Question 1

In a perfectly competitive market, if all firms face identical, constant marginal marginal cost curves, then consumer surplus is

Accepted Answer

A)  the area beneath the market demand curve and above the market clearing price.
B)  the area above the market demand curve and above the market clearing price.
C)  the total area beneath the market demand curve.
D)  definitely zero.E) B) and C)
F) A) and D)

Question 2

Which of the following would most likely be classified as a natural monopoly?

Accepted Answer

A)  A city water district
B)  Microsoft
C)  Disneyland
D)  Exxon-MobilE) B) and C)
F) None of the above

Question 3

To be able to engage in profit-maximizing price searching, a monopoly firm must be able to

Accepted Answer

A)  prevent the entry of other firms into the market for its product.
B)  induce the entry of other firms into the market for its product.
C)  avoid earning negative economic profits in the short run.
D)  always earn zero economic profits.E) C) and D)
F) A) and B)

Question 4

For a monopolist, the reason that marginal revenue is less than price is

Accepted Answer

A)  because of the perfectly elastic demand curve that the monopolist faces.
B)  because the monopolist must lower the price of the good in order to sell an additional unit.
C)  because of the U-shaped average revenue curve.
D)  because of the lack of competition in the market.E) B) and D)
F) B) and C)

Question 5

A simple way of describing the social cost of monopoly is to say that it

Accepted Answer

A)  produces too much.
B)  makes too much money.
C)  has too much political power.
D)  restricts output and charges a higher price than a perfectly competitive firm.E) All of the above
F) C) and D)

Question 6

Compared to perfect competition, a monopoly will produce ________ output, and charge a ________ price.

Accepted Answer

A)  more; higher
B)  more; lower
C)  less; higher
D)  less; lowerE) A) and C)
F) A) and D)

Question 7

In order for a firm to receive monopoly profits, there must be

Accepted Answer

A)  homogeneous products.
B)  barriers to market entry.
C)  mutual interdependence among firms.
D)  free entry and exit to the market.E) C) and D)
F) A) and B)

Question 8

A monopolist's demand curve is

Accepted Answer

A)  perfectly elastic.
B)  perfectly inelastic.
C)  of unit elasticity throughout.
D)  the industry demand curve.E) A) and C)
F) None of the above

Question 9

The more substitutes there are for a monopolist's product

Accepted Answer

A)  the less elastic is the demand curve.
B)  the more elastic is the demand curve.
C)  the steeper is the demand curve.
D)  the more positively sloped the demand curve becomes.E) B) and C)
F) A) and B)

Question 10

Which of the following is NOT a precondition for price discrimination?

Accepted Answer

A)  The product cannot be resold to another customer.
B)  The price elasticities of demand are different for each group of consumers.
C)  The product is a durable good.
D)  The seller must have some market power.E) C) and D)
F) A) and B)

Question 11

When the number of substitutes increase, the demand curve for a monopolist will

Accepted Answer

A)  not change.
B)  become more elastic.
C)  become more inelastic.
D)  become steeper.E) None of the above
F) A) and B)

Question 12

A tax that is imposed on an imported good is called a

Accepted Answer

A)  tariff.
B)  quota.
C)  government license.
D)  patent.E) A) and B)
F) A) and C)

Question 13

A monopoly sells 10 units of output at $10. If the MR of the 11th unit is $4.50, then the price of the 11th unit is

Accepted Answer

A)  also $10.
B)  $9.50.
C)  greater than $10.
D)  $7.25.E) None of the above
F) All of the above

Question 14

If different markets for a product produced by a monopolist can be separated and if the elasticity of demand differs between the two markets, then the monopolist will

Accepted Answer

A)  be able to make higher profits by using price discrimination.
B)  charge a single price in all markets.
C)  go out of business.
D)  sell the product in only one of the markets with inelastic demand curves.E) C) and D)
F) A) and C)

Question 15

MR. C) P > MC. D) MR = MC." class="answers-bank-image d-inline" rel="preload" >
-Economic inefficiency of a monopoly is indicated by

Accepted Answer

A)  P =  MR. 
C)  P > MC. 
D)  MR = MC." class="answers-bank-image d-inline" rel="preload" > .
B)  P > MR.
C)  P > MC.
D)  MR = MC.E) B) and D)
F) A) and D)

Question 16

A monopolist will not be able to receive a positive economic profit at any price-output combination at which

Accepted Answer

A)  marginal cost is less than average total cost when the monopolist has equated marginal revenue and marginal cost.
B)  the average total cost curve is everywhere above the demand curve.
C)  marginal cost is less than average variable cost when the monopolist has equated marginal revenue and marginal cost.
D)  marginal revenue falls at a faster rate than marginal cost increases.E) A) and B)
F) A) and C)

Question 17

If a firm sells 10 units of output at $100 per unit and 11 units of output when price is reduced to $99, its marginal revenue for the last unit sold is

Accepted Answer

A)  $11.
B)  $99.
C)  $109.
D)  $89.E) A) and D)
F) A) and B)

Question 18

The use of a tariff provides monopoly protection since

Accepted Answer

A)  it allows more imports into the country.
B)  it reduces competition from imports by raising the import price.
C)  it reduces exporters' profits.
D)  it expands tax credits.E) A) and B)
F) A) and C)

Question 19

-Refer to the above table. Given the demand and cost schedules, what is the profit maximizing quantity for this monopolist?

Accepted Answer

A)  14
B)  19
C)  25
D)  30E) A) and D)
F) B) and C)

Question 20

If the price elasticity of demand for U.S. automobiles is higher in Europe than it is in the United States, and transport costs are zero, a price-discriminating monopolist would charge

Accepted Answer

A)  the same price for autos in the United States as in Europe.
B)  a lower price for autos in the United States than in Europe.
C)  a higher price for autos in the United States than in Europe.
D)  a less profitable price for autos in the United States than in Europe.E) All of the above
F) B) and C)

Exam 24: Monopoly

A monopolist's demand curve is

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Which of the following is NOT a precondition for price discrimination?

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-Economic inefficiency of a monopoly is indicated by

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In a perfectly competitive market, if all firms face identical, constant marginal marginal cost curves, then consumer surplus is

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Which of the following would most likely be classified as a natural monopoly?

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-Refer to the above table. Given the demand and cost schedules, what is the profit maximizing quantity for this monopolist?

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In order for a firm to receive monopoly profits, there must be

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If a firm sells 10 units of output at $100 per unit and 11 units of output when price is reduced to $99, its marginal revenue for the last unit sold is

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A simple way of describing the social cost of monopoly is to say that it

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A monopoly sells 10 units of output at $10. If the MR of the 11th unit is $4.50, then the price of the 11th unit is

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The use of a tariff provides monopoly protection since

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If different markets for a product produced by a monopolist can be separated and if the elasticity of demand differs between the two markets, then the monopolist will

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When the number of substitutes increase, the demand curve for a monopolist will

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A monopolist will not be able to receive a positive economic profit at any price-output combination at which

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To be able to engage in profit-maximizing price searching, a monopoly firm must be able to

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The more substitutes there are for a monopolist's product

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A tax that is imposed on an imported good is called a

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For a monopolist, the reason that marginal revenue is less than price is

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If the price elasticity of demand for U.S. automobiles is higher in Europe than it is in the United States, and transport costs are zero, a price-discriminating monopolist would charge

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Compared to perfect competition, a monopoly will produce ________ output, and charge a ________ price.

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Compared to perfect competition, a monopoly will produce output, and charge a price.

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