Question 1

If a firm takes the wage as given,then the supply curve of labor to that firm is

Accepted Answer

A) horizontal. 
B) vertical. 
C) upward sloping. 
D) downward sloping. 
A) horizontal. 
B) vertical. 
C) upward sloping. 
D) downward sloping. A

Question 2

The average cost for a typical electric-power-production firm is AC = 100 - 10Q + Q2 where Q is measured in billion kilowatt hours per day.At the current regulated price,consumers demand 4 billion kilowatt hours per day.Is this market a natural monopoly? If demand increases to 10 billion kilowatt hours,is this market a natural monopoly? Explain.

Accepted Answer

The firm enjoys economies of scale up to 5 billion kilowatt hours (kwhr)per day (Minimum AC).So at 4 billion kwhr per day,the firm is a natural monopoly.At 10 billion kwhr per day,this firm is no longer a natural monopoly.

Question 3

The monopoly maximizes profit by setting

Accepted Answer

A) price equal to marginal cost. 
B) price equal to marginal revenue. 
C) marginal revenue equal to marginal cost. 
D) marginal revenue equal to zero. 
A) price equal to marginal cost. 
B) price equal to marginal revenue. 
C) marginal revenue equal to marginal cost. 
D) marginal revenue equal to zero. C

Question 4

The Lerner Index is derived from the profit-maximizing condition of a firm.

Accepted Answer

A) True 
 B)False

Question 5

Empirical evidence from electric-power-producing firms suggests that the largest electric-power-producing firms are not natural monopolies because

Accepted Answer

A) the average cost curve for these firms is U-shaped. 
B) no electric-power-producing firms are natural monopolies. 
C) the largest firms enjoy economies of scale. 
D) the designation of natural monopoly can only be bestowed by the government. 
A) the average cost curve for these firms is U-shaped. 
B) no electric-power-producing firms are natural monopolies. 
C) the largest firms enjoy economies of scale. 
D) the designation of natural monopoly can only be bestowed by the government.

Question 6

The deadweight loss represent the sum of added consumer and producer surplus if the firm would produce the quantity where P = MC.

Accepted Answer

A) True 
 B)False

Question 7

When a monopoly is maximizing its profits,

Accepted Answer

A) MR > MC. B) MR dMC/dQ. D) dMR/dQ < dMC/dQ. A) MR > MC. B) MR dMC/dQ. D) dMR/dQ < dMC/dQ.

Question 8

Suppose that market demand for a good is Q = 480 - 2p.The marginal cost is MC = 2Q.Calculate the deadweight loss resulting from a monopoly in this market.

Accepted Answer

First,solve for the competitive equilibr

Question 9

Relative to a competitive labor market,monopsony

Accepted Answer

A) is also efficient. 
B) creates a deadweight loss because it pays an excessive wage. 
C) creates a deadweight loss because the wage is below the marginal revenue product of labor. 
D) creates a deadweight loss because the wage is above the marginal revenue product of labor. 
A) is also efficient. 
B) creates a deadweight loss because it pays an excessive wage. 
C) creates a deadweight loss because the wage is below the marginal revenue product of labor. 
D) creates a deadweight loss because the wage is above the marginal revenue product of labor.

Question 10

Consider a monopolist with linear (inverse)demand p = a - bQ and constant average and marginal cost,c.Derive the monopolist's profit and the deadweight loss generated.Show that in such cases of linear demand and constant average and marginal cost,the deadweight loss is 50% of the monopolist's profits.

Accepted Answer

Profit = (a - bQ)Q - cQ
dProfi

Question 11

Which of the following would be most able to act like a monopsonist?

Accepted Answer

A) a hospital in a small isolated town 
B) a hospital in a very big city 
C) a law firm in Washington,D.C. 
D) a computer software firm in Silicon Valley 
A) a hospital in a small isolated town 
B) a hospital in a very big city 
C) a law firm in Washington,D.C. 
D) a computer software firm in Silicon Valley

Question 12

-The above figure shows the demand and marginal cost curves for a monopoly.Under monopoly,consumer surplus equals

Accepted Answer

A) a + b. 
B) a + b + c. 
C) a + b + c + d + e + f. 
D) None of the above. 
A) a + b. 
B) a + b + c. 
C) a + b + c + d + e + f. 
D) None of the above.

Question 13

Which of the following total cost functions suggests the presence of a natural monopoly?

Accepted Answer

A) TC = 2Q 
B) TC = 100 + 2Q 
C) TC = 100 + 2Q2 
D) All of the above 
A) TC = 2Q 
B) TC = 100 + 2Q 
C) TC = 100 + 2Q2 
D) All of the above

Question 14

Which of the following is an example of the snob effect?

Accepted Answer

A) The fewer consumers that buy the operating system,the fewer the applications that will be available. 
B) The more people that buy a luxury watch,the less value consumers put on the watch. 
C) The fewer ATMs available in the city,the fewer consumers want to join the network. 
D) None of the above. 
A) The fewer consumers that buy the operating system,the fewer the applications that will be available. 
B) The more people that buy a luxury watch,the less value consumers put on the watch. 
C) The fewer ATMs available in the city,the fewer consumers want to join the network. 
D) None of the above.

Question 15

Since there are no close substitutes for the monopoly's product,the monopoly can charge any price it wishes.

Accepted Answer

A) True 
 B)False

Question 16

Why is the monopoly total welfare lower than the competitive total welfare?

Accepted Answer

A monopoly restricts output relative to

Question 17

A justification for patents is that without patents consumer surplus would be

Accepted Answer

A) larger than with the patent. 
B) zero since the product would not be invented. 
C) only slightly smaller than with the patent. 
D) zero since the monopoly would be a revenue maximizer. 
A) larger than with the patent. 
B) zero since the product would not be invented. 
C) only slightly smaller than with the patent. 
D) zero since the monopoly would be a revenue maximizer.

Question 18

The ability of a monopoly to charge a price that exceeds marginal cost depends on

Accepted Answer

A) the price elasticity of supply. 
B) price elasticity of demand. 
C) slope of the demand curve. 
D) shape of the marginal cost curve. 
A) the price elasticity of supply. 
B) price elasticity of demand. 
C) slope of the demand curve. 
D) shape of the marginal cost curve.

Question 19

Why does a monopsonist's marginal expenditure curve lie above the labor supply curve?

Accepted Answer

To hire additional labor,the monopsonist

Question 20

-The above figure shows the demand and cost curves facing a monopoly.At the profit-maximizing price,the elasticity of demand equals

Accepted Answer

A) -1. 
B) zero. 
C) infinity. 
D) -3. 
A) -1. 
B) zero. 
C) infinity. 
D) -3.

If a firm takes the wage as given,then the supply curve of labor to that firm is

The monopoly maximizes profit by setting

The Lerner Index is derived from the profit-maximizing condition of a firm.

Empirical evidence from electric-power-producing firms suggests that the largest electric-power-producing firms are not natural monopolies because

The deadweight loss represent the sum of added consumer and producer surplus if the firm would produce the quantity where P = MC.

When a monopoly is maximizing its profits,

Suppose that market demand for a good is Q = 480 - 2p.The marginal cost is MC = 2Q.Calculate the deadweight loss resulting from a monopoly in this market.

Relative to a competitive labor market,monopsony

Which of the following would be most able to act like a monopsonist?

-The above figure shows the demand and marginal cost curves for a monopoly.Under monopoly,consumer surplus equals

Which of the following total cost functions suggests the presence of a natural monopoly?

Which of the following is an example of the snob effect?

Since there are no close substitutes for the monopoly's product,the monopoly can charge any price it wishes.

Why is the monopoly total welfare lower than the competitive total welfare?

A justification for patents is that without patents consumer surplus would be

The ability of a monopoly to charge a price that exceeds marginal cost depends on

Why does a monopsonist's marginal expenditure curve lie above the labor supply curve?

-The above figure shows the demand and cost curves facing a monopoly.At the profit-maximizing price,the elasticity of demand equals

Introduction

Supply and Demand

A Consumers Constrained Choice

Demand

Consumer Welfare and Policy Analysis

Firms and Production

Costs

Competitive Firms and Markets

Properties and Applications of the Competitive Model

General Equilibrium and Economic Welfare

Pricing and Advertising

Game Theory

Oligopoly and Monopolistic Competition

Factor Markets

Uncertainty

Property Rights, Externalities, Rivalry, and Exclusion

Asymmetric Information

Contracts and Moral Hazards

Filters

Exam 11: Monopoly and Monopsony

If a firm takes the wage as given,then the supply curve of labor to that firm is

The monopoly maximizes profit by setting

The Lerner Index is derived from the profit-maximizing condition of a firm.

Empirical evidence from electric-power-producing firms suggests that the largest electric-power-producing firms are not natural monopolies because

The deadweight loss represent the sum of added consumer and producer surplus if the firm would produce the quantity where P = MC.

When a monopoly is maximizing its profits,

Suppose that market demand for a good is Q = 480 - 2p.The marginal cost is MC = 2Q.Calculate the deadweight loss resulting from a monopoly in this market.

Relative to a competitive labor market,monopsony

Which of the following would be most able to act like a monopsonist?

-The above figure shows the demand and marginal cost curves for a monopoly.Under monopoly,consumer surplus equals

Which of the following total cost functions suggests the presence of a natural monopoly?

Which of the following is an example of the snob effect?

Since there are no close substitutes for the monopoly's product,the monopoly can charge any price it wishes.

Why is the monopoly total welfare lower than the competitive total welfare?

A justification for patents is that without patents consumer surplus would be

The ability of a monopoly to charge a price that exceeds marginal cost depends on

Why does a monopsonist's marginal expenditure curve lie above the labor supply curve?

-The above figure shows the demand and cost curves facing a monopoly.At the profit-maximizing price,the elasticity of demand equals

Introduction

Supply and Demand

A Consumers Constrained Choice

Demand

Consumer Welfare and Policy Analysis

Firms and Production

Costs

Competitive Firms and Markets

Properties and Applications of the Competitive Model

General Equilibrium and Economic Welfare

Pricing and Advertising

Game Theory

Oligopoly and Monopolistic Competition

Factor Markets

Uncertainty

Property Rights, Externalities, Rivalry, and Exclusion

Asymmetric Information

Contracts and Moral Hazards

Filters