Deck 10: Monopoly

Question 1

All of the following except one are examples of monopolies in Canada. Which is the exception?

A) CBC Television.
B) Manitoba Hydro.
C) Rogers Cablevision.
D) Montreal Subway system.

Answer 1

A

Question 2

An unregulated monopolist could sell the first unit of output for $40. However, for each additional unit sold, the monopolist is forced to reduce the price by $2.
Refer to the above information to answer this question. What is the value of the marginal revenue of the 7^th unit?

A) $12.
B) $16.
C) $28.
D) $34.
E) $180.

Answer 2

B

Question 3

All of the following except one are features of patent legislation. Which is the exception?

A) It gives a monopoly to the patent holder.
B) It creates a barrier to entry.
C) It guarantees that the patent holder will make economic profits.
D) It is designed to encourage research and development.
E) It is a source of monopoly power.

Answer 3

C

Question 4

What are barriers to entry?

A) Toll highways which make transportation costs very high.
B) Tariffs imposed on imported goods.
C) Obstacles that make it difficult for new participants to enter an industry.
D) Quotas imposed on imported goods.

Question 5

The following table shows the demand facing an unregulated monopolist:
$\begin{array} { c c } \text { Quantity } & \text { Price } \\1 & \$ 70 \\2 & 65 \\3 & 60 \\4 & 55 \\5 & 50 \\6 & 45 \\7 & 40 \\8 & 35 \\9 & 30 \\10 & 25\end{array}$

-Refer to the above information to answer this question. At what level of output is total revenue at a maximum and what is the value of total revenue at that output?

A) 5 and $250.
B) 7 and $280.
C) 8 and $280.
D) 10 and $250.
E) 10 and $500.

Question 6

How many years of protection are granted to patents newly registered in Canada?

A) 10 years.
B) 17 years.
C) 20 years.
D) 30 years.
E) 50 years.

Question 7

The following table shows the demand facing an unregulated monopolist:
$\begin{array} { c c } \text { Quantity } & \text { Price } \\1 & \$ 70 \\2 & 65 \\3 & 60 \\4 & 55 \\5 & 50 \\6 & 45 \\7 & 40 \\8 & 35 \\9 & 30 \\10 & 25\end{array}$

-Refer to the above information to answer this question. What is the average revenue of the 5^th unit?

A) $5.
B) $30.
C) $50.
D) $52.50.
E) $250.

Question 8

The following table shows the demand facing an unregulated monopolist:
$\begin{array} { c c } \text { Quantity } & \text { Price } \\1 & \$ 70 \\2 & 65 \\3 & 60 \\4 & 55 \\5 & 50 \\6 & 45 \\7 & 40 \\8 & 35 \\9 & 30 \\10 & 25\end{array}$

-Refer to the above information to answer this question. What is the value of marginal revenue at the output which maximizes the monopolist's total revenue?

A) $0.
B) $10.
C) $25.
D) $35.
E) $40.

Question 9

All of the following except one are examples of legal barriers to entry. Which is the exception?

A) Patent.
B) Sole ownership of a resource.
C) Licensing fee.
D) Copyright.

Question 10

Which of the following is an example of an economic barrier to entry?

A) Patent.
B) Economies of scale.
C) Licensing fee.
D) Copyright.
E) Sole ownership of a resource.

Question 11

Which of the following markets most closely resembles a monopoly?

A) The automobile market.
B) The diamond market.
C) The bond market.
D) The steel market.

Question 12

What is a monopoly?

A) A market in which a single firm is the sole producer.
B) An illegal consortium of firms acting as one.
C) A market where there is a sole buyer of a product.
D) A conglomerate where many different products are produced by one firm.

Question 13

An unregulated monopolist could sell the first unit of output for $40. However, for each additional unit sold, the monopolist is forced to reduce the price by $2.
Refer to the above information to answer this question. At what output will marginal revenue equal zero?

A) 5.
B) 8.
C) 9.
D) 10.
E) 11.

Question 14

Which of the following is an example of a technical barrier to entry?

A) Patent.
B) Economies of scale.
C) Licensing fee.
D) Copyright.
E) Sole ownership of a resource.

Question 15

All the following, except one, are types of barriers to entry. Which is the exception?

A) Social barriers.
B) Technical barriers.
C) Economic barriers.
D) Legal barriers.

Question 16

The following table shows the demand facing an unregulated monopolist:
$\begin{array} { c c } \text { Quantity } & \text { Price } \\1 & \$ 70 \\2 & 65 \\3 & 60 \\4 & 55 \\5 & 50 \\6 & 45 \\7 & 40 \\8 & 35 \\9 & 30 \\10 & 25\end{array}$

-Refer to the above information to answer this question. What is the marginal revenue of the 6^th unit?

A) $6.
B) $10.
C) $20.
D) $45.
E) $270.

Question 17

Which of the following statements regarding the definition of a monopoly market is incorrect?

A) Whether a certain market is regarded as a monopoly depends upon the definition of the demand.
B) Whether a certain market is regarded as a monopoly depends upon the definition of the market.
C) Whether a certain market is regarded as a monopoly depends upon the definition of the product.
D) Whether a certain market is regarded as a monopoly depends upon the definition of substitute goods.

Question 18

All of the following except one are necessary conditions in order for price discrimination to be practiced. Which is the exception?

A) The different groups of buyers must have different elasticities of demand.
B) The seller's costs of production must be different in reference to each group of buyers.
C) The seller must be able to identify members belonging to different buying groups.
D) The seller must be able to separate members belonging to different buying groups.
E) The seller must be able to prevent the resale of the product.

Question 19

An unregulated monopolist could sell the first unit of output for $40. However, for each additional unit sold, the monopolist is forced to reduce the price by $2.
Refer to the above information to answer this question. At what output will the monopolist maximize its total revenue?

A) 5.
B) 8.
C) 9.
D) 10.
E) 11.

Question 20

The following table shows the demand facing an unregulated monopolist:
$\begin{array} { c c } \text { Quantity } & \text { Price } \\1 & \$ 70 \\2 & 65 \\3 & 60 \\4 & 55 \\5 & 50 \\6 & 45 \\7 & 40 \\8 & 35 \\9 & 30 \\10 & 25\end{array}$

-Refer to the above information to answer this question. What is the value of the price elasticity of demand at the monopolist's maximum total revenue?

A) 0.
B) 0.77.
C) 1.
D) 1.31.
E) 2.

Question 21

All of the following except one are examples of price discrimination. Which is the exception?

A) An airline charges different prices to different travelers.
B) A telephone company charges different rates according to the time of use.
C) A professional gardener is able to buy plants at a lower price than a householder can.
D) An electricity company charges lower rates during the daytime compared to night time.
E) A hairdresser charges different rates according to the age of his clients.

Question 22

The following data refers to an unregulated monopolist:
$$\begin{array} { l c c c } \text { Quantity } & \text { Total Revenue (\$) } & \text { Total Cost (\$) } & \text { Marginal Cost (\$) } \\0 & & 20 & \\1 & 50 & & 50 \\2 & 90 & & 30 \\3 & 120 & & 10 \\4 & 140 & & 15 \\5 & 150 & & 40\\6&150&&80\end{array}$$

-Refer to the above information to answer this question. What is the profit-maximizing price?

A) $0.
B) $30.
C) $35.
D) $50.
E) $140.

Question 23

The following data relates to an unregulated monopolist with total fixed cost of $32:
$$\begin{array} { l l c } \text { Quantity } & \text { Price } ( \mathbf { \$ ) } & \text { Marginal Cost } \mathbf { ( \$ ) } \\0 & 40 & 0 \\1 & 39 & 40 \\2 & 38 & 32 \\3 & 37 & 29 \\4 & 36 & 25 \\5 & 35 & 17 \\6 & 34 & 13 \\7 & 33 & 27 \\8 & 32 & 29 \\9 & 31 & 35 \\10 & 30 & 45\end{array}$$

-Refer to the above information to answer this question. What is the level of profits at the profit-maximizing output?

A) $0.
B) $16.
C) $21.
D) $26.
E) $62.

Question 24

The following data refers to an unregulated monopolist:
$$\begin{array} { l c c c } \text { Quantity } & \text { Total Revenue (\$) } & \text { Total Cost (\$) } & \text { Marginal Cost (\$) } \\0 & & 20 & \\1 & 50 & & 50 \\2 & 90 & & 30 \\3 & 120 & & 10 \\4 & 140 & & 15 \\5 & 150 & & 40\\6&150&&80\end{array}$$

-Refer to the above information to answer this question. What is the maximum level of total profit?

A) $0.
B) $10.
C) $15.
D) $25.
E) $140.

Question 25

The following data relates to an unregulated monopolist with total fixed cost of $32:
$$\begin{array} { l l c } \text { Quantity } & \text { Price } ( \mathbf { \$ ) } & \text { Marginal Cost } \mathbf { ( \$ ) } \\0 & 40 & 0 \\1 & 39 & 40 \\2 & 38 & 32 \\3 & 37 & 29 \\4 & 36 & 25 \\5 & 35 & 17 \\6 & 34 & 13 \\7 & 33 & 27 \\8 & 32 & 29 \\9 & 31 & 35 \\10 & 30 & 45\end{array}$$

-Refer to the above information to answer this question. What is the break-even level (s) of output?

A) 0.
B) 5 and 9.
C) 5 and 10.
D) 6 and 10.
E) 8.

Question 26

Where is a monopolist's profit maximized?

A) At break-even output.
B) Where the difference between total revenue and total cost is maximum.
C) Where total revenue is maximum.
D) Where total cost is minimum.

Question 27

The following graph shows the average and marginal revenue curves for a monopolist:

Refer to the graph above to answer this question. At what price is total revenue maximized?

A) 0.
B) $30.
C) $300.
D) $600.

Question 28

The following graph shows the average and marginal revenue curves for a monopolist:

Refer to the graph above to answer this question. What is the monopolist's maximum revenue?

A) $30.
B) $60.
C) $300.
D) $600.
E) $9,000.

Question 29

Refer to the graph above to answer this question. What is the maximum profit?

A) 0.
B) $2,000.
C) $3,000.
D) $4,000.

Question 30

Refer to the graph above to answer this question. What are the break-even level(s) of output?

A) 0 units only.
B) 30 units only
C) 30 and 120 units.
D) 0, 30 and 120 units.

Question 31

Where is a monopolist's profit maximized?

A) Where marginal revenue is zero.
B) Where average revenue equals average cost.
C) Where average revenue equals marginal cost.
D) Where marginal revenue equals marginal cost.
E) Where marginal profit is maximum.

Question 32

The following graph depicts the costs and revenues for an unregulated monopolist:

Refer to the graph above to answer this question. What is the monopolist's maximum total revenue?

A) $600.
B) $40,000.
C) $42,000.
D) $48,000.
E) $50,000.

Question 33

Refer to the graph above to answer this question. What is the maximum loss?

A) 0.
B) $1,500.
C) $2,000.
D) $3,000.

Question 34

The following graph shows the average and marginal revenue curves for a monopolist:

Refer to the graph above to answer this question. At what output is total revenue maximized?

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

Question 35

The following data relates to an unregulated monopolist with total fixed cost of $32:
$$\begin{array} { l l c } \text { Quantity } & \text { Price } ( \mathbf { \$ ) } & \text { Marginal Cost } \mathbf { ( \$ ) } \\0 & 40 & 0 \\1 & 39 & 40 \\2 & 38 & 32 \\3 & 37 & 29 \\4 & 36 & 25 \\5 & 35 & 17 \\6 & 34 & 13 \\7 & 33 & 27 \\8 & 32 & 29 \\9 & 31 & 35 \\10 & 30 & 45\end{array}$$

-Refer to the above information to answer this question. What is the profit-maximizing output?

A) 0.
B) 5.
C) 6.
D) 7.
E) 10.

Question 36

Which of the following statements regarding a monopolist is correct?

A) A monopolist will only produce an output where the demand is elastic.
B) A monopolist will only produce an output where the demand is inelastic.
C) A monopolist will only produce an output where the demand is unitary elastic.
D) A monopolist will only produce an output where the demand is perfectly elastic.

Question 37

The following data relates to an unregulated monopolist with total fixed cost of $32:
$$\begin{array} { l l c } \text { Quantity } & \text { Price } ( \mathbf { \$ ) } & \text { Marginal Cost } \mathbf { ( \$ ) } \\0 & 40 & 0 \\1 & 39 & 40 \\2 & 38 & 32 \\3 & 37 & 29 \\4 & 36 & 25 \\5 & 35 & 17 \\6 & 34 & 13 \\7 & 33 & 27 \\8 & 32 & 29 \\9 & 31 & 35 \\10 & 30 & 45\end{array}$$

-Refer to the above information to answer this question. What is the profit-maximizing price?

A) $0.
B) $35.
C) $34.
D) $33.
E) $30.

Question 38

When is a monopolist's total revenue at a maximum?

A) When it is equal to its marginal revenue.
B) When it is equal to its average revenue.
C) When its marginal revenue is equal to zero.
D) When its average revenue is equal to its marginal revenue.
E) When its marginal revenue is at a maximum.

Question 39

The following data refers to an unregulated monopolist:
$$\begin{array} { l c c c } \text { Quantity } & \text { Total Revenue (\$) } & \text { Total Cost (\$) } & \text { Marginal Cost (\$) } \\0 & & 20 & \\1 & 50 & & 50 \\2 & 90 & & 30 \\3 & 120 & & 10 \\4 & 140 & & 15 \\5 & 150 & & 40\\6&150&&80\end{array}$$

-Refer to the above information to answer this question. What is the profit-maximizing output?

A) 0.
B) 3.
C) 4.
D) 5.
E) 6.

Question 40

Suppose that a monopolist was selling 20 units at $50 each but has now reduced the price to $48 and is now selling 21 units. What is the monopolist's marginal revenue?

A) $8.
B) $48.
C) $50.
D) $1,000.

Question 41

If the marginal cost of the 1000^th unit produced by a monopolist is $16 and its marginal revenue is $20, what should the monopolist do?

A) Produce more until the marginal profit becomes zero.
B) Produce less since the costs will be less and therefore the profit will be greater.
C) Produce less since it will be able to sell them at a higher price and therefore obtain greater profits.
D) Produce more until the marginal revenue becomes zero.

Question 42

The following table gives the cost and demand data for a particular market.
$\begin{array} { l l c l c } \text { Output } & \text { Price (\$) } & \begin{array} { l } \text { Marginal } \\\text { Revenue \$ }\end{array} & \begin{array} { l } \text { Average } \\\text { Cost \$ }\end{array} & \begin{array} { l } \text { Marginal } \\\text { Cost \$ }\end{array} \\0 & & & & \\1 & 16 & \$ 16 & \$ 24 & \$ 10 \\2 & 14.5 & 13 & 15 & 6 \\3 & 13 & 10 & 11.7 & 5 \\4 & 11.5 & 7 & 10.5 & 7 \\5 & 10 & 4 & 10 & 8 \\6 & 8.5 & 1 & 9.75 & 8.5 \\7 & 7 & - 2 & 9.6 & 9 \\8 & 5.5 & - 5 & 9.6 & 9.3 \\9 & 4 & - 80 & 9.6 & 9.5\end{array}$

-Refer to the above information to answer this question. Suppose that the data describes a perfectly competitive industry. What will be the equilibrium price and output?

A) $11.5 and 4.
B) $10 and 5.
C) $8.5 and 6.
D) $7 and 7.
E) $5.5 and 8.

Question 43

The following graph depicts the costs and revenues for an unregulated monopolist:

Refer to the graph above to answer this question. What is the monopolist's maximum level of total profits?

A) $0.
B) $6,000.
C) $8,000.
D) $18,000.
E) $48,000.

Question 44

Assuming that average costs are the same in both circumstances, all of the following statements except one are true regarding the long-run comparison between monopoly and perfect competition. Which is the exception?

A) The monopoly price will be higher than the competitive price.
B) The monopoly quantity will be lower than the competitive quantity.
C) The monopoly produces below capacity whereas the competitive firm produces at capacity output.
D) The monopoly may be making economic profits whereas the competitive firm will not.
E) The total costs of production for the monopolist will be greater than for the competitive firm.

Question 45

Refer to the above graph to answer this question. Suppose that the graph represents a monopolist. At the profit maximizing price and output, what will be the level of total profit?

A) $0.
B) 6.
C) $180.
D) $240.
E) Cannot be determined.

Question 46

The following graph depicts the costs and revenues for an unregulated monopolist:

Refer to the graph above to answer this question. What is the monopolist's profit-maximizing price?

A) $10
B) $18.
C) $20.
D) $30.
E) $36.

Question 47

Refer to the above graph to answer this question. Suppose that the graph represents a monopolist. What is the profit maximizing price and output?

A) $10 and 50.
B) $12 and 40.
C) $12 and 100.
D) $14 and 30.
E) Cannot be determined.

Question 48

Refer to the above graph to answer this question. Suppose that the graph represents a monopolist. At what price and output would the monopolist maximize its total revenue?

A) $0 and 50.
B) $0 and 100.
C) $10 and 50.
D) $12 and 40.
E) Cannot be determined.

Question 49

Refer to the above graph to answer this question. Suppose that the graph represents a monopolist. What would be the marginal revenue of the 20^th unit sold?

A) $4.
B) $10.
C) $12.
D) $16.
E) Cannot be determined.

Question 50

Which of the following statements is true regarding unregulated monopolies?

A) They are productively, but not allocatively, inefficient.
B) They are allocatively, but not productively, inefficient.
C) They are both productively and allocatively inefficient.
D) They are neither productively and allocatively inefficient.

Question 51

Refer to the above graph to answer this question. Suppose that the graph represents a perfectly competitive market. What will be the equilibrium price and quantity?

A) $10 and 50.
B) $12 and 40.
C) $12 and 100.
D) $14 and 30.
E) Cannot be determined.

Question 52

The following table gives the cost and demand data for a particular market.
$\begin{array} { l l c l c } \text { Output } & \text { Price (\$) } & \begin{array} { l } \text { Marginal } \\\text { Revenue \$ }\end{array} & \begin{array} { l } \text { Average } \\\text { Cost \$ }\end{array} & \begin{array} { l } \text { Marginal } \\\text { Cost \$ }\end{array} \\0 & & & & \\1 & 16 & \$ 16 & \$ 24 & \$ 10 \\2 & 14.5 & 13 & 15 & 6 \\3 & 13 & 10 & 11.7 & 5 \\4 & 11.5 & 7 & 10.5 & 7 \\5 & 10 & 4 & 10 & 8 \\6 & 8.5 & 1 & 9.75 & 8.5 \\7 & 7 & - 2 & 9.6 & 9 \\8 & 5.5 & - 5 & 9.6 & 9.3 \\9 & 4 & - 80 & 9.6 & 9.5\end{array}$

-Refer to the above information to answer this question. Suppose that the data describes a monopoly industry. What will be the total profits or loss at the profit-maximizing output?

A) $0.
B) Profit of $3.5.
C) Profit of $4.
D) Profit of $4.5.
E) Loss of $9.

Question 53

The following table gives the cost and demand data for a particular market.
$\begin{array} { l l c l c } \text { Output } & \text { Price (\$) } & \begin{array} { l } \text { Marginal } \\\text { Revenue \$ }\end{array} & \begin{array} { l } \text { Average } \\\text { Cost \$ }\end{array} & \begin{array} { l } \text { Marginal } \\\text { Cost \$ }\end{array} \\0 & & & & \\1 & 16 & \$ 16 & \$ 24 & \$ 10 \\2 & 14.5 & 13 & 15 & 6 \\3 & 13 & 10 & 11.7 & 5 \\4 & 11.5 & 7 & 10.5 & 7 \\5 & 10 & 4 & 10 & 8 \\6 & 8.5 & 1 & 9.75 & 8.5 \\7 & 7 & - 2 & 9.6 & 9 \\8 & 5.5 & - 5 & 9.6 & 9.3 \\9 & 4 & - 80 & 9.6 & 9.5\end{array}$

-Refer to the above information to answer this question. Suppose that the data describes a perfectly competitive industry. What will be the total profit or loss of the industry at equilibrium?

A) $0.
B) Profit of $3.5.
C) Profit of $4.
D) Profit of $4.5.
E) Loss of $7.50.

Question 54

The following graph depicts the costs and revenues for an unregulated monopolist:

Refer to the graph above to answer this question. What is the total revenue at the monopolist's profit-maximizing output?

A) $80.
B) $160.
C) $180.
D) $288.
E) $300.

Question 55

The following graph depicts the costs and revenues for an unregulated monopolist:

Refer to the graph above to answer this question. What is the monopolist's profit-maximizing price and output?

A) $50 and 800.
B) $40 and 600.
C) $60 and 800.
D) $70 and 600.
E) $75 and 450.

Question 56

Refer to the above graph to answer this question. Suppose that the graph represents a monopolist. What is the value of its maximum total revenue?

A) $20.
B) $100.
C) $480.
D) $500.
E) Cannot be determined.

Question 57

All of the following except one are reasons why unregulated monopolies may be undesirable? Which is the exception?

A) Monopolies are guaranteed to make economic profits in the long run.
B) Monopolies are productively inefficient.
C) Monopolies are allocatively inefficient.
D) The existence of monopolies may lead to a more unequal distribution of income and wealth.
E) Monopolists produce below capacity output.

Question 58

The following graph depicts the costs and revenues for an unregulated monopolist:

Refer to the graph above to answer this question. What is the total profit at the monopolist's profit-maximizing output?

A) $48.
B) $120.
C) $128.
D) $144.
E) $208.

Question 59

The following graph depicts the costs and revenues for an unregulated monopolist:

Refer to the graph above to answer this question. What is the total cost at the monopolist's profit-maximizing output?

A) $80.
B) $160.
C) $180.
D) $288.
E) $300.

Question 60

The following table gives the cost and demand data for a particular market.
$\begin{array} { l l c l c } \text { Output } & \text { Price (\$) } & \begin{array} { l } \text { Marginal } \\\text { Revenue \$ }\end{array} & \begin{array} { l } \text { Average } \\\text { Cost \$ }\end{array} & \begin{array} { l } \text { Marginal } \\\text { Cost \$ }\end{array} \\0 & & & & \\1 & 16 & \$ 16 & \$ 24 & \$ 10 \\2 & 14.5 & 13 & 15 & 6 \\3 & 13 & 10 & 11.7 & 5 \\4 & 11.5 & 7 & 10.5 & 7 \\5 & 10 & 4 & 10 & 8 \\6 & 8.5 & 1 & 9.75 & 8.5 \\7 & 7 & - 2 & 9.6 & 9 \\8 & 5.5 & - 5 & 9.6 & 9.3 \\9 & 4 & - 80 & 9.6 & 9.5\end{array}$

-Refer to the above information to answer this question. Suppose that the data describes a monopoly industry. What will be the monopoly price and output?

A) $11.5 and 4.
B) $10 and 5.
C) $8.5 and 6.
D) $7 and 7.
E) $5.5 and 8.

Question 61

All of the following, except one, are ways that the monopolist's activities might be threatened. Which is the exception?

A) The monopolist might fear the future intervention of the government.
B) The monopolist might fear the threat of a possible consumer boycott and the ensuing bad publicity.
C) The monopolist might fear the possibility of new firms eventually trying to enter the industry.
D) The monopolist might fear the threat of a new trade association.

Question 62

All of the following except one are valid defenses for monopoly. Which is the exception?

A) A monopoly will more likely have economies of scale than will a competitive industry.
B) Assuming it has the same costs as a competitive industry, a monopoly generally produces higher outputs.
C) There will usually be a greater amount of research and development with a monopoly than with a competitive industry.
D) Monopolies can generally offer better salaries and working conditions for their employees than can a competitive industry.

Question 63

The following graph gives cost and revenue data for a monopolist:

Refer to the above graph to answer this question. If the monopolist is unregulated, what will be the level of its maximum total revenue?

A) $80.
B) $700.
C) $1,400.
D) $3,150.
E) $3,200.

Question 64

What is the name for a market where a single producer is able to produce at a lower cost than competing firms could?

A) Unregulated monopoly.
B) Oligopoly.
C) Natural monopoly.
D) Trade association.

Question 65

The following graph gives cost and revenue data for a monopolist:

Refer to the above graph to answer this question. If the monopolist is unregulated and wishes to maximize its total profit, what will be its price and output?

A) $0 and 80.
B) $10 and 70.
C) $10 and 140.
D) $40 and 80.
E) $45 and 70.

Question 66

How do a monopoly lump-sum profits tax and a monopoly sales tax differ in their effects on the monopolist?

A) A profit tax causes the price to rise, whereas the sales tax has no effect on the price.
B) A profit tax causes the output to fall, whereas the sales tax has no effect on the output.
C) A profit tax is totally paid by the monopolist, whereas a sales tax is partially passed on to consumers.
D) A sales tax has no effect on neither the price nor the output.
E) A sales tax has no effect on the monopolist's profit but a profit tax does.

Question 67

What is meant by the term fair-return price?

A) The price which ensures that the firm is able to make normal profits only.
B) The price which ensures that the firm is able to make economic profits only.
C) The price which ensures that the output will be produced at the lowest possible cost.
D) The price which ensures the best allocation of products.
E) A price equal to marginal cost.

Question 68

The following graph shows the market demand and average cost curve for electricity (in millions of kilowatts) in an urban centre:

Refer to the above graph to answer this question. Suppose that the price is $3, and the market is served by two competing firms, each having 50% of the market. What will be the profit or loss made by each firm?

A) $0.
B) Loss of $50.
C) Loss of $100.
D) Loss of $150.
E) Profit of $100.

Question 69

What are public utilities?

A) Goods or services provided by private firms and sold directly to the public.
B) Goods or services provided by private firms and sold to the government.
C) Goods or services provided by the government and sold to private firms.
D) Goods or services which are regarded as essential and which are therefore usually provided by the government.

Question 70

The following graph gives cost and revenue data for a monopolist:

Refer to the above graph to answer this question. If the monopolist is unregulated and is maximizing its total profits, what is the level of its total revenue?

A) $80.
B) $700.
C) $1,400.
D) $3,150.
E) $4,500.

Question 71

The following graph shows the market demand and average cost curve for electricity (in millions of kilowatts) in an urban centre:

Refer to the above graph to answer this question. Suppose that the price is $3, and the market is served by two competing firms, each with average costs as shown in the graph and each having 50% of the market. What will be the quantity produced by each firm?

A) 50.
B) 55.
C) 75.
D) 100.
E) 110.

Question 72

The following graph shows the market demand and average cost curve for electricity (in millions of kilowatts) in an urban centre:

Refer to the above graph to answer this question. Suppose that the price is $3, and the market is served by a monopolist. What quantity will be sold, and what will be the total profit or loss?

A) 75 and $0.
B) 80 and $40.
C) 100 and $100.
D) 110 and $0.
E) 110 and $27.50.

Question 73

What effect does a lump-sum profit tax have on a monopolist?

A) It causes the price to increase but has no effect on the output.
B) It causes the output to decrease but has no effect on the price.
C) It causes the price to increase and the output to decrease.
D) It causes the output to increase but has no effect on the price.
E) It has no effect on either the price or the output.

Question 74

The following graph gives cost and revenue data for a monopolist:

Refer to the above graph to answer this question. If the monopolist is unregulated and wishes to maximize its total revenue, what will be its price and output?

A) $0 and 80.
B) $10 and 70.
C) $10 and 140.
D) $40 and 80.
E) $45 and 70.

Question 75

The following graph gives cost and revenue data for a monopolist:

Refer to the above graph to answer this question. If the monopolist is regulated and forced to charge the socially optimum price, what will be its resulting total revenue?

A) $700.
B) $2,400.
C) $2,750.
D) $3,000.
E) $3,150.

Question 76

What is a natural monopoly?

A) A market where a single producer is able to produce at a lower cost than competing firms could.
B) A monopoly created by government decree.
C) A monopoly created as the result of mergers and takeovers.
D) A market where the demand is very high in relation to the costs of production.

Question 77

The following graph gives cost and revenue data for a monopolist:

Refer to the above graph to answer this question. If the monopolist is regulated and forced to charge the socially optimum price, what will be its price and output?

A) $10 and 70.
B) $25 and 110.
C) $30 and 100.
D) $45 and 70.
E) $60 and 40.

Question 78

What is meant by the term socially optimum price?

A) The price which ensures that the firm is able to make normal profits only.
B) The price which ensures that the firm is able to make economic profits only.
C) The price which ensures that the output will be produced at the lowest possible cost.
D) The price which ensures the best allocation of products.
E) A price equal to average cost.

Question 79

The following graph gives cost and revenue data for a monopolist:

Refer to the above graph to answer this question. If the monopolist is unregulated and is maximizing its total revenue, what will be the resulting total profit or loss?

A) $0.
B) Loss of $600.
C) Loss of $2,400.
D) Profit of $640.
E) Profit of $2,400.

Question 80

The following graph gives cost and revenue data for a monopolist:

Refer to the above graph to answer this question. If the monopolist is unregulated, what is the level of maximum profits?

A) $0.
B) $10.
C) $450.
D) $700.
E) $2,450.