Question 1

As a monopolist facing a downward-sloping demand curve increases sales from zero,total revenue

Accepted Answer

A)  remains unchanged. 
B)  rises steadily to equal price. 
C)  falls until it equals marginal revenue. 
D)  equals demand. 
E)  rises at first but eventually falls. 
A)  remains unchanged. 
B)  rises steadily to equal price. 
C)  falls until it equals marginal revenue. 
D)  equals demand. 
E)  rises at first but eventually falls.

Question 2

The following question are based on the following diagram of a monopolist:
  
-If the monopolist is currently producing 0A and wants to maximize profits,it should

Accepted Answer

A)  do nothing because it is maximizing profits. 
B)  decrease output to zero. 
C)  raise output to 0B. 
D)  raise output to 0C. 
E)  raise output above 0C. 
A)  do nothing because it is maximizing profits. 
B)  decrease output to zero. 
C)  raise output to 0B. 
D)  raise output to 0C. 
E)  raise output above 0C.

Question 3

Marginal revenue

Accepted Answer

A)  generally rises as output increases. 
B)  exceeds price under conditions of monopoly. 
C)  is the addition to total revenue from the sale of one more unit. 
D)  coincides with marginal cost at each level of output. 
E)  is another name for profit. 
A)  generally rises as output increases. 
B)  exceeds price under conditions of monopoly. 
C)  is the addition to total revenue from the sale of one more unit. 
D)  coincides with marginal cost at each level of output. 
E)  is another name for profit.

Question 4

Experience with public regulation of monopolies indicates that

Accepted Answer

A)  on the average, regulated prices are clearly lower than unregulated prices of the same item. 
B)  regulation provides a stronger set of incentives than competitive markets for firms to increase efficiency. 
C)  a decision to base a fair rate of return on either historical cost or replacement cost yields the same pricing result. 
D)  most public utility regulation should be in the hands of federal rather than state commissions. 
E)  if a firm is guaranteed a fixed amount of profit, it will be less efficient than if its profits depend on how efficiently it operates. 
A)  on the average, regulated prices are clearly lower than unregulated prices of the same item. 
B)  regulation provides a stronger set of incentives than competitive markets for firms to increase efficiency. 
C)  a decision to base a fair rate of return on either historical cost or replacement cost yields the same pricing result. 
D)  most public utility regulation should be in the hands of federal rather than state commissions. 
E)  if a firm is guaranteed a fixed amount of profit, it will be less efficient than if its profits depend on how efficiently it operates.

Question 5

If the demand curve is horizontal,marginal revenue must be the same as

Accepted Answer

A)  total revenue. 
B)  quantity. 
C)  average costs. 
D)  price. 
E)  sales. 
A)  total revenue. 
B)  quantity. 
C)  average costs. 
D)  price. 
E)  sales.

Question 6

In the United States regulated industries produce about ________ percent of our national output.

Accepted Answer

A)  10 
B)  25 
C)  33 
D)  50 
E)  67 
A)  10 
B)  25 
C)  33 
D)  50 
E)  67

Question 7

Compared to a perfectly competitive industry in long-run equilibrium,an industry under monopoly

Accepted Answer

A)  may realize economic profits in the long run. 
B)  may sustain losses indefinitely and still remain in business. 
C)  actively encourages competitors and thereby increases profits. 
D)  continues to expand until profits are reduced to zero. 
E)  can sell at a price below average variable cost and earn economic profits. 
A)  may realize economic profits in the long run. 
B)  may sustain losses indefinitely and still remain in business. 
C)  actively encourages competitors and thereby increases profits. 
D)  continues to expand until profits are reduced to zero. 
E)  can sell at a price below average variable cost and earn economic profits.

Question 8

A firm produces heavy machinery and can sell 10 units per month at a price of $50,000.To increase sales to 11 units per month,the firm must cut its price to $46,000.The marginal revenue for selling one extra unit per month is

Accepted Answer

A)  $363. 
B)  $4,000. 
C)  $4,182. 
D)  $6,000. 
E)  $46,000. 
A)  $363. 
B)  $4,000. 
C)  $4,182. 
D)  $6,000. 
E)  $46,000.

Question 9

The following question are based on the following diagram of a monopolist:
  
-At the profit-maximizing output rate,marginal costs will be

Accepted Answer

A)  0A. 
B)  0B. 
C)  0C. 
D)  0D. 
E)  0E. 
A)  0A. 
B)  0B. 
C)  0C. 
D)  0D. 
E)  0E.

Question 10

In addition to misallocating resources,monopolists are also accused of

Accepted Answer

A)  being slow to innovate and adopt new technologies. 
B)  equating average costs with demand. 
C)  producing more of a good than society can absorb. 
D)  charging the highest prices they can possibly get. 
E)  maximizing per unit profits rather than total profits. 
A)  being slow to innovate and adopt new technologies. 
B)  equating average costs with demand. 
C)  producing more of a good than society can absorb. 
D)  charging the highest prices they can possibly get. 
E)  maximizing per unit profits rather than total profits.

Question 11

The following question are based on the following graph:
  
-For this firm profits are maximized at an output rate of

Accepted Answer

A)  0Q. 
B)  0P. 
C)  0W. 
D)  0U. 
E)  0V. 
A)  0Q. 
B)  0P. 
C)  0W. 
D)  0U. 
E)  0V.

Question 12

When total revenue for a monopolist reaches its maximum value,marginal revenue is

Accepted Answer

A)  zero. 
B)  equal to total revenue. 
C)  negative. 
D)  rising. 
E)  equal to the price. 
A)  zero. 
B)  equal to total revenue. 
C)  negative. 
D)  rising. 
E)  equal to the price.

Question 13

The following question are based on the following data for a monopolist:
  
-The profit-maximizing price is

Accepted Answer

A)  above $5. 
B)  $5. 
C)  between $4.50 and $5. 
D)  below $4.50. 
E)  impossible to determine; more information is needed. 
A)  above $5. 
B)  $5. 
C)  between $4.50 and $5. 
D)  below $4.50. 
E)  impossible to determine; more information is needed.

Question 14

Schumpeter argues that the rate of technological change is likely to be greater in imperfectly competitive industries because imperfectly competitive firms

Accepted Answer

A)  earn profits that support expenditures on research and development. 
B)  lack the power necessary to keep rivals from imitating their innovations. 
C)  have a vested interest in maintaining demand for existing products. 
D)  use their power to keep out rivals who would be more inclined to use new techniques. 
E)  are composed of a large number of independent decision-making units that are less inclined to be conservative. 
A)  earn profits that support expenditures on research and development. 
B)  lack the power necessary to keep rivals from imitating their innovations. 
C)  have a vested interest in maintaining demand for existing products. 
D)  use their power to keep out rivals who would be more inclined to use new techniques. 
E)  are composed of a large number of independent decision-making units that are less inclined to be conservative.

Question 15

Contrary to the allegations of some economists,there is evidence that the development,promotion,and diffusion of new techniques in an industry may benefit from

Accepted Answer

A)  a diversity of firm sizes in the industry. 
B)  the concentration of production in the hands of a regulated monopolist. 
C)  perfect competition. 
D)  allowing the industry to form a cartel. 
E)  the nationalization of that industry. 
A)  a diversity of firm sizes in the industry. 
B)  the concentration of production in the hands of a regulated monopolist. 
C)  perfect competition. 
D)  allowing the industry to form a cartel. 
E)  the nationalization of that industry.

Question 16

The approach to natural monopolies in the United States is to

Accepted Answer

A)  nationalize them. 
B)  break them up into small competitive businesses. 
C)  give them franchises and subject them to regulation. 
D)  require them to merge with existing perfectly competitive business firms. 
E)  leave them alone. 
A)  nationalize them. 
B)  break them up into small competitive businesses. 
C)  give them franchises and subject them to regulation. 
D)  require them to merge with existing perfectly competitive business firms. 
E)  leave them alone.

Question 17

The natural monopoly characteristics of the telecommunication industry disappeared in the last few decades,largely because of

Accepted Answer

A)  the emergence of significant economies of scale in the industry. 
B)  increased government regulation. 
C)  increased foreign competition. 
D)  widespread losses leaving firms financially weak. 
E)  rapid changes in technology. 
A)  the emergence of significant economies of scale in the industry. 
B)  increased government regulation. 
C)  increased foreign competition. 
D)  widespread losses leaving firms financially weak. 
E)  rapid changes in technology.

Question 18

The following question are based on the following diagram of a monopolist:
  
-To maximize profits,the firm will produce an output rate of

Accepted Answer

A)  0A. 
B)  0B. 
C)  0C. 
D)  0D. 
E)  0E. 
A)  0A. 
B)  0B. 
C)  0C. 
D)  0D. 
E)  0E.

Question 19

Available studies show that if the largest firms in a market of a given size were replaced by a larger number of smaller firms

Accepted Answer

A)  the rate of technological change would decline substantially. 
B)  total research and development expenditures would decrease. 
C)  the commercial introduction of innovation that requires a large amount of capital might slow down. 
D)  there would be a noticeable decline in the riskiness of research and development activities. 
E)  federal funding for research and development would automatically increase. 
A)  the rate of technological change would decline substantially. 
B)  total research and development expenditures would decrease. 
C)  the commercial introduction of innovation that requires a large amount of capital might slow down. 
D)  there would be a noticeable decline in the riskiness of research and development activities. 
E)  federal funding for research and development would automatically increase.

Question 20

A firm given exclusive rights by the government to do business in a particular area is a(n)________ monopoly.

Accepted Answer

A)  patent 
B)  output 
C)  natural 
D)  franchise 
E)  input 
A)  patent 
B)  output 
C)  natural 
D)  franchise 
E)  input

Exam 7: Monopoly and Its Regulation

As a monopolist facing a downward-sloping demand curve increases sales from zero,total revenue

The following question are based on the following diagram of a monopolist: -If the monopolist is currently producing 0A and wants to maximize profits,it should

Marginal revenue

Experience with public regulation of monopolies indicates that

If the demand curve is horizontal,marginal revenue must be the same as

In the United States regulated industries produce about ________ percent of our national output.

Compared to a perfectly competitive industry in long-run equilibrium,an industry under monopoly

A firm produces heavy machinery and can sell 10 units per month at a price of $50,000.To increase sales to 11 units per month,the firm must cut its price to $46,000.The marginal revenue for selling one extra unit per month is

The following question are based on the following diagram of a monopolist: -At the profit-maximizing output rate,marginal costs will be

In addition to misallocating resources,monopolists are also accused of

The following question are based on the following graph: -For this firm profits are maximized at an output rate of

When total revenue for a monopolist reaches its maximum value,marginal revenue is

The following question are based on the following data for a monopolist: -The profit-maximizing price is

Schumpeter argues that the rate of technological change is likely to be greater in imperfectly competitive industries because imperfectly competitive firms

Contrary to the allegations of some economists,there is evidence that the development,promotion,and diffusion of new techniques in an industry may benefit from

The approach to natural monopolies in the United States is to

The natural monopoly characteristics of the telecommunication industry disappeared in the last few decades,largely because of

The following question are based on the following diagram of a monopolist: -To maximize profits,the firm will produce an output rate of

Available studies show that if the largest firms in a market of a given size were replaced by a larger number of smaller firms

A firm given exclusive rights by the government to do business in a particular area is a(n)________ monopoly.

What is Economics

Markets and Prices

The Business Firm: Organization,motivation,and Optimal Input Decisions

Getting Behind the Demand and Supply Curves

Market Demand and Price Elasticity

Economic Efficiency,market Supply,and Perfect Competition

Monopolistic Competition,oligopoly,and Antitrust Policy

Pollution and the Environment

The Supply and Demand for Labor

Interest,rent,and Profit

Poverty,income Inequality,and Discrimination

Economic Growth

Public Goods and the Role of the Government

National Income and Product

Business Fluctuations and Unemployment

The Determination of National Output and the Keynesian Multiplier

Fiscal Policy and National Output

Inflation

Money and the Banking System

The Federal Reserve and Monetary Policy

Supply Shocks and Inflation

Productivity,growth,and Technology Policy

Surpluses,deficits,public Debt,and the Federal Budget

Monetary Policy,interest Rates,and Economic Activity

Controversies Over Stabilization Policy

International Trade

Exchange Rates and the Balance of Payments

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