Question 1

A monopoly creates a deadweight loss to society because it earns both short-run and long-run positive economic profits.

Accepted Answer

A) True 
 B)False  False

Question 2

Antitrust laws allow the government to

Accepted Answer

A)  collect revenues through the antitrust tax. 
B)  break up companies. 
C)  purchase privately-held companies through eminent domain. 
D)  All of the above are correct. 
A)  collect revenues through the antitrust tax. 
B)  break up companies. 
C)  purchase privately-held companies through eminent domain. 
D)  All of the above are correct. B

Question 3

In many countries, the government chooses to "internalize" the monopoly by owning monopoly providers of goods and services. (In some cases these firms are "nationalized," and the government actually buys or confiscates firms that operate in monopoly markets). What would be the advantages and disadvantages of such an approach to ensure that the "best interest of society" is promoted in these markets? Explain your answer.

Accepted Answer

As long as the government "owner" pursues a production and pricing policy that approaches a competitive outcome, social well-being can be enhanced. In this case the government ownership would benefit society. However, in most cases, government owners operate much like private sector monopolists. The political economy of government institutions does not ensure that government owners will pursue socially optimal policy. Also, governments have no incentive to reduce costs or innovate.

Question 4

Figure 15-17  
-Refer to Figure 15-17. Which of the following areas represents the profit earned by this profit-maximizing monopolist?

Accepted Answer

A)  BCFE 
B)  ABE 
C)  EFG 
D)  CFIH 
A)  BCFE 
B)  ABE 
C)  EFG 
D)  CFIH

Question 5

A monopoly firm can sell 150 units of output for $10 per unit. Alternatively, it can sell 151 units of output for $9.98 per unit. The marginal revenue of the 151st unit of output is

Accepted Answer

A)  -$6.98. 
B)  -$0.02. 
C)  $2.45. 
D)  $6.98. 
A)  -$6.98. 
B)  -$0.02. 
C)  $2.45. 
D)  $6.98.

Question 6

In order to sell more of its product, a monopolist must

Accepted Answer

A)  sell to the government. 
B)  sell in international markets. 
C)  lower its price. 
D)  use its market power to force up the price of complementary products. 
A)  sell to the government. 
B)  sell in international markets. 
C)  lower its price. 
D)  use its market power to force up the price of complementary products.

Question 7

The fundamental cause of monopoly is

Accepted Answer

The answer of The fundamental cause of monopoly is...

Question 8

Natural monopolies differ from other forms of monopoly because they are

Accepted Answer

A)  not subject to barriers to entry. 
B)  not regulated by government. 
C)  unable to sustain long-run profits. 
D)  are generally not worried about competition eroding their monopoly position in the market. 
A)  not subject to barriers to entry. 
B)  not regulated by government. 
C)  unable to sustain long-run profits. 
D)  are generally not worried about competition eroding their monopoly position in the market.

Question 9

A firm cannot price discriminate if

Accepted Answer

A)  its has declining marginal revenue. 
B)  it operates in a competitive market. 
C)  buyers only reveal the price they are willing to pay for the product. 
D)  it has a constant marginal cost. 
A)  its has declining marginal revenue. 
B)  it operates in a competitive market. 
C)  buyers only reveal the price they are willing to pay for the product. 
D)  it has a constant marginal cost.

Question 10

Figure 15-7  
-Refer to Figure 15-7. A profit-maximizing monopolist would incur total costs of

Accepted Answer

A)  $81. 
B)  $120. 
C)  $144. 
D)  $240. 
A)  $81. 
B)  $120. 
C)  $144. 
D)  $240.

Question 11

If government regulation sets the maximum price for a natural monopoly equal to its marginal cost, then the natural monopolist will

Accepted Answer

A)  earn economic losses. 
B)  earn economic profits. 
C)  earn zero economic profits. 
D)  produce a lower quantity of output than is socially optimal. 
A)  earn economic losses. 
B)  earn economic profits. 
C)  earn zero economic profits. 
D)  produce a lower quantity of output than is socially optimal.

Question 12

Which of the following is not correct?

Accepted Answer

A)  The demand curve facing a competitive firm is perfectly elastic. 
B)  The demand curve facing a monopolist is the market demand curve. 
C)  A monopolist can charge any price and sell any quantity that it chooses. 
D)  A monopolist can alter the market price by adjusting the quantity that it produces. 
A)  The demand curve facing a competitive firm is perfectly elastic. 
B)  The demand curve facing a monopolist is the market demand curve. 
C)  A monopolist can charge any price and sell any quantity that it chooses. 
D)  A monopolist can alter the market price by adjusting the quantity that it produces.

Question 13

Economic welfare is generally measured by (i) profit.
(ii) total surplus.
(iii) the price consumers pay for the product.

Accepted Answer

A)  (i) and (ii) only 
B)  (ii) and (iii) only 
C)  (ii) only 
D)  (i), (ii), and (iii) 
A)  (i) and (ii) only 
B)  (ii) and (iii) only 
C)  (ii) only 
D)  (i), (ii), and (iii)

Question 14

For a monopoly,

Accepted Answer

A)  average revenue exceeds marginal revenue. 
B)  average revenue equals marginal revenue. 
C)  average revenue is less than marginal revenue. 
D)  price equals marginal revenue. 
A)  average revenue exceeds marginal revenue. 
B)  average revenue equals marginal revenue. 
C)  average revenue is less than marginal revenue. 
D)  price equals marginal revenue.

Question 15

Figure 15-3  
-Refer to Figure 15-3. Which panel could represent the demand curve facing a soybean farmer?

Accepted Answer

A)  Panel A 
B)  Panel B 
C)  Panel C 
D)  Panel D 
A)  Panel A 
B)  Panel B 
C)  Panel C 
D)  Panel D

Question 16

The profit that a monopolist earns represents a loss to society that is measured through deadweight loss.

Accepted Answer

A) True 
 B)False

Question 17

A common solution to monopoly in European countries is public ownership.

Accepted Answer

A) True 
 B)False

Question 18

Figure 15-4  
-Refer to Figure 15-4. The average total cost curve for a monopoly firm is depicted by curve

Accepted Answer

A)  A. 
B)  B. 
C)  C. 
D)  D. 
A)  A. 
B)  B. 
C)  C. 
D)  D.

Question 19

For a monopoly firm,

Accepted Answer

A)  price always exceeds average revenue. 
B)  price always exceeds marginal revenue. 
C)  any price-quantity combination will maximize profits. 
D)  All of the above are correct. 
A)  price always exceeds average revenue. 
B)  price always exceeds marginal revenue. 
C)  any price-quantity combination will maximize profits. 
D)  All of the above are correct.

Question 20

Figure 15-25  
-Refer to Figure 15-25. If a regulator requires this firm to charge a fair return price, which letter represents the amount of output it will produce?

Accepted Answer

The answer of Figure 15-25  
-Refer to Figure 15-25....

Exam 15: Monopoly

A monopoly creates a deadweight loss to society because it earns both short-run and long-run positive economic profits.

Antitrust laws allow the government to

Figure 15-17 -Refer to Figure 15-17. Which of the following areas represents the profit earned by this profit-maximizing monopolist?

A monopoly firm can sell 150 units of output for $10 per unit. Alternatively, it can sell 151 units of output for $9.98 per unit. The marginal revenue of the 151st unit of output is

In order to sell more of its product, a monopolist must

The fundamental cause of monopoly is

Natural monopolies differ from other forms of monopoly because they are

A firm cannot price discriminate if

Figure 15-7 -Refer to Figure 15-7. A profit-maximizing monopolist would incur total costs of

If government regulation sets the maximum price for a natural monopoly equal to its marginal cost, then the natural monopolist will

Which of the following is not correct?

Economic welfare is generally measured by (i) profit. (ii) total surplus. (iii) the price consumers pay for the product.

For a monopoly,

Figure 15-3 -Refer to Figure 15-3. Which panel could represent the demand curve facing a soybean farmer?

The profit that a monopolist earns represents a loss to society that is measured through deadweight loss.

A common solution to monopoly in European countries is public ownership.

Figure 15-4 -Refer to Figure 15-4. The average total cost curve for a monopoly firm is depicted by curve

For a monopoly firm,

Figure 15-25 -Refer to Figure 15-25. If a regulator requires this firm to charge a fair return price, which letter represents the amount of output it will produce?

Ten Principles of Economics

Thinking Like an Economist

Interdependence and the Gains From Trade

The Market Forces of Supply and Demand

Elasticity and Its Application

Supply, Demand, and Government Policies

Consumers, Producers, and the Efficiency of Markets

Application: The Costs of Taxation

Application: International Trade

Externalities

Public Goods and Common Resources

The Design of the Tax System

The Costs of Production

Firms in Competitive Markets

Monopolistic Competition

Oligopoly

The Markets for the Factors of Production

Earnings and Discrimination

Income Inequality and Poverty

The Theory of Consumer Choice

Frontiers of Microeconomics

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