Question 1

The demand curve facing a monopolist is always:

Accepted Answer

A)  the same as the industry's demand curve. 
B)  perfectly elastic. 
C)  unit-elastic. 
D)  perfectly inelastic. 
A)  the same as the industry's demand curve. 
B)  perfectly elastic. 
C)  unit-elastic. 
D)  perfectly inelastic. A

Question 2

Price discrimination leads to a _____ price for consumers with a _____ demand.

Accepted Answer

A)  higher; more elastic 
B)  higher; perfectly elastic 
C)  lower; more elastic 
D)  lower; less elastic 
A)  higher; more elastic 
B)  higher; perfectly elastic 
C)  lower; more elastic 
D)  lower; less elastic C

Question 3

Use the following to answer questions:
Figure: The Profit-Maximizing Output and Price  
-(Figure: The Profit-Maximizing Output and Price) Look at the figure The Profit-Maximizing Output and Price. Assume that there are no fixed costs and AC = MC = $200. The profit-maximizing price for a monopolist is:

Accepted Answer

A)  $800. 
B)  $200. 
C)  $600. 
D)  $1,000. 
A)  $800. 
B)  $200. 
C)  $600. 
D)  $1,000. C

Question 4

Use the following to answer questions:
Figure: The Profit-Maximizing Output and Price  
-(Figure: The Profit-Maximizing Output and Price) Look at the figure The Profit-Maximizing Output and Price. Assume that there are no fixed costs and AC = MC = $200. At the profit-maximizing output and price for a monopolist, consumer surplus is:

Accepted Answer

A)  $0. 
B)  $600. 
C)  $1,000. 
D)  $1,600. 
A)  $0. 
B)  $600. 
C)  $1,000. 
D)  $1,600.

Question 5

If a firm has market power, the marginal revenue curve always lies below the demand curve.

Accepted Answer

A) True 
 B)False

Question 6

Use the following to answer questions:
Figure: PPV  
-(Figure: PPV) Look at the figure PPV, which shows the demand and marginal revenue for a pay-per-view football game on cable TV. Assume that the marginal cost and average cost are a constant $40. If the cable company practices perfect price discrimination, deadweight loss will be:

Accepted Answer

A)  $180. 
B)  $100. 
C)  $40. 
D)  $0. 
A)  $180. 
B)  $100. 
C)  $40. 
D)  $0.

Question 7

An oligopoly that engages in price discrimination will charge higher prices to customers with the most inelastic demand.

Accepted Answer

A) True 
 B)False

Question 8

Use the following to answer questions:  
-(Table: Demand and Total Cost) Look at the table Demand and Total Cost. Lenoia runs a natural monopoly producing electricity for a small mountain village. The table shows Lenoia's demand and total cost of producing electricity. The marginal revenue of the fourth unit of production is:

Accepted Answer

A)  $200. 
B)  $250. 
C)  $450. 
D)  $500. 
A)  $200. 
B)  $250. 
C)  $450. 
D)  $500.

Question 9

Suppose that you build a high-speed, magnetically powered transportation system from New York to Los Angeles, and you are the only firm providing this service. High fixed costs resulting from the enormous quantity of capital used in this system enable decreasing average cost for any conceivable level of demand. Your monopoly would result from:

Accepted Answer

A)  control of a scarce resource or input. 
B)  technological superiority. 
C)  increasing returns to scale. 
D)  government-set barriers. 
A)  control of a scarce resource or input. 
B)  technological superiority. 
C)  increasing returns to scale. 
D)  government-set barriers.

Question 10

Use the following to answer questions:  
-(Table: Prices and Demand) The New Orleans Saints have a monopoly on Saints logo hats. The marginal cost of producing a hat is $18. If the Saints increase the number of hats they sell from four to five, the quantity effect is a(n) _____ in total revenue of _____.

Accepted Answer

A)  decrease; $20 
B)  increase; $20 
C)  decrease; $8 
D)  increase; $8 
A)  decrease; $20 
B)  increase; $20 
C)  decrease; $8 
D)  increase; $8

Question 11

Use the following to answer questions:  
-(Table: Demand for Lenny's Coffee) Look at the table Demand for Lenny's Coffee. Lenny's Café is the only source of coffee for hundreds of miles in any direction. Lenny is selling two cups of coffee. If he lowers the price and sells three cups of coffee, the _____ effect will dominate the _____ effect, and total revenue will _____.

Accepted Answer

A)  quantity; price; decrease 
B)  price; quantity; increase 
C)  price; quantity; decrease 
D)  quantity; price; increase 
A)  quantity; price; decrease 
B)  price; quantity; increase 
C)  price; quantity; decrease 
D)  quantity; price; increase

Question 12

Most electric, gas, and water companies are examples of:

Accepted Answer

A)  unregulated monopolies. 
B)  natural monopolies. 
C)  restricted-input monopolies. 
D)  sunk-cost monopolies. 
A)  unregulated monopolies. 
B)  natural monopolies. 
C)  restricted-input monopolies. 
D)  sunk-cost monopolies.

Question 13

Suppose that you build a new jumbo jet that can carry five times more passengers than any other competitor. You have high fixed costs due to the quantity of capital used to build the jets, and average cost is decreasing for all levels of demand. In this case, your monopoly would result from:

Accepted Answer

A)  sunk costs. 
B)  location. 
C)  economies of scale. 
D)  government restrictions. 
A)  sunk costs. 
B)  location. 
C)  economies of scale. 
D)  government restrictions.

Question 14

Which of the following is TRUE?

Accepted Answer

A)  Instead of applying the marginal decision rule, monopoly firms just set the price as high as possible. 
B)  If demand is downward-sloping, P = MR. 
C)  If demand is downward-sloping, P = ATC. 
D)  If demand is downward-sloping, P > MR. 
A)  Instead of applying the marginal decision rule, monopoly firms just set the price as high as possible. 
B)  If demand is downward-sloping, P = MR. 
C)  If demand is downward-sloping, P = ATC. 
D)  If demand is downward-sloping, P > MR.

Question 15

Bob owns a trout farm with monopoly power in North Carolina. Bob's optimal output occurs where marginal revenue _____. Because of monopoly power, Bob's supply curve _____.

Accepted Answer

A)  equals marginal cost; does not exist 
B)  exceeds marginal cost; does not exist 
C)  equals marginal cost; is upward-sloping 
D)  exceeds marginal cost; is perfectly inelastic 
A)  equals marginal cost; does not exist 
B)  exceeds marginal cost; does not exist 
C)  equals marginal cost; is upward-sloping 
D)  exceeds marginal cost; is perfectly inelastic

Question 16

Market structures are categorized by:

Accepted Answer

A)  the number and size of the firms. 
B)  whether products are differentiated and the extent of advertising. 
C)  the number of firms and whether products are differentiated. 
D)  the size of the firms and the extent of advertising. 
A)  the number and size of the firms. 
B)  whether products are differentiated and the extent of advertising. 
C)  the number of firms and whether products are differentiated. 
D)  the size of the firms and the extent of advertising.

Question 17

To maximize profits, an airline will offer _____ prices to customers with _____ demand.

Accepted Answer

A)  higher; inelastic 
B)  higher; elastic 
C)  lower; inelastic 
D)  the lowest; the least 
A)  higher; inelastic 
B)  higher; elastic 
C)  lower; inelastic 
D)  the lowest; the least

Question 18

If the local phone company, a monopolist, perfectly price-discriminated, it would have lower total surplus than a monopolist that doesn't use price discrimination.

Accepted Answer

A) True 
 B)False

Question 19

Use the following to answer questions:  
-(Table: Lunch) Look at the figure Lunch. Joe makes and sells picnic lunches to people taking all-day rafting trips on the river. The marginal cost and average cost of each lunch are a constant $4. If Joe is one of many firms in a competitive industry, what is consumer surplus in the long run?

Accepted Answer

A)  $4 
B)  $10 
C)  $180 
D)  $360 
A)  $4 
B)  $10 
C)  $180 
D)  $360

Question 20

A downward-sloping demand curve will ensure that:

Accepted Answer

A) P = MR. B) P > MR. C) P < MR. D) P = MC. A) P = MR. B) P > MR. C) P < MR. D) P = MC.

The demand curve facing a monopolist is always:

Price discrimination leads to a _ price for consumers with a _ demand.

Use the following to answer questions: Figure: The Profit-Maximizing Output and Price -(Figure: The Profit-Maximizing Output and Price) Look at the figure The Profit-Maximizing Output and Price. Assume that there are no fixed costs and AC = MC = $200. The profit-maximizing price for a monopolist is:

If a firm has market power, the marginal revenue curve always lies below the demand curve.

An oligopoly that engages in price discrimination will charge higher prices to customers with the most inelastic demand.

Use the following to answer questions: -(Table: Prices and Demand) The New Orleans Saints have a monopoly on Saints logo hats. The marginal cost of producing a hat is $18. If the Saints increase the number of hats they sell from four to five, the quantity effect is a(n) _ in total revenue of _.

Most electric, gas, and water companies are examples of:

Suppose that you build a new jumbo jet that can carry five times more passengers than any other competitor. You have high fixed costs due to the quantity of capital used to build the jets, and average cost is decreasing for all levels of demand. In this case, your monopoly would result from:

Which of the following is TRUE?

Bob owns a trout farm with monopoly power in North Carolina. Bob's optimal output occurs where marginal revenue _. Because of monopoly power, Bob's supply curve _.

Market structures are categorized by:

To maximize profits, an airline will offer _ prices to customers with _ demand.

If the local phone company, a monopolist, perfectly price-discriminated, it would have lower total surplus than a monopolist that doesn't use price discrimination.

A downward-sloping demand curve will ensure that:

First Principles

Economic Models: Trade-Offs and Trade 25

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods Common Resources

The Economics of the Welfare

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Filters

Exam 13: Monopoly

The demand curve facing a monopolist is always:

Price discrimination leads to a _____ price for consumers with a _____ demand.

If a firm has market power, the marginal revenue curve always lies below the demand curve.

An oligopoly that engages in price discrimination will charge higher prices to customers with the most inelastic demand.

Most electric, gas, and water companies are examples of:

Suppose that you build a new jumbo jet that can carry five times more passengers than any other competitor. You have high fixed costs due to the quantity of capital used to build the jets, and average cost is decreasing for all levels of demand. In this case, your monopoly would result from:

Which of the following is TRUE?

Bob owns a trout farm with monopoly power in North Carolina. Bob's optimal output occurs where marginal revenue _____. Because of monopoly power, Bob's supply curve _____.

Market structures are categorized by:

To maximize profits, an airline will offer _____ prices to customers with _____ demand.

If the local phone company, a monopolist, perfectly price-discriminated, it would have lower total surplus than a monopolist that doesn't use price discrimination.

A downward-sloping demand curve will ensure that:

First Principles

Economic Models: Trade-Offs and Trade 25

Supply and Demand

Consumer and Producer Surplus

Price Controls and Quotas: Meddling With Markets

Elasticity

Taxes

International Trade

Decision Making by Individuals Firms

The Rational Consumer

Behind the Supply Curve: Inputs and Costs

Perfect Competition and the Supply Curve

Oligopoly

Monopolistic Competition and Product Differentiation

Externalities

Public Goods Common Resources

The Economics of the Welfare

Factor Markets and the Distribution of Income

Uncertainty, Risk, and Private Information

Filters

Price discrimination leads to a _ price for consumers with a _ demand.

Bob owns a trout farm with monopoly power in North Carolina. Bob's optimal output occurs where marginal revenue _. Because of monopoly power, Bob's supply curve _.

To maximize profits, an airline will offer _ prices to customers with _ demand.