Question 1

Which of the following is true of the demand curve that a monopolist faces?

Accepted Answer

A) It is perfectly elastic at the equilibrium price level. 
B) It is perfectly inelastic at the equilibrium output level. 
C) It shows how much the monopolist can sell given the output of the other firms. 
D) It is the same as the market demand curve. 
A) It is perfectly elastic at the equilibrium price level. 
B) It is perfectly inelastic at the equilibrium output level. 
C) It shows how much the monopolist can sell given the output of the other firms. 
D) It is the same as the market demand curve. D

Question 2

Assume that Bost Incorporated sells game cartridges that can be used in a popular home video system.The company currently sells 300 cartridges per week and earns $500 in profit.The production manager calculates that the marginal cost of producing the next unit is $5,while marginal revenue from one additional unit is $10.Based on this information we would conclude that:

Accepted Answer

A) Bost should reduce their output to 295 cartridges to increase profit. 
B) Bost's profit would fall to $495 by increasing output by 1 unit. 
C) Bost's profit would rise to $505 by increasing output by 1 unit. 
D) Bost's profit-maximizing output is 300 cartridges. 
A) Bost should reduce their output to 295 cartridges to increase profit. 
B) Bost's profit would fall to $495 by increasing output by 1 unit. 
C) Bost's profit would rise to $505 by increasing output by 1 unit. 
D) Bost's profit-maximizing output is 300 cartridges. C

Question 3

Given the profit function Π = R - C,derive a monopolist's profit-maximizing price and quantity.

Accepted Answer

The profit function is given by Π = R - C where R is total revenue,Π is profit,and C is total cost.Since Π,R,and C are functions of the quantity of output,differentiating with respect to Q:   
The first-order condition for maximization of profit is that the first derivative of the profit function with respect to Q should be equal to 0.   
The above equation shows that marginal revenue   should be equal to marginal cost   for output to be at the profit-maximizing level.

Question 4

Which of the following is true for a monopoly firm?

Accepted Answer

A) The marginal revenue curve is the same as the average revenue curve. 
B) The demand curve is a declining average revenue curve. 
C) The demand curve,average revenue curve,and marginal revenue curve are the same. 
D) The total revenue curve is the same as the demand curve. 
A) The marginal revenue curve is the same as the average revenue curve. 
B) The demand curve is a declining average revenue curve. 
C) The demand curve,average revenue curve,and marginal revenue curve are the same. 
D) The total revenue curve is the same as the demand curve.

Question 5

The following figure shows the marginal cost [MC],average cost [AC],marginal revenue [MR],and demand curves for a profit-maximizing monopolist.  
Refer to Figure 11-2.If the government wishes to regulate the monopoly firm by setting the price at OB in the market,the monopolist will:

Accepted Answer

A) produce the efficient quantity of output. 
B) have to shut down to cut losses. 
C) continue to earn economic profits. 
D) earn a higher profit. 
A) produce the efficient quantity of output. 
B) have to shut down to cut losses. 
C) continue to earn economic profits. 
D) earn a higher profit.

Question 6

Compared to a competitive industry,ceteris paribus,a monopoly:

Accepted Answer

A) sells a higher quantity and charges a higher price. 
B) sells the same quantity but charges a higher price. 
C) sells a smaller quantity but charges the same price. 
D) sells a smaller quantity but charges a higher price. 
A) sells a higher quantity and charges a higher price. 
B) sells the same quantity but charges a higher price. 
C) sells a smaller quantity but charges the same price. 
D) sells a smaller quantity but charges a higher price.

Question 7

Which of the following is true for a monopoly firm?

Accepted Answer

A) The monopolist's demand curve is downward-sloping and the marginal revenue curve lies above the demand curve. 
B) The monopolist's demand curve is upward-sloping and is the same as the marginal revenue curve. 
C) The monopolist's demand curve is downward-sloping and the marginal revenue curve lies below the average revenue curve. 
D) The monopolist's demand curve is upward-sloping and is the same as the total revenue curve. 
A) The monopolist's demand curve is downward-sloping and the marginal revenue curve lies above the demand curve. 
B) The monopolist's demand curve is upward-sloping and is the same as the marginal revenue curve. 
C) The monopolist's demand curve is downward-sloping and the marginal revenue curve lies below the average revenue curve. 
D) The monopolist's demand curve is upward-sloping and is the same as the total revenue curve.

Question 8

Use the following figure to answer the question : Figure 11-1 : shows the downward-sloping demand curve [D] and marginal revenue [MR] curve and the upward-sloping marginal cost [MC] curve for a monopolist.  
-Refer to Figure 11-1.If the government wishes to regulate the monopoly firm by restricting the price at OC in the market,the demand curve will be equal to _____.

Accepted Answer

A) VD 
B) CIJ 
C) CFD 
D) FD 
A) VD 
B) CIJ 
C) CFD 
D) FD

Question 9

Which of the following correctly describes a natural monopoly?

Accepted Answer

A) A natural monopoly is an industry in which products are differentiated from one another. 
B) A natural monopoly exists if one large firm's long-run average cost curve is upward-sloping. 
C) A natural monopoly is defined as a firm that operates in an industry that has significant regulatory barriers to entry. 
D) A natural monopoly is an industry that exhibits economies of scale. 
A) A natural monopoly is an industry in which products are differentiated from one another. 
B) A natural monopoly exists if one large firm's long-run average cost curve is upward-sloping. 
C) A natural monopoly is defined as a firm that operates in an industry that has significant regulatory barriers to entry. 
D) A natural monopoly is an industry that exhibits economies of scale.

Question 10

A deadweight loss arises in a monopoly market because _____ by the monopolist.

Accepted Answer

A) the marginal benefit [MB] is greater than marginal cost [MC],for the output that is not produced 
B) the MB is greater than the MC,for the output that is produced 
C) the MC is greater than MB,up to the profit-maximizing level of output produced 
D) the MB is greater than MC,for output that is not produced 
A) the marginal benefit [MB] is greater than marginal cost [MC],for the output that is not produced 
B) the MB is greater than the MC,for the output that is produced 
C) the MC is greater than MB,up to the profit-maximizing level of output produced 
D) the MB is greater than MC,for output that is not produced

Question 11

Suppose your pharmaceutical company,which operates as a monopoly,has a patent on a drug with an estimated price elasticity of demand of 1.2.If the marginal cost of producing each pill is $3,at what price should you sell your drug if profit maximization is your objective?

Accepted Answer

A) $3 
B) $9 
C) $16 
D) $18 
A) $3 
B) $9 
C) $16 
D) $18

Question 12

Answer the following:
a)Define the market for Coca-Cola,that is,what would you include in the market for Coca-Cola? Considering the market for Coca-Cola,how is the market power of Coca-Cola affected by what is included as a part of the market?
(b)Explain how cross-price elasticity of demand is relevant to a firm being investigated for antitrust violation.If you were the chief economist for this firm,would you want to show a high cross-price elasticity or a low cross price elasticity of demand between your product and a rival product? Why?

Accepted Answer

a)The market for Coca-Cola will include

Question 13

Use the following figure to answer the question : Figure 11-5 : shows the demand curve and the marginal revenue curve of a monopolist.On the horizontal axis,OG = GF.  
-Refer to Figure 11-5.At quantity G,the price elasticity of demand:

Accepted Answer

A) is equal to one. 
B) exceeds one. 
C) is equal to zero. 
D) is less than one. 
A) is equal to one. 
B) exceeds one. 
C) is equal to zero. 
D) is less than one.

Question 14

The following table shows the total revenue and total cost for a monopolist at various levels of output.
 
What is the profit-maximizing level of output for the monopolist in Table 11-2?

Accepted Answer

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

Question 15

Which of the following would reduce the monopoly power of a single firm in a monopoly market?

Accepted Answer

A) The acquisition of a patent for its production process 
B) An increase in the demand for the firm's product 
C) An increase in the price of the firm's product 
D) A reduction in the number of rival firms 
A) The acquisition of a patent for its production process 
B) An increase in the demand for the firm's product 
C) An increase in the price of the firm's product 
D) A reduction in the number of rival firms

Question 16

The following figure shows the marginal revenue [MR],demand,and average cost [AC] curves for a profit-maximizing monopolist.  
Refer to Figure 11-3.The loss in welfare in the market due to the monopoly firm is _____.

Accepted Answer

A) IFA 
B) FGH 
C) AFGB 
D) BGEO 
A) IFA 
B) FGH 
C) AFGB 
D) BGEO

Question 17

Acme Baseball Bats is a monopoly firm.If the marginal cost of producing a baseball bat is $30,and the absolute value of price elasticity of demand for Acme Baseball Bat Company is estimated to be 4,at what price should Acme set its price if it wants to maximize profits?

Accepted Answer

A) $30 
B) $40 
C) $50 
D) $60 
A) $30 
B) $40 
C) $50 
D) $60

Question 18

When the value of the Lerner index is zero for a firm:

Accepted Answer

A) its demand curve is steeply sloped. 
B) its demand curve is non-linear. 
C) the demand for its product is unit elastic. 
D) the demand for its product is perfectly elastic. 
A) its demand curve is steeply sloped. 
B) its demand curve is non-linear. 
C) the demand for its product is unit elastic. 
D) the demand for its product is perfectly elastic.

Question 19

Use the following figure to answer the question : Figure 11-1 : shows the downward-sloping demand curve [D] and marginal revenue [MR] curve and the upward-sloping marginal cost [MC] curve for a monopolist.  
-Based on Figure 11-1,the unregulated monopolist will receive producer surplus equal to area:

Accepted Answer

A) ACF. 
B) BCFH. 
C) AVFH. 
D) AWEH. 
A) ACF. 
B) BCFH. 
C) AVFH. 
D) AWEH.

Question 20

The following figure shows the marginal revenue [MR],demand,and average cost [AC] curves for a profit-maximizing monopolist in the long run.  
Refer to Figure 11-3.The equilibrium price charged by a profit-maximizing monopoly firm is _____.

Accepted Answer

A) OA 
B) OB 
C) OI 
D) OC 
A) OA 
B) OB 
C) OI 
D) OC

Which of the following is true of the demand curve that a monopolist faces?

Given the profit function Π = R - C,derive a monopolist's profit-maximizing price and quantity.

Which of the following is true for a monopoly firm?

The following figure shows the marginal cost [MC],average cost [AC],marginal revenue [MR],and demand curves for a profit-maximizing monopolist. Refer to Figure 11-2.If the government wishes to regulate the monopoly firm by setting the price at OB in the market,the monopolist will:

Compared to a competitive industry,ceteris paribus,a monopoly:

Which of the following is true for a monopoly firm?

Which of the following correctly describes a natural monopoly?

A deadweight loss arises in a monopoly market because _____ by the monopolist.

Suppose your pharmaceutical company,which operates as a monopoly,has a patent on a drug with an estimated price elasticity of demand of 1.2.If the marginal cost of producing each pill is $3,at what price should you sell your drug if profit maximization is your objective?

Use the following figure to answer the question : Figure 11-5 : shows the demand curve and the marginal revenue curve of a monopolist.On the horizontal axis,OG = GF. -Refer to Figure 11-5.At quantity G,the price elasticity of demand:

The following table shows the total revenue and total cost for a monopolist at various levels of output. What is the profit-maximizing level of output for the monopolist in Table 11-2?

Which of the following would reduce the monopoly power of a single firm in a monopoly market?

The following figure shows the marginal revenue [MR],demand,and average cost [AC] curves for a profit-maximizing monopolist. Refer to Figure 11-3.The loss in welfare in the market due to the monopoly firm is _____.

Acme Baseball Bats is a monopoly firm.If the marginal cost of producing a baseball bat is $30,and the absolute value of price elasticity of demand for Acme Baseball Bat Company is estimated to be 4,at what price should Acme set its price if it wants to maximize profits?

When the value of the Lerner index is zero for a firm:

Use the following figure to answer the question : Figure 11-1 : shows the downward-sloping demand curve [D] and marginal revenue [MR] curve and the upward-sloping marginal cost [MC] curve for a monopolist. -Based on Figure 11-1,the unregulated monopolist will receive producer surplus equal to area:

The following figure shows the marginal revenue [MR],demand,and average cost [AC] curves for a profit-maximizing monopolist in the long run. Refer to Figure 11-3.The equilibrium price charged by a profit-maximizing monopoly firm is _____.

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

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Exam 11: Monopoly

Which of the following is true of the demand curve that a monopolist faces?

Given the profit function Π = R - C,derive a monopolist's profit-maximizing price and quantity.

Which of the following is true for a monopoly firm?

The following figure shows the marginal cost [MC],average cost [AC],marginal revenue [MR],and demand curves for a profit-maximizing monopolist. Refer to Figure 11-2.If the government wishes to regulate the monopoly firm by setting the price at OB in the market,the monopolist will:

Compared to a competitive industry,ceteris paribus,a monopoly:

Which of the following is true for a monopoly firm?

Which of the following correctly describes a natural monopoly?

A deadweight loss arises in a monopoly market because _____ by the monopolist.

Suppose your pharmaceutical company,which operates as a monopoly,has a patent on a drug with an estimated price elasticity of demand of 1.2.If the marginal cost of producing each pill is $3,at what price should you sell your drug if profit maximization is your objective?

Use the following figure to answer the question : Figure 11-5 : shows the demand curve and the marginal revenue curve of a monopolist.On the horizontal axis,OG = GF. -Refer to Figure 11-5.At quantity G,the price elasticity of demand:

The following table shows the total revenue and total cost for a monopolist at various levels of output. What is the profit-maximizing level of output for the monopolist in Table 11-2?

Which of the following would reduce the monopoly power of a single firm in a monopoly market?

The following figure shows the marginal revenue [MR],demand,and average cost [AC] curves for a profit-maximizing monopolist. Refer to Figure 11-3.The loss in welfare in the market due to the monopoly firm is _____.

Acme Baseball Bats is a monopoly firm.If the marginal cost of producing a baseball bat is $30,and the absolute value of price elasticity of demand for Acme Baseball Bat Company is estimated to be 4,at what price should Acme set its price if it wants to maximize profits?

When the value of the Lerner index is zero for a firm:

Use the following figure to answer the question : Figure 11-1 : shows the downward-sloping demand curve [D] and marginal revenue [MR] curve and the upward-sloping marginal cost [MC] curve for a monopolist. -Based on Figure 11-1,the unregulated monopolist will receive producer surplus equal to area:

The following figure shows the marginal revenue [MR],demand,and average cost [AC] curves for a profit-maximizing monopolist in the long run. Refer to Figure 11-3.The equilibrium price charged by a profit-maximizing monopoly firm is _____.

An Introduction to Microeconomics

Supply and Demand

The Theory of Consumer Choice

Individual and Market Demand

Using Consumer Choice Theory

Exchange, Efficiency, and Prices

Production

The Cost of Production

Profit Maximization in Perfectly Competitive Markets

Using the Competitive Model

Product Pricing With Monopoly Power

Monopolistic Competition and Oligopoly

Game Theory and the Economics of Information

Using Noncompetitive Market Models

Employment and Pricing of Inputs

Wages, Rent, Interest, and Profit

Using Input Market Analysis

General Equilibrium Analysis and Economic Efficiency

Public Goods and Externalities

Filters