Question 1

Which of the following is an assumption of the monopoly model?

Accepted Answer

A) There exists a large number of buyers and sellers. 
B) There are no close substitutes of the good. 
C) The firm faces a horizontal demand curve. 
D) There is free entry and exit of firms. 
E) The firm is a price taker. 
A) There exists a large number of buyers and sellers. 
B) There are no close substitutes of the good. 
C) The firm faces a horizontal demand curve. 
D) There is free entry and exit of firms. 
E) The firm is a price taker. B

Question 2

The following figures show the demand and cost curves of a perfectly competitive and a monopoly firm respectively. Figure 10.7   
D: Average Revenue
AC: Average cost
MC: Marginal cost
MR: Marginal cost
-Refer to Figure 10.7.If the perfectly competitive industry and the monopoly produces the same quantity,then:

Accepted Answer

A) there are 10 firms in the perfectly competitive industry. 
B) there are 800 firms in the perfectly competitive industry. 
C) there are 1,000 firms in the perfectly competitive industry. 
D) there are 2,000 firms in the perfectly competitive industry. 
E) there are 100 firms in the perfectly competitive industry. 
A) there are 10 firms in the perfectly competitive industry. 
B) there are 800 firms in the perfectly competitive industry. 
C) there are 1,000 firms in the perfectly competitive industry. 
D) there are 2,000 firms in the perfectly competitive industry. 
E) there are 100 firms in the perfectly competitive industry. C

Question 3

The marginal revenue curve of a monopolist firm coincides with its average revenue curve.

Accepted Answer

A) True 
 B)False  False

Question 4

A monopoly is a market model in which just one firm sells a product with no close substitutes.

Accepted Answer

A) True 
 B)False

Question 5

A monopolist maximizes profit:

Accepted Answer

A) by charging the highest possible price on the demand curve. 
B) by charging a price that equals its marginal cost. 
C) by producing a level of output where the average-cost curve intersects the demand curve. 
D) by producing a level of output where marginal revenue equals marginal cost. 
E) by charging a price equal to its average total cost. 
A) by charging the highest possible price on the demand curve. 
B) by charging a price that equals its marginal cost. 
C) by producing a level of output where the average-cost curve intersects the demand curve. 
D) by producing a level of output where marginal revenue equals marginal cost. 
E) by charging a price equal to its average total cost.

Question 6

Which of the following will be the best example of a monopoly firm?

Accepted Answer

A) The US Bank 
B) The Bank of America 
C) National City Bank 
D) The Federal Reserve 
E) Washington Mutual Funds Bank 
A) The US Bank 
B) The Bank of America 
C) National City Bank 
D) The Federal Reserve 
E) Washington Mutual Funds Bank

Question 7

If at an output of 10 units a monopolist is earning a positive profit,marginal revenue is $6,and marginal cost is $4,then the monopolist:

Accepted Answer

A) is in equilibrium. 
B) should increase output. 
C) should reduce output. 
D) should lower the price at the current output level. 
E) should raise the price at the current output level. 
A) is in equilibrium. 
B) should increase output. 
C) should reduce output. 
D) should lower the price at the current output level. 
E) should raise the price at the current output level.

Question 8

The table given below shows the prices charged and marginal cost incurred by a monopolist for different units of the output. Table 10.3
 
- Assume that the firm described in Table 10.3 is incurring a total cost of $7,000 at the profit-maximizing output level.The firm will

Accepted Answer

A) lose $10,000 in the short run. 
B) break even. 
C) earn a profit of $3,800. 
D) earn a profit of $3,500. 
E) earn a profit of $5,500. 
A) lose $10,000 in the short run. 
B) break even. 
C) earn a profit of $3,800. 
D) earn a profit of $3,500. 
E) earn a profit of $5,500.

Question 9

Monopolization is a process by which the government restricts the growth of monopoly firms.

Accepted Answer

A) True 
 B)False

Question 10

A deadweight loss arises under perfect competition.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is not a necessary condition for price discrimination?

Accepted Answer

A) The firm must be a price maker. 
B) The firm must be able to distinguish between customers. 
C) The firm must be able to prevent resale between customers. 
D) The firm must be able to product homogenous products. 
E) The firm must be facing a downward-sloping demand curve. 
A) The firm must be a price maker. 
B) The firm must be able to distinguish between customers. 
C) The firm must be able to prevent resale between customers. 
D) The firm must be able to product homogenous products. 
E) The firm must be facing a downward-sloping demand curve.

Question 12

If an industry experiences economies of scale in production,then entry into the market by other firms is easy.

Accepted Answer

A) True 
 B)False

Question 13

The following figure shows the revenue and cost curves of a monopolist. Figure 10.3   D: Average Revenue
MR: Marginal Revenue
ATC: Average Total Cost
MC: marginal Cost
-Consider the monopolist described in the Figure 10.3.If the firm engages in profit-maximizing behavior,economic profit per unit of output will be:

Accepted Answer

A) 0 
B) P2 
C) P4 minus P2 
D) P5 minus P4 
E) P5 minus P1 
A) 0 
B) P2 
C) P4 minus P2 
D) P5 minus P4 
E) P5 minus P1

Question 14

If the monopolist's price happens to be greater than the average-variable cost but less than the average total cost,in the short run the monopolist will:

Accepted Answer

A) be forced to shut down to minimize the cost. 
B) operate at a loss. 
C) operate at an economic profit. 
D) operate at a normal profit. 
E) go out of business. 
A) be forced to shut down to minimize the cost. 
B) operate at a loss. 
C) operate at an economic profit. 
D) operate at a normal profit. 
E) go out of business.

Question 15

Identify the correct statement.

Accepted Answer

A) A monopolist's pricing decision is limited by the demand for its product. 
B) A monopolist is able to choose any price and quantity combination that it desires. 
C) A monopolist can increase its profits by increasing price if the demand for its good is relatively elastic. 
D) A monopolist does not suffer losses even in the short run. 
E) A monopolist is not able to reap positive profits in the long run. 
A) A monopolist's pricing decision is limited by the demand for its product. 
B) A monopolist is able to choose any price and quantity combination that it desires. 
C) A monopolist can increase its profits by increasing price if the demand for its good is relatively elastic. 
D) A monopolist does not suffer losses even in the short run. 
E) A monopolist is not able to reap positive profits in the long run.

Question 16

The following figure shows the revenue curves of a monopolist: Figure 10.6   
D: Average revenue
MR: Marginal revenue
-In Figure 10.6,assume that marginal costs are constant at $2,500 and fixed costs are 0.What would be the amount of consumer surplus if the market was perfectly competitive?

Accepted Answer

A) $1,000,000 
B) $500,000 
C) $300,000 
D) $250,000 
A) $1,000,000 
B) $500,000 
C) $300,000 
D) $250,000

Question 17

A firm such as a public utility,which is the sole producer in a market in which government determines prices and standards of service,is known as a(n):

Accepted Answer

A) local monopoly. 
B) natural monopoly. 
C) regulated monopoly. 
D) oligopoly. 
E) monopolistically competitive firm. 
A) local monopoly. 
B) natural monopoly. 
C) regulated monopoly. 
D) oligopoly. 
E) monopolistically competitive firm.

Question 18

Suppose you inherit the only spring of mineral water in an area and want to maximize profits from this costless product.You would ask your customers to bring their containers with them and:

Accepted Answer

A) charge them the highest price possible to sell some output. 
B) charge them the lowest price possible to sell as much as you can. 
C) ask them how much they would like to pay and accept it. 
D) charge the price at which MR is zero. 
E) charge the price at which MR is maximum. 
A) charge them the highest price possible to sell some output. 
B) charge them the lowest price possible to sell as much as you can. 
C) ask them how much they would like to pay and accept it. 
D) charge the price at which MR is zero. 
E) charge the price at which MR is maximum.

Question 19

The following table shows the units of the output sold at different price levels by Gizmo's Inc. Table 10.1
  
-According to Table 10.1,at what level of output is marginal revenue equal to $14?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
E) 5 
A) 1 
B) 2 
C) 3 
D) 4 
E) 5

Question 20

The figures given below represent the revenue curves of a monopolist. Figure 10.2   
TR: Total revenue curve
AR: Average revenue curve
MR: Marginal revenue curve
-According to Figure 10.2,at point C:

Accepted Answer

A) price elasticity of demand is equal to infinity. 
B) price elasticity of supply is equal to 1. 
C) price elasticity of supply is equal to 0. 
D) price elasticity of demand is equal to 0. 
E) price elasticity of demand is equal to 1. 
A) price elasticity of demand is equal to infinity. 
B) price elasticity of supply is equal to 1. 
C) price elasticity of supply is equal to 0. 
D) price elasticity of demand is equal to 0. 
E) price elasticity of demand is equal to 1.

Which of the following is an assumption of the monopoly model?

The marginal revenue curve of a monopolist firm coincides with its average revenue curve.

A monopoly is a market model in which just one firm sells a product with no close substitutes.

A monopolist maximizes profit:

Which of the following will be the best example of a monopoly firm?

If at an output of 10 units a monopolist is earning a positive profit,marginal revenue is $6,and marginal cost is $4,then the monopolist:

The table given below shows the prices charged and marginal cost incurred by a monopolist for different units of the output. Table 10.3 - Assume that the firm described in Table 10.3 is incurring a total cost of $7,000 at the profit-maximizing output level.The firm will

Monopolization is a process by which the government restricts the growth of monopoly firms.

A deadweight loss arises under perfect competition.

Which of the following is not a necessary condition for price discrimination?

If an industry experiences economies of scale in production,then entry into the market by other firms is easy.

If the monopolist's price happens to be greater than the average-variable cost but less than the average total cost,in the short run the monopolist will:

Identify the correct statement.

The following figure shows the revenue curves of a monopolist: Figure 10.6 D: Average revenue MR: Marginal revenue -In Figure 10.6,assume that marginal costs are constant at $2,500 and fixed costs are 0.What would be the amount of consumer surplus if the market was perfectly competitive?

A firm such as a public utility,which is the sole producer in a market in which government determines prices and standards of service,is known as a(n):

Suppose you inherit the only spring of mineral water in an area and want to maximize profits from this costless product.You would ask your customers to bring their containers with them and:

The following table shows the units of the output sold at different price levels by Gizmo's Inc. Table 10.1 -According to Table 10.1,at what level of output is marginal revenue equal to $14?

The figures given below represent the revenue curves of a monopolist. Figure 10.2 TR: Total revenue curve AR: Average revenue curve MR: Marginal revenue curve -According to Figure 10.2,at point C:

Economics: The World Around You

Choice, opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

Elasticity: Demand and Supply

Consumer Choice

Supply: The Costs of Doing Business

Profit Maximization

Perfect Competition

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Resource Markets

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution,Poverty and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

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Exam 10: Monopoly

Which of the following is an assumption of the monopoly model?

The marginal revenue curve of a monopolist firm coincides with its average revenue curve.

A monopoly is a market model in which just one firm sells a product with no close substitutes.

A monopolist maximizes profit:

Which of the following will be the best example of a monopoly firm?

If at an output of 10 units a monopolist is earning a positive profit,marginal revenue is $6,and marginal cost is $4,then the monopolist:

The table given below shows the prices charged and marginal cost incurred by a monopolist for different units of the output. Table 10.3 - Assume that the firm described in Table 10.3 is incurring a total cost of $7,000 at the profit-maximizing output level.The firm will

Monopolization is a process by which the government restricts the growth of monopoly firms.

A deadweight loss arises under perfect competition.

Which of the following is not a necessary condition for price discrimination?

If an industry experiences economies of scale in production,then entry into the market by other firms is easy.

If the monopolist's price happens to be greater than the average-variable cost but less than the average total cost,in the short run the monopolist will:

Identify the correct statement.

The following figure shows the revenue curves of a monopolist: Figure 10.6 D: Average revenue MR: Marginal revenue -In Figure 10.6,assume that marginal costs are constant at $2,500 and fixed costs are 0.What would be the amount of consumer surplus if the market was perfectly competitive?

A firm such as a public utility,which is the sole producer in a market in which government determines prices and standards of service,is known as a(n):

Suppose you inherit the only spring of mineral water in an area and want to maximize profits from this costless product.You would ask your customers to bring their containers with them and:

The following table shows the units of the output sold at different price levels by Gizmo's Inc. Table 10.1 -According to Table 10.1,at what level of output is marginal revenue equal to $14?

The figures given below represent the revenue curves of a monopolist. Figure 10.2 TR: Total revenue curve AR: Average revenue curve MR: Marginal revenue curve -According to Figure 10.2,at point C:

Economics: The World Around You

Choice, opportunity Costs, and Specialization

Markets, Demand and Supply, and the Price System

The Market System and the Private and Public Sector

Elasticity: Demand and Supply

Consumer Choice

Supply: The Costs of Doing Business

Profit Maximization

Perfect Competition

Monopolistic Competition and Oligopoly

Antitrust and Regulation

Market Failures, Government Failures, and Rent Seeking

Resource Markets

The Labor Market

Capital Markets

The Land Market and Natural Resources

Aging, Social Security and Health Care

Income Distribution,Poverty and Government Policy

World Trade Equilibrium

International Trade Restrictions

Exchange Rates and Financial Links Between Countries

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