Question 1

The main reason a monopolist can earn long-run economic profit, whereas a perfectly competitive firm cannot, is that

Accepted Answer

A)  monopolists operate under economies of scale 
B)  perfectly competitive firms have opportunity costs 
C)  demand for the monopolist's output is inelastic 
D)  demand for the monopolist's output is elastic 
E)  there are no barriers to entry in perfect competition 
A)  monopolists operate under economies of scale 
B)  perfectly competitive firms have opportunity costs 
C)  demand for the monopolist's output is inelastic 
D)  demand for the monopolist's output is elastic 
E)  there are no barriers to entry in perfect competition E

Question 2

NARRBEGIN: Exhibit 9-10
Exhibit 9-10
  
-What price would maximize the profit of the nondiscriminating monopolist in Exhibit 9-10?

Accepted Answer

A)  0 
B)  $2 
C)  $4.60 
D)  $6.66 
E)  $8.66 
A)  0 
B)  $2 
C)  $4.60 
D)  $6.66 
E)  $8.66 E

Question 3

Unlike firms in a perfectly competitive industry, monopolists have control over

Accepted Answer

A)  the price they charge for the product 
B)  the quantity of output they produce 
C)  the prices they pay for resources 
D)  the quantities of various resources which are used 
E)  improvements in technology 
A)  the price they charge for the product 
B)  the quantity of output they produce 
C)  the prices they pay for resources 
D)  the quantities of various resources which are used 
E)  improvements in technology A

Question 4

On a graph, to determine the price a profit-maximizing monopolist would charge, find the quantity at which MC and MR intersect and read up to the demand curve.

Accepted Answer

A) True 
 B)False

Question 5

Why would we be likely to observe dentists engaging in price discrimination?

Accepted Answer

A)  Dental care is expensive. 
B)  All dentists are basically alike. 
C)  It is very important to exercise care in choosing a dentist. 
D)  It is nearly impossible to resell the services of a dentist. 
E)  The demand for dentists is very inelastic. 
A)  Dental care is expensive. 
B)  All dentists are basically alike. 
C)  It is very important to exercise care in choosing a dentist. 
D)  It is nearly impossible to resell the services of a dentist. 
E)  The demand for dentists is very inelastic.

Question 6

Empirical estimates indicate that the annual welfare cost of monopoly in the United States

Accepted Answer

A)  ranges from less than 1 percent to 5 percent of national income 
B)  ranges from 10 percent to 20 percent of national income 
C)  is approximately 10 percent of national income 
D)  is approximately $1 billion 
E)  is approximately $1 trillion 
A)  ranges from less than 1 percent to 5 percent of national income 
B)  ranges from 10 percent to 20 percent of national income 
C)  is approximately 10 percent of national income 
D)  is approximately $1 billion 
E)  is approximately $1 trillion

Question 7

NARRBEGIN: Exhibit 9-3-1
Exhibit 9-3
  
-At the profit-maximizing output for the firm in Exhibit 9-3, the single price monopolist will charge _____ per unit of output.

Accepted Answer

A)  $30 
B)  $24 
C)  $22 
D)  $20 
E)  $10 
A)  $30 
B)  $24 
C)  $22 
D)  $20 
E)  $10

Question 8

If marginal cost is positive, which of the following is true?

Accepted Answer

A)  A monopolist always produces on the inelastic portion of the firm's demand curve. 
B)  A monopolist always produces on the inelastic portion of the market demand curve. 
C)  A monopolist always produces on the elastic portion of the market demand curve. 
D)  A monopolist always produces on the unit elastic portion of the market demand curve. 
E)  The presence of a monopolist increases the elasticity of demand. 
A)  A monopolist always produces on the inelastic portion of the firm's demand curve. 
B)  A monopolist always produces on the inelastic portion of the market demand curve. 
C)  A monopolist always produces on the elastic portion of the market demand curve. 
D)  A monopolist always produces on the unit elastic portion of the market demand curve. 
E)  The presence of a monopolist increases the elasticity of demand.

Question 9

One likely result of monopoly power is

Accepted Answer

A)  a wide variety of substitute products from which consumers can choose 
B)  an elimination of barriers to industry entry 
C)  a decline in government regulation 
D)  a higher price than would exist in a competitive industry 
E)  an improvement in allocative efficiency 
A)  a wide variety of substitute products from which consumers can choose 
B)  an elimination of barriers to industry entry 
C)  a decline in government regulation 
D)  a higher price than would exist in a competitive industry 
E)  an improvement in allocative efficiency

Question 10

NARRBEGIN: Exhibit 9-3-1
Exhibit 9-3
  
-At the profit-maximizing output for the firm in Exhibit 9-3, the single price monopolist will earn a profit of ______ per unit of output?

Accepted Answer

A)  $10 
B)  $5 
C)  $4 
D)  $0 
E)  -$5 
A)  $10 
B)  $5 
C)  $4 
D)  $0 
E)  -$5

Question 11

NARRBEGIN: Exhibit 9-3-1
Exhibit 9-3
  
-The total cost for the firm in Exhibit 9-3, a monopolist that maximizes profit while charging all customers the same price, is

Accepted Answer

A)  $3,300 
B)  $3,400 
C)  $2,808 
D)  $2,340 
E)  $1,638 
A)  $3,300 
B)  $3,400 
C)  $2,808 
D)  $2,340 
E)  $1,638

Question 12

Which of the following statements is true of a monopolist?

Accepted Answer

A)  The firm charges the highest possible price. 
B)  The firm always earns a profit. 
C)  The firm might earn a profit in the long run. 
D)  The firm generates a larger consumer surplus than a perfectly competitive firm. 
E)  The firm is more production efficient than a perfectly competitive firm. 
A)  The firm charges the highest possible price. 
B)  The firm always earns a profit. 
C)  The firm might earn a profit in the long run. 
D)  The firm generates a larger consumer surplus than a perfectly competitive firm. 
E)  The firm is more production efficient than a perfectly competitive firm.

Question 13

If a firm's demand curve slopes downward, the firm's

Accepted Answer

A)  marginal revenue will rise as price is reduced 
B)  marginal revenue will generally be less than price 
C)  total revenue will decline continuously as price is reduced 
D)  marginal revenue will always be greater than its demand 
E)  average revenue will increase continuously as output increases 
A)  marginal revenue will rise as price is reduced 
B)  marginal revenue will generally be less than price 
C)  total revenue will decline continuously as price is reduced 
D)  marginal revenue will always be greater than its demand 
E)  average revenue will increase continuously as output increases

Question 14

Suppose a single firm supplies all the ceramic windlasses in the U.S. The demand curve that firm faces is

Accepted Answer

A)  elastic everywhere 
B)  unit elastic everywhere 
C)  inelastic everywhere 
D)  perfectly inelastic everywhere 
E)  elastic at the profit-maximizing quantity 
A)  elastic everywhere 
B)  unit elastic everywhere 
C)  inelastic everywhere 
D)  perfectly inelastic everywhere 
E)  elastic at the profit-maximizing quantity

Question 15

Patent laws promote technical progress in all of the following ways except one. Which is the exception?

Accepted Answer

A)  They allow other firms to copy successful products as soon as they are marketed. 
B)  They prevent duplication of inventions. 
C)  They provide a stimulus to innovation. 
D)  They provide the inventor with a temporary monopoly. 
E)  They increase a firm's incentive to incur the up-front costs of developing new products. 
A)  They allow other firms to copy successful products as soon as they are marketed. 
B)  They prevent duplication of inventions. 
C)  They provide a stimulus to innovation. 
D)  They provide the inventor with a temporary monopoly. 
E)  They increase a firm's incentive to incur the up-front costs of developing new products.

Question 16

NARRBEGIN: Exhibit 9-11-1
Exhibit 9-11
  
-If the monopolist in Exhibit 9-11 does not price discriminate, the total amount consumers will spend on its profit-maximizing quantity of output is

Accepted Answer

A)  $95,200 
B)  $84,000 
C)  $79,000 
D)  $53,200 
E)  $42,000 
A)  $95,200 
B)  $84,000 
C)  $79,000 
D)  $53,200 
E)  $42,000

Question 17

NARRBEGIN: Exhibit 9-14
Exhibit 9-14
  
-The profit-maximizing (or loss-minimizing) price the monopoly will charge in Exhibit 9-14 is

Accepted Answer

A)  irrelevant since the firm should shut down 
B)  $11 
C)  $16 
D)  $18 
E)  $22 
A)  irrelevant since the firm should shut down 
B)  $11 
C)  $16 
D)  $18 
E)  $22

Question 18

NARRBEGIN: Exhibit 9-11-1
Exhibit 9-11
  
-Total revenue for the profit-maximizing monopoly in Exhibit 9-11 that does not price discriminate will be

Accepted Answer

A)  $95,200 
B)  $84,000 
C)  $79,000 
D)  $52,000 
E)  $42,000 
A)  $95,200 
B)  $84,000 
C)  $79,000 
D)  $52,000 
E)  $42,000

Question 19

In the short run, a monopolist will shut down when

Accepted Answer

A)  average total cost is greater than price at all output levels 
B)  average variable cost is greater than average fixed cost at all output levels 
C)  price is greater than average variable cost at all output levels 
D)  average fixed cost is greater than price at all output levels 
E)  average variable cost is greater than price at all output levels 
A)  average total cost is greater than price at all output levels 
B)  average variable cost is greater than average fixed cost at all output levels 
C)  price is greater than average variable cost at all output levels 
D)  average fixed cost is greater than price at all output levels 
E)  average variable cost is greater than price at all output levels

Question 20

Suppose that a monopolist must choose between two points on its demand curve: it can sell 100 units for $3 each, or it can sell 140 units for $2 each. Which of the following is true?

Accepted Answer

A)  The monopolist is facing elastic demand. 
B)  The monopolist is facing unit elastic demand. 
C)  The monopolist is facing inelastic demand. 
D)  The monopolist is facing perfectly elastic demand. 
E)  The elasticity of demand cannot be determined with the information given. 
A)  The monopolist is facing elastic demand. 
B)  The monopolist is facing unit elastic demand. 
C)  The monopolist is facing inelastic demand. 
D)  The monopolist is facing perfectly elastic demand. 
E)  The elasticity of demand cannot be determined with the information given.

Exam 9: A: Monopoly

The main reason a monopolist can earn long-run economic profit, whereas a perfectly competitive firm cannot, is that

NARRBEGIN: Exhibit 9-10 Exhibit 9-10 -What price would maximize the profit of the nondiscriminating monopolist in Exhibit 9-10?

Unlike firms in a perfectly competitive industry, monopolists have control over

On a graph, to determine the price a profit-maximizing monopolist would charge, find the quantity at which MC and MR intersect and read up to the demand curve.

Why would we be likely to observe dentists engaging in price discrimination?

Empirical estimates indicate that the annual welfare cost of monopoly in the United States

NARRBEGIN: Exhibit 9-3-1 Exhibit 9-3 -At the profit-maximizing output for the firm in Exhibit 9-3, the single price monopolist will charge _____ per unit of output.

If marginal cost is positive, which of the following is true?

One likely result of monopoly power is

NARRBEGIN: Exhibit 9-3-1 Exhibit 9-3 -At the profit-maximizing output for the firm in Exhibit 9-3, the single price monopolist will earn a profit of ______ per unit of output?

NARRBEGIN: Exhibit 9-3-1 Exhibit 9-3 -The total cost for the firm in Exhibit 9-3, a monopolist that maximizes profit while charging all customers the same price, is

Which of the following statements is true of a monopolist?

If a firm's demand curve slopes downward, the firm's

Suppose a single firm supplies all the ceramic windlasses in the U.S. The demand curve that firm faces is

Patent laws promote technical progress in all of the following ways except one. Which is the exception?

NARRBEGIN: Exhibit 9-11-1 Exhibit 9-11 -If the monopolist in Exhibit 9-11 does not price discriminate, the total amount consumers will spend on its profit-maximizing quantity of output is

NARRBEGIN: Exhibit 9-14 Exhibit 9-14 -The profit-maximizing (or loss-minimizing) price the monopoly will charge in Exhibit 9-14 is

NARRBEGIN: Exhibit 9-11-1 Exhibit 9-11 -Total revenue for the profit-maximizing monopoly in Exhibit 9-11 that does not price discriminate will be

In the short run, a monopolist will shut down when

Suppose that a monopolist must choose between two points on its demand curve: it can sell 100 units for $3 each, or it can sell 140 units for $2 each. Which of the following is true?

The Art and Science of Economic Analysis

Appendix: Understanding Graphs

Economic Tools and Economics Systems

Economic Decision Makers

Demand, Supply, and Markets

Elasticity of Demand and Supply

Consumer Choice and Demand

Production and Cost in the Firm

A: Perfect Competition

B: Perfect Competition

B: Monopoly

Monopolistic Competition and Oligopoly

Resource Markets

Labor Markets and Labor Unions

Capital, Interest, and Corporate Finance

Transaction Costs, Imperfect Information, and Behavioral Economics

Economic Regulation and Antitrust Policy

Public Goods and Public Choice

Externalities and the Environment

Income Distribution and Poverty

International Trade

International Finance

Economic Development

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