Question 1

Refer to the accompanying figure to answer the following questions.  
-When the price changes from $50 to $30,the price effect leads to a loss of ________ in revenue.

Accepted Answer

A)  $20 
B)  $15 
C)  $900 
D)  $600 
E)  $450 
A)  $20 
B)  $15 
C)  $900 
D)  $600 
E)  $450

Question 2

The profit-maximizing rule for a monopolist is

Accepted Answer

A)  marginal revenue = marginal cost. 
B)  price =marginal cost. 
C)  price = marginal revenue. 
D)  average total cost = marginal revenue. 
E)  average total cost = marginal cost. 
A)  marginal revenue = marginal cost. 
B)  price =marginal cost. 
C)  price = marginal revenue. 
D)  average total cost = marginal revenue. 
E)  average total cost = marginal cost.

Question 3

Why do governments issue patents?

Accepted Answer

A)  Patents foster economies of scale. 
B)  Inventors have a moral right to control their inventions. 
C)  Patents ensure that socially beneficial goods are affordable. 
D)  Firms benefit from the publicity associated with patents. 
E)  The prospect of large profits is an incentive to innovation. 
A)  Patents foster economies of scale. 
B)  Inventors have a moral right to control their inventions. 
C)  Patents ensure that socially beneficial goods are affordable. 
D)  Firms benefit from the publicity associated with patents. 
E)  The prospect of large profits is an incentive to innovation.

Question 4

Refer to the accompanying figure to answer the following questions.  
-The total cost when a firm is profit maximizing is

Accepted Answer

A)  $70,000. 
B)  $50,000. 
C)  $67,500. 
D)  $60,000. 
E)  $25,000. 
A)  $70,000. 
B)  $50,000. 
C)  $67,500. 
D)  $60,000. 
E)  $25,000.

Question 5

Rent seeking

Accepted Answer

A)  is desired by consumers. 
B)  is not a type of competition. 
C)  is a type of competition that leads to a market price and output. 
D)  is a type of competition that leads to an undesirable outcome. 
E)  occurs when resources are used to deregulate a market through the political process. 
A)  is desired by consumers. 
B)  is not a type of competition. 
C)  is a type of competition that leads to a market price and output. 
D)  is a type of competition that leads to an undesirable outcome. 
E)  occurs when resources are used to deregulate a market through the political process.

Question 6

Compare and contrast natural barriers to entry and government-created barriers to entry.

Accepted Answer

Natural barriers and government-created

Question 7

Patents and copyright law

Accepted Answer

A)  are natural barriers. 
B)  create more competition. 
C)  mean more varieties of goods and services at different price levels. 
D)  assure inventors that no one else will sell their ideas. 
E)  always result in zero economic profits. 
A)  are natural barriers. 
B)  create more competition. 
C)  mean more varieties of goods and services at different price levels. 
D)  assure inventors that no one else will sell their ideas. 
E)  always result in zero economic profits.

Question 8

Refer to the accompanying figure to answer the following questions.  
-The profit when a firm is profit maximizing is

Accepted Answer

A)  $70,000. 
B)  $50,000. 
C)  $20,500. 
D)  $20,000. 
E)  $25,000. 
A)  $70,000. 
B)  $50,000. 
C)  $20,500. 
D)  $20,000. 
E)  $25,000.

Question 9

When a cable TV provider offers,say,ESPN and the Weather Channel together but not separately,the reason is that

Accepted Answer

A)  there is no demand for either one without the other. 
B)  the provider is betting that customers will buy both rather than neither. 
C)  government regulations limit the range of services a monopolist can offer. 
D)  offering the two separately would be a market inefficiency. 
E)  it is technologically much easier to keep them together. 
A)  there is no demand for either one without the other. 
B)  the provider is betting that customers will buy both rather than neither. 
C)  government regulations limit the range of services a monopolist can offer. 
D)  offering the two separately would be a market inefficiency. 
E)  it is technologically much easier to keep them together.

Question 10

Refer to the accompanying figure to answer the following questions.  
-The deadweight loss associated with this profit-maximizing monopoly is equal to

Accepted Answer

A)  $900. 
B)  $600. 
C)  $300. 
D)  $100. 
E)  $450. 
A)  $900. 
B)  $600. 
C)  $300. 
D)  $100. 
E)  $450.

Question 11

Because the demand curve for a monopolist is downward sloping,

Accepted Answer

A)  there is no limit on the monopolist's ability to make a profit. 
B)  the monopolist can sell its product at any price it wants. 
C)  the monopolist can sell as many units of its product as it wants. 
D)  the monopolist is a price taker. 
E)  the monopolist is a price maker. 
A)  there is no limit on the monopolist's ability to make a profit. 
B)  the monopolist can sell its product at any price it wants. 
C)  the monopolist can sell as many units of its product as it wants. 
D)  the monopolist is a price taker. 
E)  the monopolist is a price maker.

Question 12

When marginal revenue intersects marginal cost on a graph,

Accepted Answer

A)  profits are maximized for a monopolist but not for a competitive firm. 
B)  profits are maximized for a competitive firm but not for a monopolist. 
C)  a monopolist prices the good at that point. 
D)  a monopolist always makes an economic profit. 
E)  a monopolist must go up to the demand curve to find the price. 
A)  profits are maximized for a monopolist but not for a competitive firm. 
B)  profits are maximized for a competitive firm but not for a monopolist. 
C)  a monopolist prices the good at that point. 
D)  a monopolist always makes an economic profit. 
E)  a monopolist must go up to the demand curve to find the price.

Question 13

Explain a situation in which,when holding costs constant,a monopolist that was earning economic profits in the past can later incur an economic loss.

Accepted Answer

A lot of people think that just because

Question 14

We cannot purchase a cable subscription for single channels like the Food Network or Cartoon Network because cable companies

Accepted Answer

A)  act like perfectly competitive firms. 
B)  are not interested in maximizing their profits. 
C)  have no market power to sell individual channels. 
D)  act like monopolies. 
E)  are pressured by the government to provide channel packages. 
A)  act like perfectly competitive firms. 
B)  are not interested in maximizing their profits. 
C)  have no market power to sell individual channels. 
D)  act like monopolies. 
E)  are pressured by the government to provide channel packages.

Question 15

Beer prices at major league baseball stadiums are usually much higher than prices at a bar or restaurant.This is mainly because

Accepted Answer

A)  it costs the owners of the baseball teams more money to buy the beer from distributors. 
B)  demand is much higher at a baseball game than at a bar. 
C)  baseball team owners have market power and can charge a higher price when they are the only sellers of the beer. 
D)  the government forces the owners of baseball teams to charge a high price. 
E)  the owners' baseball teams are not profit maximizing. 
A)  it costs the owners of the baseball teams more money to buy the beer from distributors. 
B)  demand is much higher at a baseball game than at a bar. 
C)  baseball team owners have market power and can charge a higher price when they are the only sellers of the beer. 
D)  the government forces the owners of baseball teams to charge a high price. 
E)  the owners' baseball teams are not profit maximizing.

Question 16

Which pricing rule generates the greatest welfare for society?

Accepted Answer

A)  marginal cost 
B)  average cost 
C)  total cost 
D)  fixed cost 
E)  variable cost 
A)  marginal cost 
B)  average cost 
C)  total cost 
D)  fixed cost 
E)  variable cost

Question 17

When marginal revenue is negative,the

Accepted Answer

A)  lost revenues associated with the price effect outweigh the revenue gains created by the output effect. 
B)  lost revenues associated with the price effect are outweighed by the revenue gains created by the output effect. 
C)  output effect is negative. 
D)  firm is maximizing revenues. 
E)  firm cannot be maximizing profits. 
A)  lost revenues associated with the price effect outweigh the revenue gains created by the output effect. 
B)  lost revenues associated with the price effect are outweighed by the revenue gains created by the output effect. 
C)  output effect is negative. 
D)  firm is maximizing revenues. 
E)  firm cannot be maximizing profits.

Question 18

Which statement about rent seeking is INCORRECT?

Accepted Answer

A)  It may not involve rent in the sense of payment for the use of property. 
B)  It is a form of beneficial competition. 
C)  It aims at securing monopoly rights. 
D)  It is motivated by a desire for increased profits. 
E)  It is often associated with lobbying of policymakers. 
A)  It may not involve rent in the sense of payment for the use of property. 
B)  It is a form of beneficial competition. 
C)  It aims at securing monopoly rights. 
D)  It is motivated by a desire for increased profits. 
E)  It is often associated with lobbying of policymakers.

Question 19

Marie's Car Dealership is the only dealership in Victorville,California.The owner,Marie,experiences large economies of scale.Because she is the only seller of cars in the town,

Accepted Answer

A)  Marie has market power. 
B)  Marie has no market power and must price at marginal cost. 
C)  Marie can charge any price she wants and will still sell the number of cars that maximize her profits. 
D)  consumer surplus is maximized in the car market. 
E)  total economic surplus is maximized in the car market. 
A)  Marie has market power. 
B)  Marie has no market power and must price at marginal cost. 
C)  Marie can charge any price she wants and will still sell the number of cars that maximize her profits. 
D)  consumer surplus is maximized in the car market. 
E)  total economic surplus is maximized in the car market.

Question 20

One argument against patent and copyright laws is that they

Accepted Answer

A)  provide incentives to invest in research and development. 
B)  protect intellectual property. 
C)  hinder creativity. 
D)  increase competition. 
E)  limit exposure that can benefit companies and individuals. 
A)  provide incentives to invest in research and development. 
B)  protect intellectual property. 
C)  hinder creativity. 
D)  increase competition. 
E)  limit exposure that can benefit companies and individuals.

Exam 10: Understanding Monopoly

Refer to the accompanying figure to answer the following questions. -When the price changes from $50 to $30,the price effect leads to a loss of ________ in revenue.

The profit-maximizing rule for a monopolist is

Why do governments issue patents?

Refer to the accompanying figure to answer the following questions. -The total cost when a firm is profit maximizing is

Rent seeking

Compare and contrast natural barriers to entry and government-created barriers to entry.

Patents and copyright law

Refer to the accompanying figure to answer the following questions. -The profit when a firm is profit maximizing is

When a cable TV provider offers,say,ESPN and the Weather Channel together but not separately,the reason is that

Refer to the accompanying figure to answer the following questions. -The deadweight loss associated with this profit-maximizing monopoly is equal to

Because the demand curve for a monopolist is downward sloping,

When marginal revenue intersects marginal cost on a graph,

Explain a situation in which,when holding costs constant,a monopolist that was earning economic profits in the past can later incur an economic loss.

We cannot purchase a cable subscription for single channels like the Food Network or Cartoon Network because cable companies

Beer prices at major league baseball stadiums are usually much higher than prices at a bar or restaurant.This is mainly because

Which pricing rule generates the greatest welfare for society?

When marginal revenue is negative,the

Which statement about rent seeking is INCORRECT?

Marie's Car Dealership is the only dealership in Victorville,California.The owner,Marie,experiences large economies of scale.Because she is the only seller of cars in the town,

One argument against patent and copyright laws is that they

Five Foundations of Economics

Model Building and Gains From Trade

The Market at Work: Supply and Demand

Elasticity

Market Outcomes and Tax Incidence

Price Controls

Market Inefficiencies: Externalities and Public Goods

Business Costs and Production

Firms in a Competitive Market

Price Discrimination

Monopolistic Competition and Advertising

Oligopoly and Strategic Behavior

The Demand and Supply of Resources

Income,inequality,and Poverty

Consumer Choice

Behavioral Economics and Risk Taking

Health Insurance and Health Care

Introduction to Macroeconomics and Gross Domestic Product

Unemployment

The Price Level and Inflation

Savings,interest Rates,and the Market for Loanable Funds

Financial Markets and Securities

Economic Growth and the Wealth of Nations

Growth Theory

The Aggregate Demandaggregate Supply Model

The Great Recession, the Great Depression, and Great Macroeconomic Debates

Federal Budgets: the Tools of Fiscal Policy

Fiscal Policy

Money and the Federal Reserve

Monetary Policy

International Trade

International Finance

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