Question 1

When a monopolist faces a U-shaped average cost curve in the short run,we know that as more and more output is produced,the

Accepted Answer

A)  law of diminishing marginal returns eventually overrules the decrease in average fixed cost. 
B)  decrease in average fixed cost eventually overrules the law of diminishing marginal returns. 
C)  decrease in average fixed cost always overrules the law of diminishing marginal returns. 
D)  law of diminishing marginal returns always overrules the decrease in average fixed cost. 
E)  law of diminishing marginal returns coincides with the decrease in average fixed cost. 
A)  law of diminishing marginal returns eventually overrules the decrease in average fixed cost. 
B)  decrease in average fixed cost eventually overrules the law of diminishing marginal returns. 
C)  decrease in average fixed cost always overrules the law of diminishing marginal returns. 
D)  law of diminishing marginal returns always overrules the decrease in average fixed cost. 
E)  law of diminishing marginal returns coincides with the decrease in average fixed cost.

Question 2

-Refer to the graph above.At the point of profit maximization,the monopolist earns

Accepted Answer

A)  a profit of $38.50. 
B)  a loss of $11.20. 
C)  a profit of $11.20. 
D)  a loss of $38.50. 
E)  a loss of $61.25. 
A)  a profit of $38.50. 
B)  a loss of $11.20. 
C)  a profit of $11.20. 
D)  a loss of $38.50. 
E)  a loss of $61.25.

Question 3

If a firm collects $100 in revenue when it sells five units and $114 when it sells six units,one can infer the firm is

Accepted Answer

A)  a perfect competitor. 
B)  probably a perfect competitor. 
C)  either a perfect competitor or a monopolist. 
D)  a monopolist. 
E)  of an unknown structure;there is insufficient information available. 
A)  a perfect competitor. 
B)  probably a perfect competitor. 
C)  either a perfect competitor or a monopolist. 
D)  a monopolist. 
E)  of an unknown structure;there is insufficient information available.

Question 4

Both the perfectly competitive firm and the monopolist find that

Accepted Answer

A)  price and marginal revenue are the same. 
B)  they can sell all they want to at the market price. 
C)  it is best to expand production until the benefit and the cost of the last unit produced are equal. 
D)  price is less than marginal revenue. 
E)  demand is not perfectly elastic. 
A)  price and marginal revenue are the same. 
B)  they can sell all they want to at the market price. 
C)  it is best to expand production until the benefit and the cost of the last unit produced are equal. 
D)  price is less than marginal revenue. 
E)  demand is not perfectly elastic.

Question 5

Given the total cost function TC = a + bQ,with both a > 0 and b > 0,average cost will

Accepted Answer

A)  be approximately constant over most of the output range. 
B)  fall at first and then rise as output rises. 
C)  fall over the entire range of output. 
D)  rise at first and then fall as output rises. 
E)  rise over the entire range of output. 
A)  be approximately constant over most of the output range. 
B)  fall at first and then rise as output rises. 
C)  fall over the entire range of output. 
D)  rise at first and then fall as output rises. 
E)  rise over the entire range of output.

Question 6

Market power is enjoyed by

Accepted Answer

A)  only large firms like General Motors. 
B)  all firms. 
C)  medium to large firms. 
D)  pure monopolists exclusively. 
E)  any firm that can raise its price without losing all of its sales. 
A)  only large firms like General Motors. 
B)  all firms. 
C)  medium to large firms. 
D)  pure monopolists exclusively. 
E)  any firm that can raise its price without losing all of its sales.

Question 7

One of the difficulties with cost-plus pricing involves

Accepted Answer

A)  establishing the rate of return. 
B)  the administrative costs of deciding which of the firm's costs should be included. 
C)  estimating the firm's marginal cost. 
D)  separating the firm's fixed and variable costs. 
E)  estimating the price elasticity of demand. 
A)  establishing the rate of return. 
B)  the administrative costs of deciding which of the firm's costs should be included. 
C)  estimating the firm's marginal cost. 
D)  separating the firm's fixed and variable costs. 
E)  estimating the price elasticity of demand.

Question 8

If a city owns and operates the local electricity utility where price equals marginal cost,one can infer that

Accepted Answer

A)  some fraction of the tax revenue raised by the city will pay for the losses of the electricity utility. 
B)  service will,necessarily,be poor. 
C)  the utility will generate "profit" for the city. 
D)  service will,necessarily,be good. 
E)  electricity prices will rise more quickly when compared to private ownership. 
A)  some fraction of the tax revenue raised by the city will pay for the losses of the electricity utility. 
B)  service will,necessarily,be poor. 
C)  the utility will generate "profit" for the city. 
D)  service will,necessarily,be good. 
E)  electricity prices will rise more quickly when compared to private ownership.

Question 9

In the absence of a generally accepted and enforced system of fair competition legislation,which of the following is likely to occur?

Accepted Answer

A)  All firms will join forces and form a cartel. 
B)  A cost-efficient firm will form a natural monopoly. 
C)  Consumers will likely enjoy prices that are below the cost of production. 
D)  Gangster capitalism. 
E)  All firms will charge the same price. 
A)  All firms will join forces and form a cartel. 
B)  A cost-efficient firm will form a natural monopoly. 
C)  Consumers will likely enjoy prices that are below the cost of production. 
D)  Gangster capitalism. 
E)  All firms will charge the same price.

Question 10

-Refer to the data above.Assume that firm L loses sales of 75,000 units,with 40,000 units going to firm N and 35,000 units going to firm M.Firm L now has average total cost of

Accepted Answer

A)  $240. 
B)  $184. 
C)  $153. 
D)  $150. 
E)  $143. 
A)  $240. 
B)  $184. 
C)  $153. 
D)  $150. 
E)  $143.

Question 11

-Refer to the diagram above.Assume that this is an essential service and that the regulator sets a price where price equals marginal cost.Then,the most likely outcome is that

Accepted Answer

A)  the monopolist will make an even larger profit than when it was unregulated. 
B)  the government will impose a higher tax on the monopolist. 
C)  the monopolist will make a smaller profit than when it was unregulated. 
D)  consumer surplus will decrease. 
E)  new firms will enter the market. 
A)  the monopolist will make an even larger profit than when it was unregulated. 
B)  the government will impose a higher tax on the monopolist. 
C)  the monopolist will make a smaller profit than when it was unregulated. 
D)  consumer surplus will decrease. 
E)  new firms will enter the market.

Question 12

The significant difference between perfect competitors and imperfect competitors is

Accepted Answer

A)  their goal of maximizing profit. 
B)  the structure of their costs. 
C)  the relationship of marginal cost to total cost. 
D)  the relationship of price to marginal revenue. 
E)  the relationship of marginal revenue to marginal cost. 
A)  their goal of maximizing profit. 
B)  the structure of their costs. 
C)  the relationship of marginal cost to total cost. 
D)  the relationship of price to marginal revenue. 
E)  the relationship of marginal revenue to marginal cost.

Question 13

Which of the following industries does not fit the natural monopoly model?

Accepted Answer

A)  Electricity. 
B)  Cable TV. 
C)  Municipal water. 
D)  Natural gas. 
E)  Housing. 
A)  Electricity. 
B)  Cable TV. 
C)  Municipal water. 
D)  Natural gas. 
E)  Housing.

Question 14

-Given the total cost function TC = 1,000 + 2Q,when output is 1,000 units,average total cost __________ and when output is 10,000 units,average total cost __________.

Accepted Answer

A)  is $3;is $2.10 
B)  is $3,000;is $21,000 
C)  is $1.002;is 0.0102 cents 
D)  is $1,000;is $10,000 
E)  cannot be calculated;cannot be calculated 
A)  is $3;is $2.10 
B)  is $3,000;is $21,000 
C)  is $1.002;is 0.0102 cents 
D)  is $1,000;is $10,000 
E)  cannot be calculated;cannot be calculated

Question 15

Constant returns to scale occur when a doubling of all inputs

Accepted Answer

A)  doubles the price of outputs. 
B)  more than doubles output. 
C)  less than doubles the price of the inputs. 
D)  exactly doubles output. 
E)  less than doubles output. 
A)  doubles the price of outputs. 
B)  more than doubles output. 
C)  less than doubles the price of the inputs. 
D)  exactly doubles output. 
E)  less than doubles output.

Question 16

The correct sequence of market structures from most to least competitive is

Accepted Answer

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

When a monopolist faces a U-shaped average cost curve in the short run,we know that as more and more output is produced,the

-Refer to the graph above.At the point of profit maximization,the monopolist earns

If a firm collects $100 in revenue when it sells five units and $114 when it sells six units,one can infer the firm is

Both the perfectly competitive firm and the monopolist find that

Given the total cost function TC = a + bQ,with both a > 0 and b > 0,average cost will

Market power is enjoyed by

One of the difficulties with cost-plus pricing involves

If a city owns and operates the local electricity utility where price equals marginal cost,one can infer that

In the absence of a generally accepted and enforced system of fair competition legislation,which of the following is likely to occur?

-Refer to the data above.Assume that firm L loses sales of 75,000 units,with 40,000 units going to firm N and 35,000 units going to firm M.Firm L now has average total cost of

-Refer to the diagram above.Assume that this is an essential service and that the regulator sets a price where price equals marginal cost.Then,the most likely outcome is that

The significant difference between perfect competitors and imperfect competitors is

Which of the following industries does not fit the natural monopoly model?

-Given the total cost function TC = 1,000 + 2Q,when output is 1,000 units,average total cost and when output is 10,000 units,average total cost .

Constant returns to scale occur when a doubling of all inputs

The correct sequence of market structures from most to least competitive is

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

When a monopolist faces a U-shaped average cost curve in the short run,we know that as more and more output is produced,the

-Refer to the graph above.At the point of profit maximization,the monopolist earns

If a firm collects $100 in revenue when it sells five units and $114 when it sells six units,one can infer the firm is

Both the perfectly competitive firm and the monopolist find that

Given the total cost function TC = a + bQ,with both a > 0 and b > 0,average cost will

Market power is enjoyed by

One of the difficulties with cost-plus pricing involves

If a city owns and operates the local electricity utility where price equals marginal cost,one can infer that

In the absence of a generally accepted and enforced system of fair competition legislation,which of the following is likely to occur?

-Refer to the data above.Assume that firm L loses sales of 75,000 units,with 40,000 units going to firm N and 35,000 units going to firm M.Firm L now has average total cost of

-Refer to the diagram above.Assume that this is an essential service and that the regulator sets a price where price equals marginal cost.Then,the most likely outcome is that

The significant difference between perfect competitors and imperfect competitors is

Which of the following industries does not fit the natural monopoly model?

-Given the total cost function TC = 1,000 + 2Q,when output is 1,000 units,average total cost __________ and when output is 10,000 units,average total cost __________.

Constant returns to scale occur when a doubling of all inputs

The correct sequence of market structures from most to least competitive is

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

-Given the total cost function TC = 1,000 + 2Q,when output is 1,000 units,average total cost and when output is 10,000 units,average total cost .