when the price effect is greater than the output effect.
D)   negative when the output effect is greater than the price effect.E) None of the above
F) A) and D)

Question 13

If government officials break a natural monopoly up into several smaller firms,then

Accepted Answer

A)   competition will force firms to attain economic profits rather than accounting profits.
B)   competition will force firms to produce surplus output,which drives up price.
C)   the average costs of production will increase.
D)   the average costs of production will decrease.E) None of the above
F) All of the above

Question 14

A monopolist that practices perfect price discrimination

Accepted Answer

A)   creates no deadweight loss.
B)   charges one group of buyers a higher price than another group,such as offering a student discount.
C)   charges a higher price but produces the same monopoly level of output as when a single price is charged.
D)   charges some customers a price below marginal cost because costs are covered by the high-priced buyers.E) A) and C)
F) B) and D)

Question 15

If a monopolist is able to perfectly price discriminate,

Accepted Answer

A)   consumer surplus is always increased.
B)   total surplus is always decreased.
C)   consumer surplus and deadweight losses are transformed into monopoly profits.
D)   the price effect dominates the output effect on monopoly revenue.E) B) and C)
F) A) and B)

Question 16

Price discrimination requires the firm to

Accepted Answer

A)   separate customers according to their willingness to pay.
B)   differentiate between different units of its product.
C)   engage in arbitrage.
D)   use coupons.E) A) and B)
F) A) and C)

Question 17

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 D)
F) B) and C)

Question 18

Which of the following may eliminate some or all of the inefficiency that results from monopoly pricing?

Accepted Answer

A)   The government can regulate the monopoly.
B)   The monopoly can be prohibited from price discriminating.
C)   The monopoly can be forced to operate at a point where its marginal revenue is equal to its marginal cost.
D)   None of the above would eliminate any inefficiency associated with a monopoly.E) All of the above
F) A) and B)

Question 19

When a monopolist decreases the price of its good,consumers

Accepted Answer

A)   continue to buy the same amount.
B)   buy more.
C)   buy less.
D)   may buy more or less,depending on the price elasticity of demand.E) A) and B)
F) A) and C)

Question 20

Monopolists can achieve any level of profit they desire because they have unlimited market power.

Accepted Answer

A) True 
 B)False

Exam 15: Monopoly

The key issue in determining the efficiency of public versus private ownership of a monopoly is

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When a monopolist decreases the price of its good,consumers

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Table 15-4 Consider the following demand and cost information for a monopoly. -Refer to Table 15-4.The marginal revenue of the second unit is

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A monopolist produces where P > MC = MR.

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Monopolists can achieve any level of profit they desire because they have unlimited market power.

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If government officials break a natural monopoly up into several smaller firms,then

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Which of the following is a characteristic of a natural monopoly?

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If the government regulates the price a natural monopolist can charge to be equal to the firm's marginal cost,the government will likely need to subsidize the firm.

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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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A profit-maximizing monopolist charges a price of $12.The intersection of the marginal revenue and marginal cost curves occurs where output is 10 units and marginal cost is $6.Average total cost for 10 units of output is $5.What is the monopolist's profit?

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Figure 15-7 -Refer to Figure 15-7.What area represents the total surplus lost due to monopoly pricing?

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Which of the following statements is correct?

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For a monopolist,marginal revenue is

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Which of the following may eliminate some or all of the inefficiency that results from monopoly pricing?

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If the government regulates the price that a natural monopolist can charge to be equal to the firm's marginal cost,the firm will

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A monopolist that practices perfect price discrimination

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One method used to control the ability of firms to capture monopoly profit in the United States is through

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"Monopolists do not worry about efficient production and minimizing costs since they can just pass along any increase in costs to their consumers." This statement is

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If a monopolist is able to perfectly price discriminate,

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Price discrimination requires the firm to

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