Question 1

Assume someone organises all farms in the nation into a single-price monopoly. As a result, the price consumers pay for food

Accepted Answer

A)  rises. 
B)  does not change, that is, it remains constant. 
C)  falls. 
D)  might rise or fall depending on whether the demand for food is elastic or inelastic. 
E)  might rise or fall depending on whether the monopoly's marginal revenue curve lies above or below its demand curve. 
A)  rises. 
B)  does not change, that is, it remains constant. 
C)  falls. 
D)  might rise or fall depending on whether the demand for food is elastic or inelastic. 
E)  might rise or fall depending on whether the monopoly's marginal revenue curve lies above or below its demand curve. A

Question 2

Arnie's Airlines is a monopoly airline that is able to price discriminate. If Arnie's decides to price discriminate, then

Accepted Answer

A)  consumer surplus decreases. 
B)  Arnie's revenues decrease. 
C)  Arnie's will see all of his tickets at a single price. 
D)  Arnie's sells fewer tickets. 
E)  Arnie's profit decreases. 
A)  consumer surplus decreases. 
B)  Arnie's revenues decrease. 
C)  Arnie's will see all of his tickets at a single price. 
D)  Arnie's sells fewer tickets. 
E)  Arnie's profit decreases. A

Question 3

Monopolies ________ fair and ________ efficient.

Accepted Answer

A)  are never; are always 
B)  might be; are always 
C)  are always; are not 
D)  are always; are always 
E)  might be; might be 
A)  are never; are always 
B)  might be; are always 
C)  are always; are not 
D)  are always; are always 
E)  might be; might be E

Question 4

-Suppose the grocery store market in Brisbane is perfectly competitive. Then one store buys all the others and becomes a single-price monopoly. The figure above shows the relevant demand and cost curves. When the market is perfectly competitive, the price of a kilogram of steak is ________ and when it is a monopoly, the price of a kilogram of steak is ________.

Accepted Answer

A)  $4; $20 
B)  $4; $12 
C)  $4; $8 
D)  $8; $4 
E)  $8; $12 
A)  $4; $20 
B)  $4; $12 
C)  $4; $8 
D)  $8; $4 
E)  $8; $12

Question 5

Rent seeking is the act of obtaining special treatment from ________ to create ________.

Accepted Answer

A)  a monopoly; consumer surplus 
B)  the government; economic profit 
C)  the government; consumer surplus 
D)  competitive producers; a monopoly 
E)  consumers; a monopoly 
A)  a monopoly; consumer surplus 
B)  the government; economic profit 
C)  the government; consumer surplus 
D)  competitive producers; a monopoly 
E)  consumers; a monopoly

Question 6

A price-discriminating monopoly charges

Accepted Answer

A)  different prices to buyers for different products. 
B)  the same price to every buyer for the same product. 
C)  a different price to different buyers, because the costs are different. 
D)  each customer a price that equals the marginal cost of serving that customer. 
E)  a different price to different types of buyers for the same product, even though there are no differences in costs. 
A)  different prices to buyers for different products. 
B)  the same price to every buyer for the same product. 
C)  a different price to different buyers, because the costs are different. 
D)  each customer a price that equals the marginal cost of serving that customer. 
E)  a different price to different types of buyers for the same product, even though there are no differences in costs.

Question 7

Today, you might be buying from a regulated natural monopoly when you purchase

Accepted Answer

A)  food in a supermarket or in a restaurant. 
B)  a car, a truck or a bicycle. 
C)  natural gas or electricity. 
D)  a house, an apartment or a plot of land. 
E)  a computer, a phone or a camera. 
A)  food in a supermarket or in a restaurant. 
B)  a car, a truck or a bicycle. 
C)  natural gas or electricity. 
D)  a house, an apartment or a plot of land. 
E)  a computer, a phone or a camera.

Question 8

Arnie's Airlines is a monopoly airline that is able to price discriminate. If Arnie's decides to price discriminate, then

Accepted Answer

A)  Arnie's profit increases. 
B)  Arnie's revenues decrease. 
C)  consumer surplus increases. 
D)  Arnie's sells fewer tickets. 
E)  Arnie can no longer set a price that depends upon the buyer's willingness to pay. 
A)  Arnie's profit increases. 
B)  Arnie's revenues decrease. 
C)  consumer surplus increases. 
D)  Arnie's sells fewer tickets. 
E)  Arnie can no longer set a price that depends upon the buyer's willingness to pay.

Question 9

If a single-price monopoly is making a large economic profit, what keeps other firms from competing away the profit?

Accepted Answer

A)  The monopoly must be keeping the amount earned secret. 
B)  The existing firm's ATC must be too large to allow competitors to enter and earn an economic profit. 
C)  There are barriers to entry. 
D)  The market must be too small. 
E)  Nothing, other firms will enter and will compete away the profit. 
A)  The monopoly must be keeping the amount earned secret. 
B)  The existing firm's ATC must be too large to allow competitors to enter and earn an economic profit. 
C)  There are barriers to entry. 
D)  The market must be too small. 
E)  Nothing, other firms will enter and will compete away the profit.

Question 10

A natural barrier to entry is defined as a barrier that arises because of

Accepted Answer

A)  many firms producing the good and thereby allowing choice for all consumers. 
B)  technology that allows one firm to meet the entire market demand at lower average total cost than could two or more firms. 
C)  one firm owning a key natural resource. 
D)  patents or licences that exclude others from producing a good or service. 
E)  anticompetitive practices by a firm that keep other firms from producing. 
A)  many firms producing the good and thereby allowing choice for all consumers. 
B)  technology that allows one firm to meet the entire market demand at lower average total cost than could two or more firms. 
C)  one firm owning a key natural resource. 
D)  patents or licences that exclude others from producing a good or service. 
E)  anticompetitive practices by a firm that keep other firms from producing.

Question 11

Which of the following statements is FALSE?

Accepted Answer

A)  In the long run, a monopoly can earn a larger economic profit than can a perfectly competitive firm. 
B)  A perfectly competitive market produces more output and charges a lower price than a monopoly. 
C)  In a perfectly competitive market, the price is equal to the marginal cost, but in a market with a single-price monopoly, price exceeds marginal cost. 
D)  A perfectly competitive firm produces where MR = MC but a monopoly produces where MR > MC. 
E)  The consumer surplus is smaller for a market with a monopoly than for a perfectly competitive market. 
A)  In the long run, a monopoly can earn a larger economic profit than can a perfectly competitive firm. 
B)  A perfectly competitive market produces more output and charges a lower price than a monopoly. 
C)  In a perfectly competitive market, the price is equal to the marginal cost, but in a market with a single-price monopoly, price exceeds marginal cost. 
D)  A perfectly competitive firm produces where MR = MC but a monopoly produces where MR > MC. 
E)  The consumer surplus is smaller for a market with a monopoly than for a perfectly competitive market.

Question 12

-Suppose that, along a linear demand curve, the elasticity of demand is equal to 1 when the price is $4 and the quantity is 100 units. Then the

Accepted Answer

A)  marginal revenue is positive at 100 units. 
B)  marginal revenue is negative at 100 units. 
C)  total revenue is at its maximum when 100 units are produced. 
D)  Both answers A and B are correct. 
E)  Both answers A and C are correct. 
A)  marginal revenue is positive at 100 units. 
B)  marginal revenue is negative at 100 units. 
C)  total revenue is at its maximum when 100 units are produced. 
D)  Both answers A and B are correct. 
E)  Both answers A and C are correct.

Question 13

-In order to maximise its profit, a single-price monopoly produces the amount of output so that

Accepted Answer

A)  P = ATC. 
B)  MR = MC. 
C)  P = MC. 
D)  P = MC - MR. 
E)  P = MR. 
A)  P = ATC. 
B)  MR = MC. 
C)  P = MC. 
D)  P = MC - MR. 
E)  P = MR.

Question 14

Which of the following firms is most likely to be a monopoly?

Accepted Answer

A)  A local book store 
B)  A local bank 
C)  A clothing store 
D)  A local restaurant 
E)  A local distributor of natural gas 
A)  A local book store 
B)  A local bank 
C)  A clothing store 
D)  A local restaurant 
E)  A local distributor of natural gas

Question 15

The good produced by a monopoly

Accepted Answer

A)  has no close substitutes. 
B)  has perfect substitutes. 
C)  must be unable to be resold. 
D)  can be easily duplicated. 
E)  has no substitutes at all. 
A)  has no close substitutes. 
B)  has perfect substitutes. 
C)  must be unable to be resold. 
D)  can be easily duplicated. 
E)  has no substitutes at all.

Question 16

For a natural monopoly, economies of scale

Accepted Answer

A)  are totally absent. 
B)  lead to a legal barrier to entry. 
C)  and diseconomies of scale exist along the long-run average cost curve at least until it crosses the market demand curve. 
D)  exist along the long-run average cost curve at least until it crosses the market demand curve. 
E)  as well as constant returns to scale and diseconomies of scale exist along the long-run average cost curve at least until it crosses the market demand curve. 
A)  are totally absent. 
B)  lead to a legal barrier to entry. 
C)  and diseconomies of scale exist along the long-run average cost curve at least until it crosses the market demand curve. 
D)  exist along the long-run average cost curve at least until it crosses the market demand curve. 
E)  as well as constant returns to scale and diseconomies of scale exist along the long-run average cost curve at least until it crosses the market demand curve.

Question 17

Rate of return regulation is designed to allow a natural monopoly to

Accepted Answer

A)  make zero economic profit. 
B)  underestimate its average cost. 
C)  make zero normal profit. 
D)  make an economic profit. 
E)  compete with any firm entering the market. 
A)  make zero economic profit. 
B)  underestimate its average cost. 
C)  make zero normal profit. 
D)  make an economic profit. 
E)  compete with any firm entering the market.

Question 18

For a monopoly, marginal revenue is equal to

Accepted Answer

A)  the price multiplied by the quantity sold. 
B)  the price of the product. 
C)  the amount people buy at a given price. 
D)  the change in total revenue brought about by a one-unit increase in quantity sold. 
E)  the amount people buy between two prices. 
A)  the price multiplied by the quantity sold. 
B)  the price of the product. 
C)  the amount people buy at a given price. 
D)  the change in total revenue brought about by a one-unit increase in quantity sold. 
E)  the amount people buy between two prices.

Question 19

In Norway, where the government runs liquor stores, the monopoly results from

Accepted Answer

A)  control of an essential resource. 
B)  patents. 
C)  public fear. 
D)  economies of scale. 
E)  legal restrictions. 
A)  control of an essential resource. 
B)  patents. 
C)  public fear. 
D)  economies of scale. 
E)  legal restrictions.

Question 20

-The above figure represents the market for cable television in Oakland, Florida. Time Warner Communications (TWC) is the sole provider of cable television to the residents of this Central Florida community. If TWC operated under a marginal cost pricing rule, what is the price of cable television in Oakland?

Accepted Answer

A)  $0 
B)  $40 
C)  $20 
D)  $30 
E)  $10 
A)  $0 
B)  $40 
C)  $20 
D)  $30 
E)  $10

Assume someone organises all farms in the nation into a single-price monopoly. As a result, the price consumers pay for food

Arnie's Airlines is a monopoly airline that is able to price discriminate. If Arnie's decides to price discriminate, then

Monopolies fair and efficient.

Rent seeking is the act of obtaining special treatment from to create .

A price-discriminating monopoly charges

Today, you might be buying from a regulated natural monopoly when you purchase

Arnie's Airlines is a monopoly airline that is able to price discriminate. If Arnie's decides to price discriminate, then

If a single-price monopoly is making a large economic profit, what keeps other firms from competing away the profit?

A natural barrier to entry is defined as a barrier that arises because of

Which of the following statements is FALSE?

-Suppose that, along a linear demand curve, the elasticity of demand is equal to 1 when the price is $4 and the quantity is 100 units. Then the

-In order to maximise its profit, a single-price monopoly produces the amount of output so that

Which of the following firms is most likely to be a monopoly?

The good produced by a monopoly

For a natural monopoly, economies of scale

Rate of return regulation is designed to allow a natural monopoly to

For a monopoly, marginal revenue is equal to

In Norway, where the government runs liquor stores, the monopoly results from

Getting Started

The Australian and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

Exam 15: Monopoly

Assume someone organises all farms in the nation into a single-price monopoly. As a result, the price consumers pay for food

Arnie's Airlines is a monopoly airline that is able to price discriminate. If Arnie's decides to price discriminate, then

Monopolies ________ fair and ________ efficient.

Rent seeking is the act of obtaining special treatment from ________ to create ________.

A price-discriminating monopoly charges

Today, you might be buying from a regulated natural monopoly when you purchase

Arnie's Airlines is a monopoly airline that is able to price discriminate. If Arnie's decides to price discriminate, then

If a single-price monopoly is making a large economic profit, what keeps other firms from competing away the profit?

A natural barrier to entry is defined as a barrier that arises because of

Which of the following statements is FALSE?

-Suppose that, along a linear demand curve, the elasticity of demand is equal to 1 when the price is $4 and the quantity is 100 units. Then the

-In order to maximise its profit, a single-price monopoly produces the amount of output so that

Which of the following firms is most likely to be a monopoly?

The good produced by a monopoly

For a natural monopoly, economies of scale

Rate of return regulation is designed to allow a natural monopoly to

For a monopoly, marginal revenue is equal to

In Norway, where the government runs liquor stores, the monopoly results from

Getting Started

The Australian and Global Economies

The Economic Problem

Demand and Supply

Elasticities of Demand and Supply

Efficiency and Fairness of Markets

Government Actions in Markets

Taxes

Global Markets in Action

Externalities

Public Goods and Common Resources

Consumer Choice and Demand

Production and Cost

Perfect Competition

Monopolistic Competition

Oligopoly

Markets for Factors of Production

Economic Inequality

Filters

Monopolies fair and efficient.

Rent seeking is the act of obtaining special treatment from to create .