Question 1

For the monopolist, the average revenue curve is the demand curve.

Accepted Answer

A) True 
 B)False

Question 2

If a monopolist's marginal cost shifts upward,:

Accepted Answer

A) total revenue will remain unchanged. 
B) total revenue will increase. 
C) total revenue will fall. 
D) total revenue may rise or fall depending on the slope of the demand curve. 
A) total revenue will remain unchanged. 
B) total revenue will increase. 
C) total revenue will fall. 
D) total revenue may rise or fall depending on the slope of the demand curve.

Question 3

Which of the following statements is true?

Accepted Answer

A) Monopoly profits are generally zero. 
B) Monopoly profits are maximized when total revenue is maximized. 
C) The condition, MC = MR, is the optimizing condition for monopolists and firms in perfectly competitive markets. 
D) Usually the demand and marginal revenue curves for a monopoly are the same. 
A) Monopoly profits are generally zero. 
B) Monopoly profits are maximized when total revenue is maximized. 
C) The condition, MC = MR, is the optimizing condition for monopolists and firms in perfectly competitive markets. 
D) Usually the demand and marginal revenue curves for a monopoly are the same.

Question 4

Which of the following describes a correct relation between price elasticity of demand and a monopolist's marginal revenue when inverse demand is linear, P = a-bQ?

Accepted Answer

A) Demand is elastic when $Q > a / 2 b$. B) Demand is inelastic when $Q > a / b$. C) Demand is unit elastic when $P = a / 2 b$. D) Demand is elastic when $Q < a / 2 b$. A) Demand is elastic when $Q > a / 2 b$. B) Demand is inelastic when $Q > a / b$. C) Demand is unit elastic when $P = a / 2 b$. D) Demand is elastic when $Q < a / 2 b$.

Question 5

A monopolist owns two plants in which to produce a product which has inverse demand $P =$ $( 770 / 3 ) - 3 Q$. The monopolist has marginal cost curves of $M C _ { 1 } = 20 + 3 Q _ { 1 }$ and $M C _ { 2 } = 10 + 6 Q _ { 2 }$ in the two plants, respectively. Which of the following represents the optimal outputs in the two plants, $Q _ { 1 }$ and $Q _ { 2 }$ and the market price?

Accepted Answer

A)  $Q _ { 1 } = 170 / 9 ; Q _ { 2 } = 100 / 9 ; P = 500 / 3$. 
B)  $Q _ { 1 } = 100 / 9 ; Q _ { 2 } = 170 / 9 ; P = 500 / 3$. 
C)  $Q _ { 1 } = 500 / 3 ; Q _ { 2 } = 170 / 9 ; P = 100 / 9$. 
D)  $Q _ { 1 } = 500 / 3 ; Q _ { 2 } = 100 / 9 ; P = 170 / 9$. 
A)  $Q _ { 1 } = 170 / 9 ; Q _ { 2 } = 100 / 9 ; P = 500 / 3$. 
B)  $Q _ { 1 } = 100 / 9 ; Q _ { 2 } = 170 / 9 ; P = 500 / 3$. 
C)  $Q _ { 1 } = 500 / 3 ; Q _ { 2 } = 170 / 9 ; P = 100 / 9$. 
D)  $Q _ { 1 } = 500 / 3 ; Q _ { 2 } = 100 / 9 ; P = 170 / 9$.

Question 6

A natural monopoly refers to:

Accepted Answer

A) Any monopoly based on natural resources. 
B) Any monopolized market. 
C) A monopolized market where the barriers to entry are not structural. 
D) A market for which the total cost incurred by a single firm producing that output is less than the combined total cost of two or more firms producing the same total output between them. 
A) Any monopoly based on natural resources. 
B) Any monopolized market. 
C) A monopolized market where the barriers to entry are not structural. 
D) A market for which the total cost incurred by a single firm producing that output is less than the combined total cost of two or more firms producing the same total output between them.

Question 7

When a monopoly sells its product in multiple markets, it should:

Accepted Answer

A) add the demand curves in both markets, derive the marginal revenue curve from the aggregate demand curve and optimize its output by setting marginal cost equal to marginal revenue derived from the aggregate demand curve. 
B) add the demand curves in both markets, derive the marginal revenue curve from the aggregate demand curve and optimize its output by setting price equal to marginal revenue. 
C) let managers in each market determine the optimal output based on cultural preferences. 
D) produce its product in each market and set MC = MR as any single market monopolist. 
A) add the demand curves in both markets, derive the marginal revenue curve from the aggregate demand curve and optimize its output by setting marginal cost equal to marginal revenue derived from the aggregate demand curve. 
B) add the demand curves in both markets, derive the marginal revenue curve from the aggregate demand curve and optimize its output by setting price equal to marginal revenue. 
C) let managers in each market determine the optimal output based on cultural preferences. 
D) produce its product in each market and set MC = MR as any single market monopolist.

Question 8

A monopolist and a perfectly competitive firm both produce an output level where marginal revenue equals marginal cost.

Accepted Answer

A) True 
 B)False

Question 9

IEPR tells us that the price elasticity of demand plays a vital role in determining what price a monopolist should charge to maximize profits.

Accepted Answer

A) True 
 B)False

Question 10

Which of the following statements regarding a monopolist's profit maximizing condition is false?

Accepted Answer

A) The monopolist's profit-maximizing price will be greater than marginal cost for the last unit supplied. 
B) A monopolist can earn positive economic profit. 
C) Because monopoly price is above marginal cost and a monopoly earns positive economic profit, there are no benefits to consumers in the monopoly market. 
D) Price equals average revenue at the profit-maximizing quantity of output. 
A) The monopolist's profit-maximizing price will be greater than marginal cost for the last unit supplied. 
B) A monopolist can earn positive economic profit. 
C) Because monopoly price is above marginal cost and a monopoly earns positive economic profit, there are no benefits to consumers in the monopoly market. 
D) Price equals average revenue at the profit-maximizing quantity of output.

Question 11

One argument for allowing monopolies to exist is:

Accepted Answer

A) it would be inefficient to break up natural monopolies into smaller units. 
B) monopolies lead to net economic benefits as a rule. 
C) the free market acts as a more effective regulator than the government. 
D) they allow for greater standardization of products and improved quality control. 
A) it would be inefficient to break up natural monopolies into smaller units. 
B) monopolies lead to net economic benefits as a rule. 
C) the free market acts as a more effective regulator than the government. 
D) they allow for greater standardization of products and improved quality control.

Question 12

Inverse demand for a monopolist's product is given by $P = 300 - 6 Q$ while the monopolist's marginal cost is given by $M C = 3 Q$. The profit-maximizing quantity of output for this monopolist is:

Accepted Answer

A)  $33.33$ 
B)  100 
C)  50 
D)  20 
A)  $33.33$ 
B)  100 
C)  50 
D)  20

Question 13

Suppose that product X is sold by a monopolist who has constant marginal cost for producing X. Further suppose that there is an exogenous shock to the product X market, resulting in an increase in demand for X and a resulting rightward shift in marginal revenue. Which of the following statements is correct regarding the equilibrium price and quantity of X?

Accepted Answer

A) Both price and quantity will rise. 
B) Both price and quantity will fall. 
C) Price will rise; the effect on quantity is uncertain. 
D) Quantity will rise; the effect on price is uncertain. 
A) Both price and quantity will rise. 
B) Both price and quantity will fall. 
C) Price will rise; the effect on quantity is uncertain. 
D) Quantity will rise; the effect on price is uncertain.

Question 14

A monopolist and a perfectly competitive firm both maximize profits.

Accepted Answer

A) True 
 B)False

Question 15

A monopolist faces an inverse demand curve $P = 300 - 6 Q$ and has a constant marginal cost of 20. The IEPR formula for this monopolist could be stated in the following way:

Accepted Answer

A)  $\frac { p - 20 } { p } = \left( \frac { 1 } { p / 6 } \right)$ 
B)  $\frac { p - 20 } { p } = \frac { 300 - p } { p }$ 
C)  $\frac { p - 20 } { p } = \frac { P } { 300 - P }$ 
D)  $\frac { p - 20 } { p } = - P ( Q / 6 )$ 
A)  $\frac { p - 20 } { p } = \left( \frac { 1 } { p / 6 } \right)$ 
B)  $\frac { p - 20 } { p } = \frac { 300 - p } { p }$ 
C)  $\frac { p - 20 } { p } = \frac { P } { 300 - P }$ 
D)  $\frac { p - 20 } { p } = - P ( Q / 6 )$

Question 16

When comparing a monopoly with a perfectly competitive equilibrium, moving from a situation of perfect competition to monopoly leads to a:

Accepted Answer

A) deadweight gain. 
B) deadweight loss. 
C) net economic benefit. 
D) welfare improvement. 
A) deadweight gain. 
B) deadweight loss. 
C) net economic benefit. 
D) welfare improvement.

Question 17

Suppose a monopolist faces a demand curve $Q = a P ^ { - b }$ and that the monopolist has a constant marginal cost of $C$. The monopolist's profit-maximizing price is:

Accepted Answer

A)  $P = C ( 1 - 1 / b )$ 
B)  $P = C ( 1 / b )$ 
C)  $P = C \left( \frac { 1 } { 1 - 1 / b } \right)$ 
D)  $P = C ( - 1 / b )$ 
A)  $P = C ( 1 - 1 / b )$ 
B)  $P = C ( 1 / b )$ 
C)  $P = C \left( \frac { 1 } { 1 - 1 / b } \right)$ 
D)  $P = C ( - 1 / b )$

Question 18

Inverse demand for a monopolist's product is given by $P = 300 - 6 Q$ while the monopolist's marginal cost is given by $M C = 3 Q$. The profit-maximizing price for this monopolist is:

Accepted Answer

A)  100 
B)  180 
C)  60 
D)  150 
A)  100 
B)  180 
C)  60 
D)  150

Question 19

-Based on the graph above, the total economic benefit under perfect competition would be:

Accepted Answer

A) 2,700 
B) 1,350 
C) 675 
D) 500 
A) 2,700 
B) 1,350 
C) 675 
D) 500

Question 20

A monopolist can earn positive economic profit.

Accepted Answer

A) True 
 B)False

For the monopolist, the average revenue curve is the demand curve.

If a monopolist's marginal cost shifts upward,:

Which of the following statements is true?

Which of the following describes a correct relation between price elasticity of demand and a monopolist's marginal revenue when inverse demand is linear, P = a-bQ?

A natural monopoly refers to:

When a monopoly sells its product in multiple markets, it should:

A monopolist and a perfectly competitive firm both produce an output level where marginal revenue equals marginal cost.

IEPR tells us that the price elasticity of demand plays a vital role in determining what price a monopolist should charge to maximize profits.

Which of the following statements regarding a monopolist's profit maximizing condition is false?

One argument for allowing monopolies to exist is:

Inverse demand for a monopolist's product is given by $P = 300 - 6 Q$ while the monopolist's marginal cost is given by $M C = 3 Q$ . The profit-maximizing quantity of output for this monopolist is:

A monopolist and a perfectly competitive firm both maximize profits.

A monopolist faces an inverse demand curve $P = 300 - 6 Q$ and has a constant marginal cost of 20. The IEPR formula for this monopolist could be stated in the following way:

When comparing a monopoly with a perfectly competitive equilibrium, moving from a situation of perfect competition to monopoly leads to a:

Suppose a monopolist faces a demand curve $Q = a P ^ { - b }$ and that the monopolist has a constant marginal cost of $C$ . The monopolist's profit-maximizing price is:

Inverse demand for a monopolist's product is given by $P = 300 - 6 Q$ while the monopolist's marginal cost is given by $M C = 3 Q$ . The profit-maximizing price for this monopolist is:

-Based on the graph above, the total economic benefit under perfect competition would be:

A monopolist can earn positive economic profit.

Analyzing Economic Problems

Demand and Supply Analysis

Consumer Preferences and the Concept of Utility

Consumer Choice

The Theory of Demand

Inputs and Production Functions

Costs and Cost Minimization

Cost Curves

Perfectly Competitive Markets

Competitive Markets: Applications

Capturing Surplus

Market Structure and Competition

Game Theory and Strategic Behavior

Risk and Information

General Equilibrium Theory

Externalities and Public Goods

Filters

Exam 11: Monopoly and Monopsony

For the monopolist, the average revenue curve is the demand curve.

If a monopolist's marginal cost shifts upward,:

Which of the following statements is true?

Which of the following describes a correct relation between price elasticity of demand and a monopolist's marginal revenue when inverse demand is linear, P = a-bQ?

A natural monopoly refers to:

When a monopoly sells its product in multiple markets, it should:

A monopolist and a perfectly competitive firm both produce an output level where marginal revenue equals marginal cost.

IEPR tells us that the price elasticity of demand plays a vital role in determining what price a monopolist should charge to maximize profits.

Which of the following statements regarding a monopolist's profit maximizing condition is false?

One argument for allowing monopolies to exist is:

Inverse demand for a monopolist's product is given by P=300−6QP = 300 - 6 QP=300−6Q while the monopolist's marginal cost is given by MC=3QM C = 3 QMC=3Q . The profit-maximizing quantity of output for this monopolist is:

A monopolist and a perfectly competitive firm both maximize profits.

A monopolist faces an inverse demand curve P=300−6QP = 300 - 6 QP=300−6Q and has a constant marginal cost of 20. The IEPR formula for this monopolist could be stated in the following way:

When comparing a monopoly with a perfectly competitive equilibrium, moving from a situation of perfect competition to monopoly leads to a:

Suppose a monopolist faces a demand curve Q=aP−bQ = a P ^ { - b }Q=aP−b and that the monopolist has a constant marginal cost of CCC . The monopolist's profit-maximizing price is:

Inverse demand for a monopolist's product is given by P=300−6QP = 300 - 6 QP=300−6Q while the monopolist's marginal cost is given by MC=3QM C = 3 QMC=3Q . The profit-maximizing price for this monopolist is:

-Based on the graph above, the total economic benefit under perfect competition would be:

A monopolist can earn positive economic profit.

Analyzing Economic Problems

Demand and Supply Analysis

Consumer Preferences and the Concept of Utility

Consumer Choice

The Theory of Demand

Inputs and Production Functions

Costs and Cost Minimization

Cost Curves

Perfectly Competitive Markets

Competitive Markets: Applications

Capturing Surplus

Market Structure and Competition

Game Theory and Strategic Behavior

Risk and Information

General Equilibrium Theory

Externalities and Public Goods

Filters

Inverse demand for a monopolist's product is given by $P = 300 - 6 Q$ while the monopolist's marginal cost is given by $M C = 3 Q$ . The profit-maximizing quantity of output for this monopolist is:

A monopolist faces an inverse demand curve $P = 300 - 6 Q$ and has a constant marginal cost of 20. The IEPR formula for this monopolist could be stated in the following way:

Suppose a monopolist faces a demand curve $Q = a P ^ { - b }$ and that the monopolist has a constant marginal cost of $C$ . The monopolist's profit-maximizing price is:

Inverse demand for a monopolist's product is given by $P = 300 - 6 Q$ while the monopolist's marginal cost is given by $M C = 3 Q$ . The profit-maximizing price for this monopolist is: