Question 1

In a natural monopoly,throughout the range of market demand

Accepted Answer

A) marginal cost is above average total cost and pulls average total cost upward. 
B) average total cost is above marginal cost and pulls marginal cost upward. 
C) marginal cost is below average total cost and pulls average total cost downward. 
D) there are diseconomies of scale. 
A) marginal cost is above average total cost and pulls average total cost upward. 
B) average total cost is above marginal cost and pulls marginal cost upward. 
C) marginal cost is below average total cost and pulls average total cost downward. 
D) there are diseconomies of scale.

Question 2

Draw a graph that shows producer surplus,consumer surplus,and deadweight loss in a market where the seller practices perfect price discrimination.Be sure to identify the demand curve,the marginal revenue curve,the marginal cost curve,and the profit-maximising quantity on the graph.

Accepted Answer

The perfect price discriminator sells Q₃

Question 3

Which of the following is a reason why airline yield management is an effective method to increase revenue?

Accepted Answer

A) because airlines have invested heavily in developing computer models that identify optimal pricing strategies in the various market segments 
B) because airlines have successfully induced customers to reveal their resources and preferences by offering them different versions of the product such as business class and coach plane tickets 
C) because a ticket is a contract to transport a specific person,and is not transferable 
D) because airlines have a monopoly in long-distance carriage 
A) because airlines have invested heavily in developing computer models that identify optimal pricing strategies in the various market segments 
B) because airlines have successfully induced customers to reveal their resources and preferences by offering them different versions of the product such as business class and coach plane tickets 
C) because a ticket is a contract to transport a specific person,and is not transferable 
D) because airlines have a monopoly in long-distance carriage

Question 4

Figure 9-9   Figure 9-9 shows the demand and cost curves for a monopolist.
-Refer to Figure 9-9.What is the economically efficient output level?

Accepted Answer

A) 600 units 
B) 800 units 
C) 940 units 
D) 1160 units 
A) 600 units 
B) 800 units 
C) 940 units 
D) 1160 units

Question 5

Which of the following statements is true?

Accepted Answer

A) Monopolists are price makers.All other firms are price takers. 
B) Unlike other industries,monopoly industries have high barriers to entry. 
C) Only monopoly firms are granted patents and copyrights. 
D) Unlike other firms,a monopolist's demand curve is the same as the market demand curve. 
A) Monopolists are price makers.All other firms are price takers. 
B) Unlike other industries,monopoly industries have high barriers to entry. 
C) Only monopoly firms are granted patents and copyrights. 
D) Unlike other firms,a monopolist's demand curve is the same as the market demand curve.

Question 6

Firms do not have market power in which of the following market structures?

Accepted Answer

A) perfect competition only 
B) perfect competition and monopolistic competition 
C) oligopoly 
D) monopoly 
A) perfect competition only 
B) perfect competition and monopolistic competition 
C) oligopoly 
D) monopoly

Question 7

One reason patent protection is vitally important to pharmaceutical firms is

Accepted Answer

A) successful new drugs are not profitable.If firms are not granted patents,many would go out of business and health care would be severely diminished. 
B) the approval process for new drugs through the Food and Drug Administration can take more than 10 years and is very costly.Patents enable firms to recover costs incurred during this process. 
C) that taxes on profits from drugs are very high;profits from patent protection enable firms to pay these taxes. 
D) the high salaries pharmaceutical firms pay to scientists and doctors make their labour costs higher than for any other business.Profits from patents are needed to pay these labour costs. 
A) successful new drugs are not profitable.If firms are not granted patents,many would go out of business and health care would be severely diminished. 
B) the approval process for new drugs through the Food and Drug Administration can take more than 10 years and is very costly.Patents enable firms to recover costs incurred during this process. 
C) that taxes on profits from drugs are very high;profits from patent protection enable firms to pay these taxes. 
D) the high salaries pharmaceutical firms pay to scientists and doctors make their labour costs higher than for any other business.Profits from patents are needed to pay these labour costs.

Question 8

To be a natural monopoly a firm must

Accepted Answer

A) control a key resource input. 
B) have economies of scale that are so large that it can supply the entire market at a lower cost than two or more firms. 
C) have significant network externalities. 
D) be very large relative to the total market. 
A) control a key resource input. 
B) have economies of scale that are so large that it can supply the entire market at a lower cost than two or more firms. 
C) have significant network externalities. 
D) be very large relative to the total market.

Question 9

Are restaurant coupons a form of price discrimination? Why or why not?

Accepted Answer

Yes,coupons are a form of price discrimi

Question 10

Table 9-3
   Julie plans to start a pet-sitting service.She surveyed her neighbourhood to determine the demand for this service.Assume that each person surveyed demands only one hour of pet sitting services per period.Table 9-3 above shows a portion of her survey results.
-Refer to Table 9-3.Suppose Julie's marginal cost of providing this service is constant at $7 and she decides to charge each customer according to his or her willingness to pay.What is the value of consumer surplus by her customers?

Accepted Answer

A) $39 
B) $28 
C) $11 
D) $0 
A) $39 
B) $28 
C) $11 
D) $0

Question 11

Figure 9-15  
-Refer to Figure 9-15.What is the consumer surplus received under perfect price discrimination?

Accepted Answer

A) the area under the demand curve above P1 
B) the area under the demand curve above P3 
C) the area under the demand curve above P4 
D) zero 
A) the area under the demand curve above P1 
B) the area under the demand curve above P3 
C) the area under the demand curve above P4 
D) zero

Question 12

Which of the following is true for a monopolist?

Accepted Answer

A) Being the only seller in the market,the monopolist faces a perfectly inelastic demand curve. 
B) Being the only seller in the market,the monopolist faces a perfectly elastic demand curve. 
C) Being the only seller in the market,the monopolist faces the market demand curve. 
D) Being the only seller in the market,the monopolist faces a downward-sloping demand curve that lies below the marginal revenue curve. 
A) Being the only seller in the market,the monopolist faces a perfectly inelastic demand curve. 
B) Being the only seller in the market,the monopolist faces a perfectly elastic demand curve. 
C) Being the only seller in the market,the monopolist faces the market demand curve. 
D) Being the only seller in the market,the monopolist faces a downward-sloping demand curve that lies below the marginal revenue curve.

Question 13

Long-run economic profits would most likely exist in which market structure?

Accepted Answer

A) monopoly,monopolistic competition and oligopoly 
B) monopoly and oligopoly 
C) monopoly and monopolistic competition 
D) monopoly only 
A) monopoly,monopolistic competition and oligopoly 
B) monopoly and oligopoly 
C) monopoly and monopolistic competition 
D) monopoly only

Question 14

Table 9-1
   A monopoly producer of foreign language translation software faces a demand and cost structure as given in Table 9-1.
-Refer to Table 9-1.What is the marginal revenue from the sale of the 12th unit?

Accepted Answer

A) $75 
B) $50 
C) $20 
D) -$5 
A) $75 
B) $50 
C) $20 
D) -$5

Question 15

A firm that has the ability to control to some degree the price of the product it sells

Accepted Answer

A) is also able to dictate the quantity purchased. 
B) faces a demand curve that is inelastic throughout the range of market demand. 
C) is a price maker. 
D) faces a perfectly inelastic demand curve. 
A) is also able to dictate the quantity purchased. 
B) faces a demand curve that is inelastic throughout the range of market demand. 
C) is a price maker. 
D) faces a perfectly inelastic demand curve.

Question 16

For a natural monopoly,the marginal cost of producing an additional unit of its product is relatively small.

Accepted Answer

A) True 
 B)False

Question 17

Why is price discrimination legal but not discrimination based on race or gender?

Accepted Answer

A) because price discrimination increases profits and therefore tax revenues for the government,but discrimination based on race or gender reduces tax revenues 
B) because price discrimination reduces deadweight loss,but discrimination based on race or gender increases deadweight loss 
C) because price discrimination involves charging people different prices based on their willingness to pay rather than on the basis of arbitrary characteristics 
D) because price discrimination enables firms to increase output and employment,but race- or gender-based discrimination reduces employment 
A) because price discrimination increases profits and therefore tax revenues for the government,but discrimination based on race or gender reduces tax revenues 
B) because price discrimination reduces deadweight loss,but discrimination based on race or gender increases deadweight loss 
C) because price discrimination involves charging people different prices based on their willingness to pay rather than on the basis of arbitrary characteristics 
D) because price discrimination enables firms to increase output and employment,but race- or gender-based discrimination reduces employment

Question 18

Why might a producer practice price discrimination?

Accepted Answer

A) to make its products more affordable to those with low incomes 
B) to maximise economic efficiency 
C) to maximise profits 
D) to maximise quantity demanded 
A) to make its products more affordable to those with low incomes 
B) to maximise economic efficiency 
C) to maximise profits 
D) to maximise quantity demanded

Question 19

Figure 9-6   Figure 9-6 shows the cost and demand curves for a monopolist.
-Refer to Figure 9-6.The profit-maximising output and price for the monopolist are

Accepted Answer

A) output = 62;price = $24. 
B) output = 62;price = $18. 
C) output = 83;price = $22. 
D) output = 104;price = $20.80. 
A) output = 62;price = $24. 
B) output = 62;price = $18. 
C) output = 83;price = $22. 
D) output = 104;price = $20.80.

Question 20

Joss is a marketing consultant.Iris and Daphne are potential customers interested in commissioning Joss to undertake a market survey and compile the findings in a report.Iris is willing to pay $500 for the service while Daphne is willing to pay $800.Suppose that the opportunity cost of Joss's time is $1200.Assume that Iris and Daphne do not know each other.If Joss charges the same price per copy to both Iris and Daphne,

Accepted Answer

A) the report will not get written. 
B) only Daphne will commission the job and the report will be written. 
C) both Iris and Daphne will commission the job and the report will be written. 
D) No conclusion can be drawn without information on the price. 
A) the report will not get written. 
B) only Daphne will commission the job and the report will be written. 
C) both Iris and Daphne will commission the job and the report will be written. 
D) No conclusion can be drawn without information on the price.

In a natural monopoly,throughout the range of market demand

Draw a graph that shows producer surplus,consumer surplus,and deadweight loss in a market where the seller practices perfect price discrimination.Be sure to identify the demand curve,the marginal revenue curve,the marginal cost curve,and the profit-maximising quantity on the graph.

Which of the following is a reason why airline yield management is an effective method to increase revenue?

Figure 9-9 Figure 9-9 shows the demand and cost curves for a monopolist. -Refer to Figure 9-9.What is the economically efficient output level?

Which of the following statements is true?

Firms do not have market power in which of the following market structures?

One reason patent protection is vitally important to pharmaceutical firms is

To be a natural monopoly a firm must

Are restaurant coupons a form of price discrimination? Why or why not?

Figure 9-15 -Refer to Figure 9-15.What is the consumer surplus received under perfect price discrimination?

Which of the following is true for a monopolist?

Long-run economic profits would most likely exist in which market structure?

Table 9-1 A monopoly producer of foreign language translation software faces a demand and cost structure as given in Table 9-1. -Refer to Table 9-1.What is the marginal revenue from the sale of the 12th unit?

A firm that has the ability to control to some degree the price of the product it sells

For a natural monopoly,the marginal cost of producing an additional unit of its product is relatively small.

Why is price discrimination legal but not discrimination based on race or gender?

Why might a producer practice price discrimination?

Figure 9-6 Figure 9-6 shows the cost and demand curves for a monopolist. -Refer to Figure 9-6.The profit-maximising output and price for the monopolist are

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: the Responsiveness of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Consumer Choice and Behavioural Economics

Technology, Production and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition

Oligopoly: Firms in Less Competitive Markets

The Markets for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

Externalities, Environmental Policy and Public Goods

The Distribution of Income and Social Policy

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Exam 9: Monopoly Markets

In a natural monopoly,throughout the range of market demand

Draw a graph that shows producer surplus,consumer surplus,and deadweight loss in a market where the seller practices perfect price discrimination.Be sure to identify the demand curve,the marginal revenue curve,the marginal cost curve,and the profit-maximising quantity on the graph.

Which of the following is a reason why airline yield management is an effective method to increase revenue?

Figure 9-9 Figure 9-9 shows the demand and cost curves for a monopolist. -Refer to Figure 9-9.What is the economically efficient output level?

Which of the following statements is true?

Firms do not have market power in which of the following market structures?

One reason patent protection is vitally important to pharmaceutical firms is

To be a natural monopoly a firm must

Are restaurant coupons a form of price discrimination? Why or why not?

Figure 9-15 -Refer to Figure 9-15.What is the consumer surplus received under perfect price discrimination?

Which of the following is true for a monopolist?

Long-run economic profits would most likely exist in which market structure?

Table 9-1 A monopoly producer of foreign language translation software faces a demand and cost structure as given in Table 9-1. -Refer to Table 9-1.What is the marginal revenue from the sale of the 12th unit?

A firm that has the ability to control to some degree the price of the product it sells

For a natural monopoly,the marginal cost of producing an additional unit of its product is relatively small.

Why is price discrimination legal but not discrimination based on race or gender?

Why might a producer practice price discrimination?

Figure 9-6 Figure 9-6 shows the cost and demand curves for a monopolist. -Refer to Figure 9-6.The profit-maximising output and price for the monopolist are

Economics: Foundations and Models

Choices and Trade-Offs in the Market

Where Prices Come From: the Interaction of Demand and Supply

Elasticity: the Responsiveness of Demand and Supply

Economic Efficiency, Government Price Setting and Taxes

Consumer Choice and Behavioural Economics

Technology, Production and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition

Oligopoly: Firms in Less Competitive Markets

The Markets for Labour and Other Factors of Production

International Trade

Government Intervention in the Market

Externalities, Environmental Policy and Public Goods

The Distribution of Income and Social Policy

Filters