Question 1

Some argue that the best government response to monopolies is no response at all, because:

Accepted Answer

A) they are too powerful to be dealt with effectively. 
B) no one can decide which monopolies to regulate. 
C) the creation of regulation may be too difficult. 
D) left unchecked all monopolies eventually shut down. 
A) they are too powerful to be dealt with effectively. 
B) no one can decide which monopolies to regulate. 
C) the creation of regulation may be too difficult. 
D) left unchecked all monopolies eventually shut down. C

Question 2

If an inefficient public monopoly cannot provide a service at a price that sufficient numbers of people are willing to pay it:

Accepted Answer

A) can remain in operation by covering its losses with revenue from taxes. 
B) must shut down and leave the industry in the long run. 
C) should expand operations until demand is satisfied. 
D) will seek out more efficiencies. 
A) can remain in operation by covering its losses with revenue from taxes. 
B) must shut down and leave the industry in the long run. 
C) should expand operations until demand is satisfied. 
D) will seek out more efficiencies. A

Question 3

Perfect price discrimination:

Accepted Answer

A) requires each customer to pay exactly what they are willing to pay. 
B) maximizes consumer surplus. 
C) is not efficient. 
D) minimizes producer surplus. 
A) requires each customer to pay exactly what they are willing to pay. 
B) maximizes consumer surplus. 
C) is not efficient. 
D) minimizes producer surplus. A

Question 4

Producing any quantity of output less than the point where the marginal revenue and marginal cost curves intersect leads to:

Accepted Answer

A) average total cost that is lower than average variable cost. 
B) marginal cost that is higher than marginal revenue. 
C) marginal revenue that is higher than marginal cost. 
D) a loss of profits when producing the units. 
A) average total cost that is lower than average variable cost. 
B) marginal cost that is higher than marginal revenue. 
C) marginal revenue that is higher than marginal cost. 
D) a loss of profits when producing the units.

Question 5

The graph shown represents the cost and revenue curves faced by a monopoly.   If Q2 units are being produced, the monopolist:

Accepted Answer

A) is not maximizing profits. 
B) is producing where marginal costs are less than marginal revenue. 
C) is earning negative profits. 
D) should increase production. 
A) is not maximizing profits. 
B) is producing where marginal costs are less than marginal revenue. 
C) is earning negative profits. 
D) should increase production.

Question 6

If a monopoly wishes to sell more output, it must:

Accepted Answer

A) find a more cost-effective way to produce its goods. 
B) lower the price of its goods. 
C) be experiencing economies of scale. 
D) eliminate its existing competition. 
A) find a more cost-effective way to produce its goods. 
B) lower the price of its goods. 
C) be experiencing economies of scale. 
D) eliminate its existing competition.

Question 7

For a monopoly, marginal revenue for all units greater than one is always _______ than price because of the _______ effect.

Accepted Answer

A) lower; price 
B) greater; price 
C) greater; quantity 
D) lower; quantity 
A) lower; price 
B) greater; price 
C) greater; quantity 
D) lower; quantity

Question 8

For a monopoly, for all units greater than one the marginal revenue curve:

Accepted Answer

A) lies above the demand curve. 
B) lies below the average revenue curve. 
C) cannot be negative. 
D) All of these are true. 
A) lies above the demand curve. 
B) lies below the average revenue curve. 
C) cannot be negative. 
D) All of these are true.

Question 9

In general, with a monopolist's outcome:

Accepted Answer

A) consumers lose surplus. 
B) monopolies earn profit. 
C) deadweight loss occurs. 
D) All of these are true. 
A) consumers lose surplus. 
B) monopolies earn profit. 
C) deadweight loss occurs. 
D) All of these are true.

Question 10

Public policy responses to monopolies:

Accepted Answer

A) sometimes aim to break up existing monopolies. 
B) always have more costs than benefits to society. 
C) always have more benefits than costs to society. 
D) never benefit society in the end. 
A) sometimes aim to break up existing monopolies. 
B) always have more costs than benefits to society. 
C) always have more benefits than costs to society. 
D) never benefit society in the end.

Question 11

Perfect price discrimination:

Accepted Answer

A) eliminates all consumer surplus. 
B) maximizes producer surplus. 
C) creates no deadweight loss. 
D) All of these are true. 
A) eliminates all consumer surplus. 
B) maximizes producer surplus. 
C) creates no deadweight loss. 
D) All of these are true.

Question 12

The table shown represents the revenues faced by a monopolist.
 
What is the firm's marginal revenue of the sixth unit?

Accepted Answer

A) $0 
B) −$200 
C) $3,000 
D) $500 
A) $0 
B) −$200 
C) $3,000 
D) $500

Question 13

This graph shows the cost and revenue curves faced by a monopoly.   Which of the following statements is true?The profit maximizing quantity is 100.The profit maximizing price is $5.The deadweight loss at the profit maximizing price and quantity is zero.

Accepted Answer

A) I only 
B) I and II only 
C) III only 
D) I, II, and III 
A) I only 
B) I and II only 
C) III only 
D) I, II, and III

Question 14

Which of the following statements about the practice of price discrimination is true?

Accepted Answer

A) Firms can easily identify different groups' willingness to pay, so price discrimination is prevalent in every market. 
B) Price discrimination is practiced less today than it was in the mid-1900s. 
C) Perfect price discrimination is impossible. 
D) Price discrimination has only been observed in markets where monopolies are present. 
A) Firms can easily identify different groups' willingness to pay, so price discrimination is prevalent in every market. 
B) Price discrimination is practiced less today than it was in the mid-1900s. 
C) Perfect price discrimination is impossible. 
D) Price discrimination has only been observed in markets where monopolies are present.

Question 15

A natural monopoly is a market in which a single firm:

Accepted Answer

A) owns a key resource or input into the production of the good. 
B) can produce the entire market quantity at a lower cost than multiple firms. 
C) is protected from competition through government legislation. 
D) gains market share over time through aggressive tactics. 
A) owns a key resource or input into the production of the good. 
B) can produce the entire market quantity at a lower cost than multiple firms. 
C) is protected from competition through government legislation. 
D) gains market share over time through aggressive tactics.

Question 16

With a monopolist's outcome, producer surplus is _______ that of a competitive market.

Accepted Answer

A) higher than 
B) lower than 
C) the same as 
D) Any of these is possible. 
A) higher than 
B) lower than 
C) the same as 
D) Any of these is possible.

Question 17

Consider a museum that is trying to decide what price to charge for tickets. It knows that the maximum amount students and the elderly would be willing to pay for a ticket is $10. Suppose there are 5,000 students and elderly individuals who would buy a ticket at this price. There are also 30,000 adults who would be willing to pay $25 for a ticket. If the museum cannot price discriminate, it will charge a price of _______ and earn _______ in revenue. If the museum is able to perfectly price discriminate, it will increase its revenue by _______.

Accepted Answer

A) $20; $600,000; $200,000 
B) $10; $875,000; $125,000 
C) $25; $750,000; $50,000 
D) $25; $750,000; $125,000 
A) $20; $600,000; $200,000 
B) $10; $875,000; $125,000 
C) $25; $750,000; $50,000 
D) $25; $750,000; $125,000

Question 18

Consider a market in which one firm controls 80 percent of the market. Suppose a new firm tries to enter the market, and the firm with market power responds by temporarily cutting its prices to very low levels. This practice is known as:

Accepted Answer

A) predatory pricing. 
B) monopoly pricing. 
C) aggressive pricing. 
D) All of these are exemplified by this practice. 
A) predatory pricing. 
B) monopoly pricing. 
C) aggressive pricing. 
D) All of these are exemplified by this practice.

Question 19

In theory, placing a price control on a natural monopoly should:

Accepted Answer

A) have the same outcome as public ownership. 
B) create negative economic profits for the company. 
C) reduce deadweight loss to zero. 
D) be implemented in conjunction with quantity controls. 
A) have the same outcome as public ownership. 
B) create negative economic profits for the company. 
C) reduce deadweight loss to zero. 
D) be implemented in conjunction with quantity controls.

Question 20

The table shown represents the revenues faced by a monopolist.
 
Graphing the first two columns of the table would yield which curve?

Accepted Answer

A) Marginal revenue 
B) Market supply 
C) Market demand 
D) Total productivity 
A) Marginal revenue 
B) Market supply 
C) Market demand 
D) Total productivity

Exam 14: Monopoly

Some argue that the best government response to monopolies is no response at all, because:

If an inefficient public monopoly cannot provide a service at a price that sufficient numbers of people are willing to pay it:

Perfect price discrimination:

Producing any quantity of output less than the point where the marginal revenue and marginal cost curves intersect leads to:

The graph shown represents the cost and revenue curves faced by a monopoly. If Q2 units are being produced, the monopolist:

If a monopoly wishes to sell more output, it must:

For a monopoly, marginal revenue for all units greater than one is always _______ than price because of the _______ effect.

For a monopoly, for all units greater than one the marginal revenue curve:

In general, with a monopolist's outcome:

Public policy responses to monopolies:

Perfect price discrimination:

The table shown represents the revenues faced by a monopolist. What is the firm's marginal revenue of the sixth unit?

This graph shows the cost and revenue curves faced by a monopoly. Which of the following statements is true?The profit maximizing quantity is 100.The profit maximizing price is $5.The deadweight loss at the profit maximizing price and quantity is zero.

Which of the following statements about the practice of price discrimination is true?

A natural monopoly is a market in which a single firm:

With a monopolist's outcome, producer surplus is _______ that of a competitive market.

Consider a market in which one firm controls 80 percent of the market. Suppose a new firm tries to enter the market, and the firm with market power responds by temporarily cutting its prices to very low levels. This practice is known as:

In theory, placing a price control on a natural monopoly should:

The table shown represents the revenues faced by a monopolist. Graphing the first two columns of the table would yield which curve?

Economics and Life

Specialization and Exchange

Markets

Elasticity

Efficiency

Government Intervention

Consumer Behavior

Behavioral Economics: a Closer Look at Decision Making

Game Theory and Strategic Thinking

Information

Time and Uncertainty

The Costs of Production

Perfect Competition

Monopolistic Competition and Oligopoly

The Facts of Production

International Trade

Externalities

Public Goods and Common Resources

Taxation and the Public Budget

Poverty, Inequality, and Discrimination

Political Choices

Public Policy and Choice Architecture

Filters

For a monopoly, marginal revenue for all units greater than one is always _ than price because of the _ effect.