Deck 22: Monopoly

Question 1

Which statement is true?

A)Because they are the only seller in the industry,the monopolist does not have to lower their price to sell more output.
B)Most firms in the United States are monopolies.
C)Unlike the perfect competitor,the monopolist does not necessarily produce at that output where MC = MR.
D)None of these statements are true.

Answer 1

D

Question 2

Which statement is false?

A)A monopoly is both a firm and an industry.
B)A monopoly is an imperfect competitor.
C)There are monopolies in the United States at the regional and local levels.
D)None of these statements are false.

Answer 2

D

Question 3

As a firm grows larger

A)economies of scale set in,then diseconomies of scale.
B)diseconomies of scale set in,then economies of scale.
C)economies of scale and diseconomies of scale set in at the same time.
D)neither economies of scale nor diseconomies of scale set in.

Answer 3

A

Question 4

The monopolist and the perfect competitor differ in that

A)they face different demand curves.
B)the monopolist does not always produce at an output in which MC = MR.
C)the monopolist is always a large firm.
D)the monopolist is more efficient.

Question 5

Assume a downward-sloping straight-line demand curve that intersects the output axis at an output of 6.At what output does the MR curve intersect the output axis?

A)0
B)3
C)6
D)9
E)12

Question 6

Which statement is false?

A)Monopolies tend to be inefficient.
B)Economic power is easily translated into political power.
C)Two ways of preventing public utilities from taking advantage of their power are government regulation and government ownership.
D)None of these statements are false.

Question 7

A monopolist operates at the minimum point of its ATC curve

A)only in the short run.
B)only in the long run.
C)in both the short run and the long run.
D)in neither the short run nor the long run.

Question 8

Which statement is true?

A)Big business has a great deal of economic power but very little political power.
B)Big business has a great deal of political power but very little economic power.
C)Big business has a great deal of economic and political power.
D)Big business does not have much political or economic power.

Question 9

Which statement is false?

A)Natural monopolies can provide cheaper service as monopolies than could several competing firms.
B)The two main justifications for monopoly are economies of scale and natural monopoly.
C)Economies of scale and high capital requirements are significant barriers to entry.
D)None of these statements are false.

Question 10

Which statement is false?

A)The monopolist's demand and marginal revenue curves are two separate curves.
B)The monopolist can sell more output only by lowering price.
C)The monopolist produces at the minimum point of its ATC curve.
D)None of these statements are false.

Question 11

Each of the following is a legal barrier to entry into an industry except

A)government licensing.
B)patents.
C)government franchising.
D)All of these choices are legal barriers.

Question 12

Which statement is true?

A)The monopolist's most efficient output is its most profitable output as well.
B)The monopolist charges a higher price than the perfect competitor in the long run.
C)All monopolists have control over an essential resource.
D)None of these statements are true.

Question 13

Which statement is true?

A)All monopolies are very large firms.
B)Most monopolists do not produce at an output in which MC = MR.
C)The monopolist's demand curve and MR curve are identical.
D)None of these statements are true.

Question 14

A firm can sell 22 units at $20,but to sell 23 units,the price is cut to $19.The marginal revenue derived from selling the 23rd unit is

A)$9.
B)$3.
C)0.
D)-$3.
E)-$9.

Question 15

There are ___________ limits to monopoly power.

A)no
B)some
C)many

Question 16

Which one of these is not a natural monopoly?

A)A local electric company
B)A local natural gas company
C)A local cable TV company
D)All of these choices are examples of natural monopolies.

Question 17

Which statement is true?

A)The monopolist operates at the minimum point of its average total cost curve.
B)Once a monopoly is set up,it is impossible to dislodge it.
C)Monopolies are always large firms.
D)Price is always read off the demand curve.

Question 18

Which statement is true?

A)All monopolies are good.
B)All monopolies are bad.
C)Most natural monopolies are government regulated or government owned.
D)None of these statements are true.

Question 19

Which statement is false?

A)The monopolist produces the entire industry supply.
B)The monopolist faces the entire industry demand curve.
C)A monopoly is generally the largest firm in the industry.
D)None of these statements are false.

Question 20

When more substitutes become available,a monopolist has __________ power to raise price.

A)less
B)infinite
C)more

Question 21

$$\begin{array} { c r } \text { Output } & \text { Price } \\1 & \$ 25 \\2 & 23 \\3 & 21 \\4 & 19 \\5 & 17\end{array}$$

-The marginal revenue that would be derived from the production of a second unit is

A)$17.
B)$19.
C)$21.
D)$23.
E)$25.

Question 22

If a monopolist's price were $8,it is likely that in equilibrium

A)MC = MR,and both are less than $8.
B)MC = MR,and both are more than $8.
C)MC = MR,and both are equal to $8.
D)None of the choices are correct.

Question 23

$$\begin{array} { c r } \text { Output } & \text { Price } \\1 & \$ 25 \\2 & 23 \\3 & 21 \\4 & 19 \\5 & 17\end{array}$$

-The marginal revenue that would be derived from producing a fifth unit of output is

A)$9.
B)$11.
C)$13.
D)$15.
E)$17.

Question 24

$$\begin{array} { c r } \text { Output } & \text { Price } \\1 & \$ 30 \\2 & 28 \\3 & 26 \\4 & 24 \\5 & 22\end{array}$$

-The marginal revenue that would be derived from producing the fourth unit of output is

A)$24.
B)$22.
C)$20.
D)$18.
E)$16.

Question 25

The monopolistic firm's demand curve

A)is perfectly inelastic.
B)coincides with its marginal revenue curve.
C)is perfectly elastiC.
D)is less elastic than a perfectly competitive firm's demand curve.

Question 26

$$\begin{array} { c r } \text { Output } & \text { Price } \\1 & \$ 25 \\2 & 23 \\3 & 21 \\4 & 19 \\5 & 17\end{array}$$

-The marginal revenue that would be derived from production of a third unit is

A)$17.
B)$19.
C)$21.
D)$23.
E)$25.

Question 27

$$\begin{array} { c r } \text { Output } & \text { Price } \\1 & \$ 25 \\2 & 23 \\3 & 21 \\4 & 19 \\5 & 17\end{array}$$

-If the marginal cost were $21,output would be

A)1.
B)2.
C)3.
D)4.
E)5.

Question 28

If the firm is maximizing profits,it is producing ____ units of output and charging a price of ___.

A)OF;ON
B)OF;OL
C)OG;ON
D)OG;OM
E)OG;OL

Question 29

The monopolist's demand curve is ______ that of the perfect competitor;the monopolist's marginal revenue curve is ______ that of the perfect competitor.

A)identical to;identical to
B)different from;different from
C)identical to;different from
D)different from;identical to

Question 30

$$\begin{array} { c r } \text { Output } & \text { Price } \\1 & \$ 30 \\2 & 28 \\3 & 26 \\4 & 24 \\5 & 22\end{array}$$

-If marginal cost were $22,how many units of output would this firm produce?

A)1
B)2
C)3
D)4
E)5

Question 31

$$\begin{array} { c r } \text { Output } & \text { Price } \\1 & \$ 25 \\2 & 23 \\3 & 21 \\4 & 19 \\5 & 17\end{array}$$

-If the marginal cost were $13,how many units of output would this firm produce?

A)1
B)2
C)3
D)4
E)5

Question 32

A natural monopoly

A)has an average cost curve that reaches minimum possible average cost at a low level of output.
B)has a marginal cost curve that is steeply upward sloping.
C)is usually subject to antitrust suits.
D)is usually allowed to choose its price so as to maximize profits in the United States.
E)occurs when a single firm can supply the entire market demand for a product at a lower average cost than would be possible if two or more firms supplied the market.

Question 33

For a monopolist,the price of the product

A)always equals the marginal revenue.
B)is always less than the marginal revenue.
C)exceeds the marginal revenue.
D)always equals the marginal cost of the product.

Question 34

Which statement is true?

A)All monopolies are large firms.
B)The monopolist produces a product similar to its competitors.
C)There is no such thing as a natural monopoly.
D)There are no close substitutes for a monopolist's product.

Question 35

Unlike a perfectly competitive firm,a profit-maximizing monopolist

A)can select a price and sell as much as it desires.
B)equates marginal revenue and marginal cost.
C)can produce any desired amount and charge as much as it desires.
D)can choose a price and output combination from a downward-sloping demand curve.

Question 36

Monopolies are usually viewed with concern from an economic standpoint since

A)size is inherently dangerous;the larger the firm,the more likely it is to squeeze out the "little producer."
B)resources may be allocated in an inefficient manner.
C)the government may be put at the mercy of several large producers.
D)the variety of goods available on the market will be limiteD.

Question 37

$$\begin{array} { c r } \text { Output } & \text { Price } \\1 & \$ 30 \\2 & 28 \\3 & 26 \\4 & 24 \\5 & 22\end{array}$$

-The marginal revenue that would be derived from producing a fifth unit of output is

A)$18.
B)$16.
C)$14.
D)$12.
E)$10.

Question 38

$$\begin{array} { c r } \text { Output } & \text { Price } \\1 & \$ 30 \\2 & 28 \\3 & 26 \\4 & 24 \\5 & 22\end{array}$$

-When marginal cost is greater than marginal revenue,the monopolist can increase its profit or minimize its loss by

A)expanding output.
B)reducing output.
C)lowering price.
D)producing where price = ATC.

Question 39

$$\begin{array} { c r } \text { Output } & \text { Price } \\1 & \$ 30 \\2 & 28 \\3 & 26 \\4 & 24 \\5 & 22\end{array}$$

-If the marginal cost were $14,output would be

A)1.
B)2.
C)3.
D)4.
E)5.

Question 40

$$\begin{array} { c r } \text { Output } & \text { Price } \\1 & \$ 30 \\2 & 28 \\3 & 26 \\4 & 24 \\5 & 22\end{array}$$

-If the marginal cost were $22,the firm would maximize its profit at _____ unit(s)of output.

A)1
B)2
C)3
D)4
E)5

Question 41

The loss-maximizing firm will be earning total revenue of

A)OMHG.
B)OLJF.
C)OMQN.
D)EKHG.
E)OMIF.

Question 42

If this firm were a perfect competitor,at what output would it produce in the long run?

A)OP
B)OM
C)OL
D)None of the choices are correct.

Question 43

If a monopolist's marginal cost equals its marginal revenue

A)output should be raised.
B)output should be reduced.
C)production is at its most efficient level.
D)profits are maximized or losses are minimizeD.

Question 44

If the firm is maximizing profits,total profit will be

A)LKJM.
B)NIKL.
C)MJKL.
D)OFKL.
E)OFJM.

Question 45

The profit-maximizing firm will be earning total revenue of

A)OFIN.
B)OFJM.
C)OFKL.
D)OGHM.
E)NIKL.

Question 46

Marginal revenue for a monopolist

A)decreases as price decreases because each unit of the good is being sold for a lower price.
B)increases as output increases because demand is inelastic.
C)is constant and equal to price.
D)increases as price decreases because more people are willing and able to purchase the good at a lower price.

Question 47

A firm can sell 14 units at $18,but to sell 15 units,the firm must cut the price to $17.The marginal revenue derived from selling the 15th unit is

A)-$18.
B)0.
C)$3.
D)$17.
E)$18.

Question 48

A monopoly firm selling moustache wax to vain men in a small town is currently maximizing profits by charging a price of $5.It follows that the marginal cost of moustache wax

A)is greater than $5.
B)is equal to $5.
C)is less than $5.
D)None of these choices are true.

Question 49

For a firm to be a natural monopoly,it should have

A)a special patent.
B)exclusive access to a copyright.
C)a cost curve that was continuously downward sloping to the right.
D)a monopoly on a natural resource.
E)a product so unique that no other firm could come close to producing it.

Question 50

If the firm is minimizing losses,total loss will be

A)OMKE.
B)EKQN.
C)NQHG.
D)FIHG.
E)OLJF.

Question 51

At what output would this firm produce most efficiently?

A)OL
B)OM
C)OP
D)None of the choices are correct.

Question 52

In the United States,natural monopolies

A)are easily converted to competitive industries.
B)are common in retailing.
C)are commonly regulated by governments.
D)are rarely regulated by governments.

Question 53

If the firm is minimizing losses,it is producing ___ units of output and charging a price of __.

A)OM;ON
B)OL;ON
C)OM;OF
D)OL;OF
E)OM;OG

Question 54

If the government attempts to break up a natural monopoly to enforce competition in an industry

A)the average cost of producing the good will increase.
B)the smallest firm will have a significant cost advantage over the larger,less efficient firms.
C)the average cost of producing the good will decrease.
D)the price paid by consumers will be expected to remain the same.

Question 55

A firm that has substantial monopoly power

A)confronts a perfectly-elastic demand curve.
B)can sell as much as it wants at the price it chooses.
C)can strongly influence the price that it charges for its output.
D)is one of only a few firms in the industry.

Question 56

If the monopolist can sell 10 units at a price of $7 and 11 units at a price of $6.50,the marginal revenue of the 11th unit is

A)-$1.50.
B)0.
C)$1.50.
D)$6.50.
E)$7.00.

Question 57

When looking at a monopolist's level of output,you can expect to find

A)average revenue greater than price.
B)price greater than marginal cost.
C)marginal cost greater than marginal revenue.
D)marginal revenue greater than price.

Question 58

If this firm were a perfect competitor,what price would it charge in the long run?

A)OE
B)ON
C)OF
D)None of the choices are correct.

Question 59

Patents function to

A)establish permanent monopolies.
B)temporarily protect monopoly power.
C)encourage firms to reduce output.
D)reduce monopoly power.

Question 60

In late 2008,Wal-Mart agreed to settle 63 of the over 70 lawsuits filed against them across the United States,paying out ____________ million.

A)less than $125
B)between $125 and $250
C)between $352 and $640
D)over $800

Question 61

A public utility would be an example of

A)a natural monopoly.
B)an unnatural monopoly.
C)an unregulated private monopoly.
D)a competitive monopoly.

Question 62

Which of the following is NOT true about a monopoly?

A)The demand curve for a monopoly's product is perfectly elastic
B)For any given quantity the price of the monopoly's product will exceed the marginal revenue from that amount.
C)If the monopoly maximizes profit it will charge a price that exceeds marginal cost.
D)It must adjust output until marginal revenue equals marginal cost to maximize profit.

Question 63

If profit-maximizing,this firm will charge a price of

A)$8.
B)$10.
C)$12.
D)$16.

Question 64

If the firm maximizes its profits,its marginal cost will be

A)$8.
B)$10.
C)$12.
D)$16.

Question 65

The profit-maximizing firm's output will be about

A)450.
B)500.
C)550.
D)625.
E)750.

Question 66

A monopoly firm is different from a perfectly competitive firm in that

A)there are many substitutes for the monopolist's product,whereas there are no close substitutes for the perfectly competitive firm's product.
B)the monopolist's demand curve is perfectly inelastic,whereas the perfectly competitive firm's demand curve is perfectly elastic.
C)the monopolist can influence price in the market,whereas the perfectly competitive firm is a price taker.
D)All of these choices are true.

Question 67

The firm's maximum profit will be

A)$900.
B)$1,800.
C)$3,360.
D)$5,400.
E)$6,000.

Question 68

Which statement is true?

A)The monopolist usually operates at the minimum point of its ATC.
B)Nearly all monopolies are very large firms.
C)Most natural monopolies produce agricultural products or natural resources.
D)None of these statements are true.

Question 69

Assuming the monopolist shown in the graph adjusts output to maximize profits,it is

A)earning profits in the short-run.
B)having losses in the short-run.
C)earning profits in the long-run.
D)earning profits and could be in the short-run or long-run.

Question 70

Which statement is false?

A)The monopolist's demand and marginal revenue curves are identical.
B)Your local phone company is a natural monopoly.
C)A monopoly can be a small firm.
D)None of these statements are false.

Question 71

The monopolist shown in the above graph

A)is making a profit.
B)is taking a loss.
C)is breaking even.
D)may be making a profit or breaking even.
E)may be taking a loss or breaking even.

Question 72

Public utilities

A)are primarily regulated natural monopolies.
B)are competitive firms.
C)experience only insignificant economies of scale in production.
D)are seldom regulateD.

Question 73

The monopolist shown in the above graph

A)is making a profit.
B)is taking a loss.
C)is breaking even.
D)may be making a profit or breaking even.
E)may be taking a loss or breaking even.

Question 74

If total revenue is increasing as output is rising,then

A)marginal revenue must be equal to zero.
B)marginal revenue must be greater than zero.
C)marginal revenue must be less than zero.
D)price must be increasing.
E)price must be constant.

Question 75

If the firm were operating at optimal efficiency it would have an output of

A)OI.
B)OJ.
C)OK.
D)OL.

Question 76

The profit-maximizing firm will operate at an output of _____.

A)OI
B)OJ
C)OK
D)OL

Question 77

If a monopoly firm can sell its eighth unit of output for a price of $175,it may expect to receive a price __________ in order to sell more than eight units.

A)of more than $175
B)of $175
C)of less than $175
D)of $100
E)of less than $100

Question 78

When total revenue is at a maximum

A)average revenue is zero.
B)marginal revenue is zero.
C)price is at a maximum.
D)quantity sold is at a maximum.

Question 79

Natural monopolies are monopolies that are based on

A)patents.
B)control over a strategic natural resource.
C)extensive economies of scale in production.
D)copyrights.

Question 80

An industry that realizes such large economies of scale in producing its product that single-firm production of that good or service is most efficient is called a(n)

A)fixed cost monopoly.
B)patent monopoly.
C)economies of scale monopoly.
D)natural monopoly.