Question 1

Monopoly power occurs when a shift in market demand does not affect a monopoly's profits.

Accepted Answer

A) True 
 B)False  False

Question 2

Monopoly and competition both tend to result in some deadweight loss.

Accepted Answer

A) True 
 B)False  False

Question 3

The deadweight loss of a monopoly is the amount of benefits transferred from consumers to the monopoly.

Accepted Answer

A) True 
 B)False  False

Question 4

On a graph of monopoly, the profit-maximizing output level is determined by noting where the ____ and ____ curves cross.

Accepted Answer

A) marginal revenue; demand 
B) marginal cost; demand 
C) marginal cost; average total cost 
D) marginal revenue; marginal cost 
E) average total cost; demand 
A) marginal revenue; demand 
B) marginal cost; demand 
C) marginal cost; average total cost 
D) marginal revenue; marginal cost 
E) average total cost; demand

Question 5

Patents and copyrights are barriers to entry created by

Accepted Answer

A) consumer associations. 
B) contractual agreement. 
C) industry associations. 
D) government. 
E) the nature of a market. 
A) consumer associations. 
B) contractual agreement. 
C) industry associations. 
D) government. 
E) the nature of a market.

Question 6

Barriers to entry do not exist for a monopoly.

Accepted Answer

A) True 
 B)False

Question 7

A monopoly will expand output until total revenue is maximized.

Accepted Answer

A) True 
 B)False

Question 8

A profit-maximizing monopoly might choose to produce anywhere along a straight-line market demand curve.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is true of a contestable market?

Accepted Answer

A) Competitors act like monopolists. 
B) Competitors act like consumers. 
C) Monopolists act like competitors. 
D) Monopolists act like consumers. 
E) Firms are controlled by the government. 
A) Competitors act like monopolists. 
B) Competitors act like consumers. 
C) Monopolists act like competitors. 
D) Monopolists act like consumers. 
E) Firms are controlled by the government.

Question 10

Which of the following is not a difference between a monopoly and a competitive firm?

Accepted Answer

A) An industry that is monopolized will produce less than the same industry that is competitive. 
B) Monopolies always earn economic profits, whereas competitive firms never do. 
C) For a monopoly, price is greater than marginal revenue, whereas price and marginal revenue are the same for a competitive firm. 
D) There is a deadweight loss associated with a monopoly, whereas a competitive industry suffers no deadweight loss. 
E) A competitive firm produces at minimum average total cost in a long-run equilibrium, whereas this is not necessarily the case for a monopoly. 
A) An industry that is monopolized will produce less than the same industry that is competitive. 
B) Monopolies always earn economic profits, whereas competitive firms never do. 
C) For a monopoly, price is greater than marginal revenue, whereas price and marginal revenue are the same for a competitive firm. 
D) There is a deadweight loss associated with a monopoly, whereas a competitive industry suffers no deadweight loss. 
E) A competitive firm produces at minimum average total cost in a long-run equilibrium, whereas this is not necessarily the case for a monopoly.

Question 11

If output price is $4 and marginal cost is $1, calculate the price elasticity of demand according to the rule of thumb given in the text.

Accepted Answer

1.33 E_d = 1/price-c

Question 12

A monopoly's demand curve most likely

Accepted Answer

A) is less elastic than a competitive firm's demand curve. 
B) does not exist. 
C) has the same elasticity as a competitive firm's demand curve. 
D) is more elastic than a competitive firm's demand curve. 
E) could be more or less elastic than a competitive firm's demand curve, depending on the level of output. 
A) is less elastic than a competitive firm's demand curve. 
B) does not exist. 
C) has the same elasticity as a competitive firm's demand curve. 
D) is more elastic than a competitive firm's demand curve. 
E) could be more or less elastic than a competitive firm's demand curve, depending on the level of output.

Question 13

When price equals marginal cost,

Accepted Answer

A) a monopoly should raise its price to increase profits. 
B) a monopoly's profits are maximized. 
C) a competitive firm should decrease output to increase profits. 
D) it means that profits are maximized for both competitive firms and monopolies. 
E) a competitive firm should raise its price to increase profits. 
A) a monopoly should raise its price to increase profits. 
B) a monopoly's profits are maximized. 
C) a competitive firm should decrease output to increase profits. 
D) it means that profits are maximized for both competitive firms and monopolies. 
E) a competitive firm should raise its price to increase profits.

Question 14

The monopolist is the sole seller of a product for which there are no close substitutes.

Accepted Answer

A) True 
 B)False

Question 15

What are some reasons for a monopoly to see both its market power and profits reduce?

Accepted Answer

A monopoly might see its profits reduced

Question 16

Government licensing policies can eliminate monopolies.

Accepted Answer

A) True 
 B)False

Question 17

If a firm is producing at a point at which marginal revenues are greater than marginal costs, it should decrease its level of production.

Accepted Answer

A) True 
 B)False

Question 18

The main difference between a monopoly and a competitive firm is that

Accepted Answer

A) they have differently-shaped cost curves. 
B) a monopoly can change its output, whereas a competitive firm cannot. 
C) with a monopoly there is a market demand, whereas with a competitive firm there is only firm demand. 
D) a monopoly is not concerned with market price. 
E) a monopoly can affect market price, whereas a competitive firm cannot. 
A) they have differently-shaped cost curves. 
B) a monopoly can change its output, whereas a competitive firm cannot. 
C) with a monopoly there is a market demand, whereas with a competitive firm there is only firm demand. 
D) a monopoly is not concerned with market price. 
E) a monopoly can affect market price, whereas a competitive firm cannot.

Question 19

Which of the following describes one of the differences in profit-maximizing behavior between a monopoly and a competitive firm?

Accepted Answer

A) A monopoly produces more and charges the same price as a competitive firm. 
B) A monopoly produces less and charges the same price as a competitive firm. 
C) A monopoly produces more and charges a higher price than a competitive firm. 
D) A monopoly produces less and charges a lower price than a competitive firm. 
E) A monopoly produces less and charges a higher price than a competitive firm. 
A) A monopoly produces more and charges the same price as a competitive firm. 
B) A monopoly produces less and charges the same price as a competitive firm. 
C) A monopoly produces more and charges a higher price than a competitive firm. 
D) A monopoly produces less and charges a lower price than a competitive firm. 
E) A monopoly produces less and charges a higher price than a competitive firm.

Question 20

For a monopoly, average revenue is always less than price.

Accepted Answer

A) True 
 B)False

Exam 10: Monopoly

Monopoly power occurs when a shift in market demand does not affect a monopoly's profits.

Monopoly and competition both tend to result in some deadweight loss.

The deadweight loss of a monopoly is the amount of benefits transferred from consumers to the monopoly.

On a graph of monopoly, the profit-maximizing output level is determined by noting where the ____ and ____ curves cross.

Patents and copyrights are barriers to entry created by

Barriers to entry do not exist for a monopoly.

A monopoly will expand output until total revenue is maximized.

A profit-maximizing monopoly might choose to produce anywhere along a straight-line market demand curve.

Which of the following is true of a contestable market?

Which of the following is not a difference between a monopoly and a competitive firm?

If output price is $4 and marginal cost is $1, calculate the price elasticity of demand according to the rule of thumb given in the text.

A monopoly's demand curve most likely

When price equals marginal cost,

The monopolist is the sole seller of a product for which there are no close substitutes.

What are some reasons for a monopoly to see both its market power and profits reduce?

Government licensing policies can eliminate monopolies.

If a firm is producing at a point at which marginal revenues are greater than marginal costs, it should decrease its level of production.

The main difference between a monopoly and a competitive firm is that

Which of the following describes one of the differences in profit-maximizing behavior between a monopoly and a competitive firm?

For a monopoly, average revenue is always less than price.

The Central Idea

Observing and Explaining the Economy

The Supply and Demand Model

Subtleties of the Supply and Demand Model

The Demand Curve and the Behavior of Consumers

The Supply Curve and the Behavior of Firms

The Efficiency of Markets

Costs and the Changes at Firms Over Time

The Rise and Fall of Industries

Product Differentiation, Monopolistic Competition, and Oligopoly

Antitrust Policy and Regulation

Labor Markets

Taxes, Transfers, and Income Distribution

Public Goods, Externalities, and Government Behavior

Capital and Financial Markets

Macroeconomics: the Big Picture

Measuring the Production, Income, and Spending of Nations

The Spending Allocation Model

Unemployment and Employment

Productivity and Economic Growth

Money and Inflation

The Nature and Causes of Economic Fluctuations

The Economic Fluctuations Model

Using the Economic Fluctuations Model

Fiscal Policy

Monetary Policy

Economic Growth Around the World

International Trade

International Finance

Filters

On a graph of monopoly, the profit-maximizing output level is determined by noting where the and curves cross.