Question 1

Which of the following is TRUE if a monopolist faces a constant marginal cost? The monopolist faces a

Accepted Answer

A)  constant total cost. 
B)  constant average variable cost. 
C)  perfectly elastic demand curve. 
D)  vertical demand curve. 
E)  vertical supply curve. 
A)  constant total cost. 
B)  constant average variable cost. 
C)  perfectly elastic demand curve. 
D)  vertical demand curve. 
E)  vertical supply curve.

Question 2

-Refer to the table above.The marginal revenue of selling the sixth unit is

Accepted Answer

A)  $30. 
B)  $6. 
C)  $5. 
D)  $2. 
E)  $0. 
A)  $30. 
B)  $6. 
C)  $5. 
D)  $2. 
E)  $0.

Question 3

What happens to producer and consumer surplus when a monopolist increases output above the profit-maximizing output level?

Accepted Answer

A)  Both producer and consumer surplus increase. 
B)  Producer surplus falls but consumer surplus rises. 
C)  Both producer and consumer surplus decrease. 
D)  Producer surplus rises but consumer surplus falls. 
E)  Both producer and consumer surplus remain unchanged. 
A)  Both producer and consumer surplus increase. 
B)  Producer surplus falls but consumer surplus rises. 
C)  Both producer and consumer surplus decrease. 
D)  Producer surplus rises but consumer surplus falls. 
E)  Both producer and consumer surplus remain unchanged.

Question 4

-Refer to the table above.If these data refer to a profit-maximizing monopolist,the firm will produce where __________,which in this example means that output will be __________ units,and it will be sold at a price of ________ per unit.

Accepted Answer

A)  P = MC;3;$8 
B)  MR = MC;5;$6 
C)  P = MR;4;$7 
D)  MR = MC;3;$8 
E)  P = MC;5;$6 
A)  P = MC;3;$8 
B)  MR = MC;5;$6 
C)  P = MR;4;$7 
D)  MR = MC;3;$8 
E)  P = MC;5;$6

Question 5

The elasticity of demand for an imperfectly competitive firm is

Accepted Answer

A)  infinity. 
B)  greater than zero and less than infinity. 
C)  zero. 
D)  greater than zero and less than one. 
E)  greater than one. 
A)  infinity. 
B)  greater than zero and less than infinity. 
C)  zero. 
D)  greater than zero and less than one. 
E)  greater than one.

Question 6

-Refer to the table above.The deadweight loss due to monopoly in the market stems from the fact that

Accepted Answer

A)  this monopolist will earn a large profit. 
B)  the value of unit four and unit five exceed or equal the cost of producing them. 
C)  the cost of producing units four and five exceed their value. 
D)  the monopolist's price is "too low." 
E)  the monopolist's output is "too large." 
A)  this monopolist will earn a large profit. 
B)  the value of unit four and unit five exceed or equal the cost of producing them. 
C)  the cost of producing units four and five exceed their value. 
D)  the monopolist's price is "too low." 
E)  the monopolist's output is "too large."

Question 7

Exclusive contracting involves provincial or municipal governments

Accepted Answer

A)  directly providing a good or service. 
B)  regulating the price a natural monopolist can charge. 
C)  acquiring bids from private firms and awarding the contract to the lowest bidder. 
D)  requiring that agencies purchase goods from minority-owned businesses. 
E)  getting bids from one firm exclusively. 
A)  directly providing a good or service. 
B)  regulating the price a natural monopolist can charge. 
C)  acquiring bids from private firms and awarding the contract to the lowest bidder. 
D)  requiring that agencies purchase goods from minority-owned businesses. 
E)  getting bids from one firm exclusively.

Question 8

Which of the following statements about perfect price discrimination is FALSE?

Accepted Answer

A)  Consumer surplus is zero. 
B)  Total economic surplus is maximized. 
C)  Some consumers are paying less than their reservation price. 
D)  The monopolist will capture all consumer surplus. 
E)  The monopolist will always be better off. 
A)  Consumer surplus is zero. 
B)  Total economic surplus is maximized. 
C)  Some consumers are paying less than their reservation price. 
D)  The monopolist will capture all consumer surplus. 
E)  The monopolist will always be better off.

Question 9

To sell an extra unit of output,a perfect competitor __________,while an imperfect competitor __________.

Accepted Answer

A)  does not alter price;must lower price 
B)  must hope the market price falls;must lower price 
C)  does not alter price;does not alter price either 
D)  must lower price;must lower price 
E)  must lower price;must offer discounts 
A)  does not alter price;must lower price 
B)  must hope the market price falls;must lower price 
C)  does not alter price;does not alter price either 
D)  must lower price;must lower price 
E)  must lower price;must offer discounts

Question 10

In this diagram,D* represents the demand curve facing a monopolist and d** represents the demand curve facing a perfectly competitive firm.
-Refer to the diagram above.Assume that the current price is P1 and current production is Q1.Total revenue to the perfect competitor is equal to the area of __________ and the area of __________ for the monopolist.

Accepted Answer

A)  (A + 
B) ; (A + 
B)  
B)  A;B 
C)  (A + 
B) ; (B + 
E)  
D)  (A + B + 
C) ; (A + B + C + 
E)  
E)  (A - 
B) ; (C + D - 
E)  
A)  (A + 
B) ; (A + 
B)  
B)  A;B 
C)  (A + 
B) ; (B + 
E)  
D)  (A + B + 
C) ; (A + B + C + 
E)  
E)  (A - 
B) ; (C + D - 
E)

Question 11

A city government that produces electricity for the local residents and businesses is an example of

Accepted Answer

A)  government regulation of a natural monopoly. 
B)  government using exclusive contracting agreements. 
C)  the results of the enforcement of competition laws. 
D)  the ever growing presence of government in the economy. 
E)  government ownership of a natural monopoly. 
A)  government regulation of a natural monopoly. 
B)  government using exclusive contracting agreements. 
C)  the results of the enforcement of competition laws. 
D)  the ever growing presence of government in the economy. 
E)  government ownership of a natural monopoly.

Question 12

An industry that features a few firms that produce close substitutes is called

Accepted Answer

A)  pure monopoly. 
B)  imperfect monopoly. 
C)  monopolistic competition. 
D)  oligopoly. 
E)  competitive monopoly. 
A)  pure monopoly. 
B)  imperfect monopoly. 
C)  monopolistic competition. 
D)  oligopoly. 
E)  competitive monopoly.

Question 13

Suppose that a monopolist is considering two different pricing schemes: offering the good at $100 per unit with a $10 rebate coupon,or just charging a flat $90 per unit.His economic consultant would advise him to

Accepted Answer

A)  charge the $90 price. 
B)  charge the $100 price and "misplace" most of the rebate coupons. 
C)  charge the $100 price because less than 100% of the buyers will mail in the rebate. 
D)  do either;the impact will be the same. 
E)  charge the $90 price because most consumers ignore rebate offers. 
A)  charge the $90 price. 
B)  charge the $100 price and "misplace" most of the rebate coupons. 
C)  charge the $100 price because less than 100% of the buyers will mail in the rebate. 
D)  do either;the impact will be the same. 
E)  charge the $90 price because most consumers ignore rebate offers.

Question 14

A monopolist facing a downward-sloping demand curve finds that his marginal cost is constant at $10 and his marginal revenue is zero.This monopolist should

Accepted Answer

A)  reduce production. 
B)  increase production. 
C)  leave production unchanged. 
D)  reduce the production cost further. 
E)  decrease price. 
A)  reduce production. 
B)  increase production. 
C)  leave production unchanged. 
D)  reduce the production cost further. 
E)  decrease price.

Question 15

Production and distribution of electricity would be a __________ candidate for exclusive contracting because __________.

Accepted Answer

A)  poor;it is a complex task with large fixed investments 
B)  good;it is a simple task 
C)  poor;production costs are very uncertain 
D)  good;transferring the fixed investments from one firm to another is easily accomplished 
E)  poor;demand for electricity is difficult to estimate 
A)  poor;it is a complex task with large fixed investments 
B)  good;it is a simple task 
C)  poor;production costs are very uncertain 
D)  good;transferring the fixed investments from one firm to another is easily accomplished 
E)  poor;demand for electricity is difficult to estimate

Question 16

Predatory pricing refers to selling

Accepted Answer

A)  above cost in order to make a profit. 
B)  below cost in order to take a loss. 
C)  below cost in order to drive competitors out of business. 
D)  above cost in order to ensure product quality. 
E)  above cost in order to drive competitors out of business 
A)  above cost in order to make a profit. 
B)  below cost in order to take a loss. 
C)  below cost in order to drive competitors out of business. 
D)  above cost in order to ensure product quality. 
E)  above cost in order to drive competitors out of business

Question 17

When a firm with constant returns to scale uses 30% more of all inputs and input prices remain unchanged,then

Accepted Answer

A)  total cost rises by less than 30%. 
B)  average cost falls by 30%. 
C)  total cost rises by more than 30%. 
D)  average cost remains unchanged. 
E)  average cost rises by 30%. 
A)  total cost rises by less than 30%. 
B)  average cost falls by 30%. 
C)  total cost rises by more than 30%. 
D)  average cost remains unchanged. 
E)  average cost rises by 30%.

Question 18

-Refer to the graph above.A profit-maximizing monopolist would earn a profit of ___________ per unit.

Accepted Answer

A)  $1 
B)  $2 
C)  $3 
D)  $4 
E)  $5 
A)  $1 
B)  $2 
C)  $3 
D)  $4 
E)  $5

Question 19

-Refer to the graph above.A profit-maximizing monopolist would charge a price of

Accepted Answer

A)  $3 per unit. 
B)  $4 per unit. 
C)  $5 per unit. 
D)  $6 per unit. 
E)  $7 per unit. 
A)  $3 per unit. 
B)  $4 per unit. 
C)  $5 per unit. 
D)  $6 per unit. 
E)  $7 per unit.

Question 20

When marginal revenue is equal to zero,

Accepted Answer

A)  profit is maximized. 
B)  total cost is minimized. 
C)  elasticity of demand is zero. 
D)  total revenue is maximized. 
E)  total revenue is minimized. 
A)  profit is maximized. 
B)  total cost is minimized. 
C)  elasticity of demand is zero. 
D)  total revenue is maximized. 
E)  total revenue is minimized.

Which of the following is TRUE if a monopolist faces a constant marginal cost? The monopolist faces a

-Refer to the table above.The marginal revenue of selling the sixth unit is

What happens to producer and consumer surplus when a monopolist increases output above the profit-maximizing output level?

-Refer to the table above.If these data refer to a profit-maximizing monopolist,the firm will produce where ,which in this example means that output will be units,and it will be sold at a price of per unit.

The elasticity of demand for an imperfectly competitive firm is

-Refer to the table above.The deadweight loss due to monopoly in the market stems from the fact that

Exclusive contracting involves provincial or municipal governments

Which of the following statements about perfect price discrimination is FALSE?

To sell an extra unit of output,a perfect competitor ,while an imperfect competitor .

A city government that produces electricity for the local residents and businesses is an example of

An industry that features a few firms that produce close substitutes is called

Suppose that a monopolist is considering two different pricing schemes: offering the good at $100 per unit with a $10 rebate coupon,or just charging a flat $90 per unit.His economic consultant would advise him to

A monopolist facing a downward-sloping demand curve finds that his marginal cost is constant at $10 and his marginal revenue is zero.This monopolist should

Production and distribution of electricity would be a candidate for exclusive contracting because .

Predatory pricing refers to selling

When a firm with constant returns to scale uses 30% more of all inputs and input prices remain unchanged,then

-Refer to the graph above.A profit-maximizing monopolist would earn a profit of ___________ per unit.

-Refer to the graph above.A profit-maximizing monopolist would charge a price of

When marginal revenue is equal to zero,

Thinking Like an Economist

Comparative Advantage: the Basis for Exchange

Supply and Demand: an Introduction

Demand: the Benefit Side of the Market

Perfectly Competitive Supply: the Cost Side of the Market

Efficiency and Exchange

The Quest for Profit and the Invisible Hand

Thinking Strategically

Externalities and Property Rights

The Economics of Information

Labour Markets

The Economics of Public Policy

Public Goods and Taxation

Income Distribution

Filters

Exam 8: Monopoly and Other Forms of Imperfect Competition

Which of the following is TRUE if a monopolist faces a constant marginal cost? The monopolist faces a

-Refer to the table above.The marginal revenue of selling the sixth unit is

What happens to producer and consumer surplus when a monopolist increases output above the profit-maximizing output level?

-Refer to the table above.If these data refer to a profit-maximizing monopolist,the firm will produce where __________,which in this example means that output will be __________ units,and it will be sold at a price of ________ per unit.

The elasticity of demand for an imperfectly competitive firm is

-Refer to the table above.The deadweight loss due to monopoly in the market stems from the fact that

Exclusive contracting involves provincial or municipal governments

Which of the following statements about perfect price discrimination is FALSE?

To sell an extra unit of output,a perfect competitor __________,while an imperfect competitor __________.

A city government that produces electricity for the local residents and businesses is an example of

An industry that features a few firms that produce close substitutes is called

Suppose that a monopolist is considering two different pricing schemes: offering the good at $100 per unit with a $10 rebate coupon,or just charging a flat $90 per unit.His economic consultant would advise him to

A monopolist facing a downward-sloping demand curve finds that his marginal cost is constant at $10 and his marginal revenue is zero.This monopolist should

Production and distribution of electricity would be a __________ candidate for exclusive contracting because __________.

Predatory pricing refers to selling

When a firm with constant returns to scale uses 30% more of all inputs and input prices remain unchanged,then

-Refer to the graph above.A profit-maximizing monopolist would earn a profit of ___________ per unit.

-Refer to the graph above.A profit-maximizing monopolist would charge a price of

When marginal revenue is equal to zero,

Thinking Like an Economist

Comparative Advantage: the Basis for Exchange

Supply and Demand: an Introduction

Demand: the Benefit Side of the Market

Perfectly Competitive Supply: the Cost Side of the Market

Efficiency and Exchange

The Quest for Profit and the Invisible Hand

Thinking Strategically

Externalities and Property Rights

The Economics of Information

Labour Markets

The Economics of Public Policy

Public Goods and Taxation

Income Distribution

Filters

-Refer to the table above.If these data refer to a profit-maximizing monopolist,the firm will produce where ,which in this example means that output will be units,and it will be sold at a price of per unit.

To sell an extra unit of output,a perfect competitor ,while an imperfect competitor .

Production and distribution of electricity would be a candidate for exclusive contracting because .