Question 1

If a competing firm is able to overcome an entry barrier of a monopolized industry,the demand curve of the single firm already in the industry will

Accepted Answer

A) shift to the right. 
B) remain the same in spite of the entry of the other firm. 
C) shift to the left. 
D) become less elastic. 
E) shift to the left and become more elastic. 
A) shift to the right. 
B) remain the same in spite of the entry of the other firm. 
C) shift to the left. 
D) become less elastic. 
E) shift to the left and become more elastic. E

Question 2

Suppose a monopolist faces the demand curve and cost curves shown below.   FIGURE 10-5
-Refer to Figure 10-5.The average per unit profit earned by this profit-maximizing single-price monopolist is

Accepted Answer

A) P4 - P0. 
B) P4 - P1. 
C) P4 - P2. 
D) P4 - P3. 
E) P3 - P2. 
A) P4 - P0. 
B) P4 - P1. 
C) P4 - P2. 
D) P4 - P3. 
E) P3 - P2. C

Question 3

Suppose that a single-price monopolist knows the following information:   The total profit being earned by this firm at the current level of output is

Accepted Answer

A) $1500. 
B) $3000. 
C) $6500. 
D) $10 500. 
E) $13 500. 
A) $1500. 
B) $3000. 
C) $6500. 
D) $10 500. 
E) $13 500. B

Question 4

Suppose the technology of production is such that the typical firm's minimum efficient scale is 1400 units per week at an average long-run cost of $9 per unit.If the total quantity demanded in this market at a price of $9 per unit is 22 million units per week,the likely result will be

Accepted Answer

A) a cartel. 
B) price discrimination. 
C) a natural monopoly. 
D) a concentrated oligopoly. 
E) a competitive industry. 
A) a cartel. 
B) price discrimination. 
C) a natural monopoly. 
D) a concentrated oligopoly. 
E) a competitive industry.

Question 5

The average revenue curve for a single-price monopolist

Accepted Answer

A) is a horizontal line,equal to the price of its product. 
B) lies below its demand curve. 
C) coincides with its demand curve. 
D) slopes upward to the right. 
E) does not exist. 
A) is a horizontal line,equal to the price of its product. 
B) lies below its demand curve. 
C) coincides with its demand curve. 
D) slopes upward to the right. 
E) does not exist.

Question 6

Consider a monopolist that is able to distinguish between two distinct market segments,A and B,for its product.Marginal cost is constant at $18 for each unit produced.The firm is currently selling its output at a single price and allocating its output across segments such that marginal revenue in segment A is $25 and marginal revenue in segment B is $15.How can this firm maximize its profit?

Accepted Answer

A) increase the output in segment A and decrease the output in segment B 
B) increase the output in segments A and B 
C) decrease the output in segment A and increase the output in segment B 
D) decrease the output in segments A and B 
E) maintain the current output and its allocation across segments 
A) increase the output in segment A and decrease the output in segment B 
B) increase the output in segments A and B 
C) decrease the output in segment A and increase the output in segment B 
D) decrease the output in segments A and B 
E) maintain the current output and its allocation across segments

Question 7

A monopolist will be earning positive economic profits

Accepted Answer

A) at all times,since it controls the market. 
B) when price equals marginal cost. 
C) whenever marginal revenue equals marginal cost. 
D) when price exceeds average total cost. 
E) whenever marginal revenue is positive. 
A) at all times,since it controls the market. 
B) when price equals marginal cost. 
C) whenever marginal revenue equals marginal cost. 
D) when price exceeds average total cost. 
E) whenever marginal revenue is positive.

Question 8

The figure below shows the demand schedule and demand curve for a product produced by a single-price monopolist.   FIGURE 10-1
-Refer to Figure 10-1.What is the level of output at which marginal revenue first becomes negative?

Accepted Answer

A) 5th unit 
B) 6th unit 
C) 7th unit 
D) 8th unit 
E) 9th unit 
A) 5th unit 
B) 6th unit 
C) 7th unit 
D) 8th unit 
E) 9th unit

Question 9

A monopoly is distinguished from a firm operating under any other market structure in the following way: the monopoly

Accepted Answer

A) charges a price higher than its average revenue. 
B) can choose its output level. 
C) can choose its level of cost. 
D) does not produce at a profit-maximizing level of output. 
E) faces a demand curve which is identical to the market demand curve. 
A) charges a price higher than its average revenue. 
B) can choose its output level. 
C) can choose its level of cost. 
D) does not produce at a profit-maximizing level of output. 
E) faces a demand curve which is identical to the market demand curve.

Question 10

Marginal revenue is less than price for a single-price monopolist because the

Accepted Answer

A) firm's output decisions do not affect the selling price. 
B) firm must lower its price for all units if it wants to sell more of the product. 
C) monopolist charges a price higher than the unit production cost. 
D) monopolist must worry about how its price setting will lead to entry by other firms. 
E) monopolist has achieved economies of scale. 
A) firm's output decisions do not affect the selling price. 
B) firm must lower its price for all units if it wants to sell more of the product. 
C) monopolist charges a price higher than the unit production cost. 
D) monopolist must worry about how its price setting will lead to entry by other firms. 
E) monopolist has achieved economies of scale.

Question 11

If a monopolist is practising perfect price discrimination,we know that

Accepted Answer

A) the firm is facing a perfectly elastic demand curve. 
B) the firm is facing a perfectly inelastic demand curve. 
C) marginal cost is rising as output rises. 
D) the firm is producing a lower output than it would if it were a single-price monopolist. 
E) the firm is selling each unit at a different price and capturing all consumer surplus. 
A) the firm is facing a perfectly elastic demand curve. 
B) the firm is facing a perfectly inelastic demand curve. 
C) marginal cost is rising as output rises. 
D) the firm is producing a lower output than it would if it were a single-price monopolist. 
E) the firm is selling each unit at a different price and capturing all consumer surplus.

Question 12

Your food-services company has been named as the monopoly provider of meals at a small university.The cost and demand schedules are:
   TABLE 10-2
-Refer to Table 10-2.The marginal cost between 300 and 400 meals per day is

Accepted Answer

A) $0. 
B) $1.00. 
C) $1.50. 
D) $2.00. 
E) $3.00. 
A) $0. 
B) $1.00. 
C) $1.50. 
D) $2.00. 
E) $3.00.

Question 13

Which of the following statements about single-price monopolists is correct?

Accepted Answer

A) The profit-maximizing level of output is the same as the total revenue-maximizing level of output. 
B) The average revenue curve lies above the demand curve. 
C) AR is greater than MR. 
D) Price elasticity of demand will be equal to one if the firm is profit-maximizing. 
E) Price equals marginal cost at the profit-maximizing level of output. 
A) The profit-maximizing level of output is the same as the total revenue-maximizing level of output. 
B) The average revenue curve lies above the demand curve. 
C) AR is greater than MR. 
D) Price elasticity of demand will be equal to one if the firm is profit-maximizing. 
E) Price equals marginal cost at the profit-maximizing level of output.

Question 14

Your food-services company has been named as the monopoly provider of meals at a small university.The cost and demand schedules are:
   TABLE 10-2
-Refer to Table 10-2,and suppose that the firm is a single-price monopolist.The level of output at which profits are zero is between

Accepted Answer

A) 0 and 100 meals. 
B) 100 and 200 meals. 
C) 200 and 300 meals. 
D) 300 and 400 meals. 
E) 300 and 500 meals. 
A) 0 and 100 meals. 
B) 100 and 200 meals. 
C) 200 and 300 meals. 
D) 300 and 400 meals. 
E) 300 and 500 meals.

Question 15

Consider a monopolist that is able to distinguish between two distinct market segments,A and B,for its product.Marginal cost is constant at $18 for each unit produced.The firm is currently selling its output at a single price and allocating its output across segments such that marginal revenue in segment A is $25 and marginal revenue in segment B is $15.Is this firm maximizing its profit?

Accepted Answer

A) Yes,because it has set a price such that MC is between the MRs of the two market segments. 
B) No,because it is only possible to equate MR and MC when there is a single MR curve. 
C) Yes,because since marginal cost is constant,the firm must set a single price. 
D) No,this firm can increase its profits by price discriminating across the two market segments. 
A) Yes,because it has set a price such that MC is between the MRs of the two market segments. 
B) No,because it is only possible to equate MR and MC when there is a single MR curve. 
C) Yes,because since marginal cost is constant,the firm must set a single price. 
D) No,this firm can increase its profits by price discriminating across the two market segments.

Question 16

TABLE 10-1
-Refer to Table 10-1,which displays the demand schedule for a single-price monopolist.Which of the following statements about price elasticity of demand is true?

Accepted Answer

A) demand is unit-elastic at a price of $4 
B) demand is elastic at a price of $8 
C) demand is elastic at a price of $5 
D) demand is inelastic at a price of $8 
E) demand is elastic at a price of $3 
A) demand is unit-elastic at a price of $4 
B) demand is elastic at a price of $8 
C) demand is elastic at a price of $5 
D) demand is inelastic at a price of $8 
E) demand is elastic at a price of $3

Question 17

The diagram below shows the demand curve and marginal cost and marginal revenue curves for a new heart medication for which the pharmaceutical firm holds a 20-year patent on its production and sales.This protection gives the firm monopoly power for the 20 years of the patent.   FIGURE 10-6
-Refer to Figure 10-6.Assume this pharmaceutical firm is practicing perfect price discrimination among its buyers.At its profit-maximizing level of output it will produce

Accepted Answer

A) Q1 units and charge a price of p1 on the last unit sold. 
B) Q1 units and charge a price of p1 on all units. 
C) Q0 units and charge a price of p0 on the last unit sold. 
D) Q0 units and charge a price of p0 on all units. 
E) It is not possible to determine with the information provided. 
A) Q1 units and charge a price of p1 on the last unit sold. 
B) Q1 units and charge a price of p1 on all units. 
C) Q0 units and charge a price of p0 on the last unit sold. 
D) Q0 units and charge a price of p0 on all units. 
E) It is not possible to determine with the information provided.

Question 18

The diagram below shows the demand curve facing a single-price monopolist.   FIGURE 10-4
-Refer to Figure 10-4.At what level of quantity does the marginal revenue curve for this firm intersect the horizontal axis?

Accepted Answer

A) 0 
B) 250 
C) 350 
D) 500 
E) 700 
A) 0 
B) 250 
C) 350 
D) 500 
E) 700

Question 19

Suppose the technology of an industry is such that the typical firm's minimum efficient scale is 18 units per day at an average long-run cost of $1600 per unit.If the total quantity demanded at a price of $1750 per unit is 16 units per month,the likely result would be

Accepted Answer

A) a competitive industry. 
B) a cartel. 
C) price discrimination. 
D) a natural monopoly. 
E) a concentrated oligopoly. 
A) a competitive industry. 
B) a cartel. 
C) price discrimination. 
D) a natural monopoly. 
E) a concentrated oligopoly.

Question 20

Consider a monopolist that is able to distinguish between two distinct market segments,A and B,for its product.Marginal cost is constant at $100 for each unit produced.The firm is currently selling its output at a single price and allocating its output across segments such that marginal revenue in segment A is $85 and marginal revenue in segment B is $105.How can this firm maximize its profit?

Accepted Answer

A) increase the output in segment A and decrease the output in segment B 
B) increase the output in segments A and B 
C) decrease the output in segment A and increase the output in segment B 
D) decrease the output in segments A and B 
E) maintain the current output and its allocation across segments 
A) increase the output in segment A and decrease the output in segment B 
B) increase the output in segments A and B 
C) decrease the output in segment A and increase the output in segment B 
D) decrease the output in segments A and B 
E) maintain the current output and its allocation across segments

Exam 10: Monopoly, cartels, and Price Discrimination

If a competing firm is able to overcome an entry barrier of a monopolized industry,the demand curve of the single firm already in the industry will

Suppose a monopolist faces the demand curve and cost curves shown below. FIGURE 10-5 -Refer to Figure 10-5.The average per unit profit earned by this profit-maximizing single-price monopolist is

Suppose that a single-price monopolist knows the following information: The total profit being earned by this firm at the current level of output is

Suppose the technology of production is such that the typical firm's minimum efficient scale is 1400 units per week at an average long-run cost of $9 per unit.If the total quantity demanded in this market at a price of $9 per unit is 22 million units per week,the likely result will be

The average revenue curve for a single-price monopolist

A monopolist will be earning positive economic profits

The figure below shows the demand schedule and demand curve for a product produced by a single-price monopolist. FIGURE 10-1 -Refer to Figure 10-1.What is the level of output at which marginal revenue first becomes negative?

A monopoly is distinguished from a firm operating under any other market structure in the following way: the monopoly

Marginal revenue is less than price for a single-price monopolist because the

If a monopolist is practising perfect price discrimination,we know that

Your food-services company has been named as the monopoly provider of meals at a small university.The cost and demand schedules are: TABLE 10-2 -Refer to Table 10-2.The marginal cost between 300 and 400 meals per day is

Which of the following statements about single-price monopolists is correct?

Your food-services company has been named as the monopoly provider of meals at a small university.The cost and demand schedules are: TABLE 10-2 -Refer to Table 10-2,and suppose that the firm is a single-price monopolist.The level of output at which profits are zero is between

TABLE 10-1 -Refer to Table 10-1,which displays the demand schedule for a single-price monopolist.Which of the following statements about price elasticity of demand is true?

The diagram below shows the demand curve facing a single-price monopolist. FIGURE 10-4 -Refer to Figure 10-4.At what level of quantity does the marginal revenue curve for this firm intersect the horizontal axis?

Suppose the technology of an industry is such that the typical firm's minimum efficient scale is 18 units per day at an average long-run cost of $1600 per unit.If the total quantity demanded at a price of $1750 per unit is 16 units per month,the likely result would be

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