Deck 11: Monopoly

Question 1

The figure given below shows the aggregate demand and supply curves of a perfectly competitive market.Figure 10.7

Which of the following is true under monopoly?

A)Price is equal to marginal revenue.
B)Price is equal to marginal cost.
C)Price is less than marginal revenue.
D)Price is less than marginal cost.
E)Price is greater than marginal revenue.

Answer 1

Price is greater than marginal revenue.

Question 2

The figure given below shows the aggregate demand and supply curves of a perfectly competitive market.Figure 10.7

In many cities, the market for cab services is monopolized. This monopoly arises because:

A)of economies of scale.
B)of government restrictions on the entry of new firms.
C)there is a limited space on the streets for taxis.
D)it protects the consumers from unscrupulous drivers.
E)of high fixed costs of entering the business.

Answer 2

of government restrictions on the entry of new firms.

Question 3

The figure given below shows the aggregate demand and supply curves of a perfectly competitive market.Figure 10.7

Which of the following is true of the demand curve faced by a monopolist?

A)​A monopolist's demand curve is infinitely elastic.
B)​A monopolist's demand curve is more elastic than a competitive firm's demand curve.
C)​A monopolist faces a relatively inelastic demand curve.
D)​A monopolist's demand curve coincides with its marginal revenue curve.
E)​A monopolist faces a positively sloped demand curve.

Answer 3

​A monopolist faces a relatively inelastic demand curve.

Question 4

The following table shows the units of output sold at different price levels by Gizmo's Inc.Table 11.1

According to Table 11.1, what is the marginal revenue of the third unit?

A)$42
B)$32
C)$18
D)$14
E)$10

Question 5

The figure given below shows the aggregate demand and supply curves of a perfectly competitive market.Figure 10.7

Which of the following is an assumption of the monopoly model?

A)There exists a large number of buyers and sellers.
B)There are no close substitutes of the good.
C)The firm faces a horizontal demand curve.
D)There is free entry and exit of firms.
E)The firm is a price taker.

Question 6

The figure given below shows the aggregate demand and supply curves of a perfectly competitive market.Figure 10.7

A firm, such as a public utility, which is the sole producer in a market in which the government determines prices and standards of service, is known as a(n):

A)local monopoly.
B)natural monopoly.
C)regulated monopoly.
D)oligopoly.
E)monopolistically competitive firm.

Question 7

The figure given below shows the aggregate demand and supply curves of a perfectly competitive market.Figure 10.7

Which of the following market structures is characterized by a single firm and huge barriers to entry?

A)Monopolistic competition
B)Oligopoly
C)Monopoly
D)Monopsony
E)Perfect competition

Question 8

The figure given below shows the aggregate demand and supply curves of a perfectly competitive market.Figure 10.7

Before World War II, Alcoa controlled the supply of bauxite in the United States. Because bauxite is a scarce resource that is vital to the production of aluminum:

A)Alcoa was bound to charge a nominal price in the U.S. aluminum market.
B)Alcoa had a monopoly in the U.S. aluminum market.
C)the U.S. aluminum market was highly competitive.
D)Alcoa can be said to have operated in a monopolistically competitive market.
E)Alcoa can be said to have operated in an oligopolistic market structure.

Question 9

The figure given below shows the aggregate demand and supply curves of a perfectly competitive market.Figure 10.7

A clothing store can sell two shirts for $20 each or three shirts for $18 each. At a quantity of three shirts sold, marginal revenue is _____.

A)$18
B)$14
C)$54
D)$20
E)$44

Question 10

The figure given below shows the aggregate demand and supply curves of a perfectly competitive market.Figure 10.7

Which of the following refers to a natural monopoly?

A)A monopoly resulting from government control
B)A monopoly resulting from economies of scale
C)A monopoly resulting from output leadership
D)A monopoly resulting from a large advertising budget
E)A monopoly resulting from trade restrictions

Question 11

The figure given below shows the aggregate demand and supply curves of a perfectly competitive market.Figure 10.7

In which of the following situations, is a barrier to entry into a monopoly least likely to exist?

A)A large firm enjoys economies of scale.
B)The tariffs on foreign goods are eliminated by the government.
C)A company is the sole inventor of what it produces and no one else can make a good substitute.
D)Government restrictions such as license requirements are enacted.
E)A company is the only owner of an essential resource needed to produce its product.

Question 12

The figure given below shows the aggregate demand and supply curves of a perfectly competitive market.Figure 10.7

Which of the following is an industry without significant barriers to entry?

A)Electricity generation
B)Natural gas distribution
C)Cable television provision
D)Corn farming
E)Postal services

Question 13

The figure given below shows the aggregate demand and supply curves of a perfectly competitive market.Figure 10.7

When long-run average costs are declining for the entire range of demand, the firm is known as a(n):

A)local monopoly.
B)regulated monopoly.
C)monopolistically competitive firm.
D)natural monopoly.
E)oligopoly.

Question 14

The figure given below shows the aggregate demand and supply curves of a perfectly competitive market.Figure 10.7

Which of the following will be the best example of a monopoly firm?

A)The US Bank
B)The Bank of America
C)National City Bank
D)The Federal Reserve
E)Washington Mutual Funds Bank

Question 15

The figure given below shows the aggregate demand and supply curves of a perfectly competitive market.Figure 10.7

Barriers to entry do not occur when:

A)economies of scale in production exist in an industry.
B)firms requires a professional license or franchise agreement.
C)the firm that introduces a product is granted a patent.
D)a firm controls a scarce resource.
E)diseconomies of scale in production exist in an industry.

Question 16

The figure given below shows the aggregate demand and supply curves of a perfectly competitive market.Figure 10.7

A local monopoly is a firm that:

A)is the sole supplier of a good, without substitutes, in a specific geographic area.
B)is one of the suppliers of a good in a specific geographic area.
C)supplies all the products needed by consumers in a country.
D)produces to meet the requirement of only one consumer.
E)is one of the suppliers of a good that has a lot of substitutes, in a specific geographic area.

Question 17

The figure given below shows the aggregate demand and supply curves of a perfectly competitive market.Figure 10.7

When Glaxo-Wellcome introduced AZT, an AIDS drug, it was able to enjoy high profits because:

A)the drug was highly recommended by doctors.
B)of the quick response of rivals in introducing substitute drugs.
C)of barriers to entry provided by patents.
D)of its competitive price in the pharmaceutical industry.
E)it experienced constant returns to scale in the long run.

Question 18

The figure given below shows the aggregate demand and supply curves of a perfectly competitive market.Figure 10.7

Which of the following statements is true?

A)​A firm that has monopoly power is a price maker.
B)​A firm that has monopoly power is a price taker.
C)​A firm that has monopoly power earns exorbitant profits.
D)​A firm that has monopoly power has a perfectly elastic demand curve.
E)​A firm that has monopoly power has a perfectly inelastic demand curve.

Question 19

The figure given below shows the aggregate demand and supply curves of a perfectly competitive market.Figure 10.7

If a firm has a perfectly elastic demand curve, then:

A)it must be a monopoly firm.
B)it can charge any price it desires.
C)the firm has significant market power.
D)the firm has no market power.
E)the firm should shut down.

Question 20

The figure given below shows the aggregate demand and supply curves of a perfectly competitive market.Figure 10.7

Firms that have downward-sloping demand curves:

A)earn positive economic profits even in the long run.
B)produce homogeneous products.
C)operate in a perfectly competitive market structure.
D)enjoy monopoly or market power.
E)are price takers.

Question 21

The table given below shows the prices charged and marginal cost incurred by a monopolist for different units of output.Table 11.3

What price will the profit-maximizing firm, described in Table 11.3 charge, if the firm is earning a positive economic profit?

A)$1,500
B)$1,400
C)$1,350
D)$1,300
E)$1,550

Question 22

The table given below shows the price charged by a firm and the marginal cost incurred by it for different levels of the output.Table 11.2

Assume that the firm described in Table 11.2 is incurring a total cost of $25, at the profit-maximizing output level. The firm will:

A)lose $10 in the short run.
B)break even.
C)earn a profit of $50.
D)earn a profit of $30.
E)earn a profit of $55.

Question 23

The figures given below represent the revenue curves of a monopolist.Figure 11.2
TR: Total revenue curve
AR: Average revenue curve
MR: Marginal revenue curve
A monopolist maximizes profit:

A)by charging the highest possible price on the demand curve.
B)by charging a price that equals its marginal cost.
C)by producing a level of output where the average-cost curve intersects the demand curve.
D)by producing a level of output where marginal revenue equals marginal cost.
E)by charging a price equal to its average total cost.

Question 24

The figures given below represent the revenue curves of a monopolist.Figure 11.2
TR: Total revenue curve
AR: Average revenue curve
MR: Marginal revenue curve
Refer to Figure 11.2. If the output at E is 600 units, then the output at B is _____ units. (We know that the slope of the marginal revenue curve is twice the slope of the average revenue curve.)

A)900 units.
B)200 units.
C)300 units.
D)1200 units.
E)800 units.

Question 25

The figures given below represent the revenue curves of a monopolist.Figure 11.2
TR: Total revenue curve
AR: Average revenue curve
MR: Marginal revenue curve
According to Figure 11.2, at point C:

A)price elasticity of demand is equal to infinity.
B)price elasticity of supply is equal to 1.
C)price elasticity of supply is greater than 1.
D)price elasticity of demand is equal to 0.
E)price elasticity of demand is equal to 1.

Question 26

The following table shows the units of output sold at different price levels by Gizmo's Inc.Table 11.1

Refer to Table 11.1. At what level of output is total revenue maximized?

A)3
B)4
C)5
D)6
E)7

Question 27

The figure given below shows the demand curve faced by a firm.Figure 11.1

Refer to Figure 11.1 and calculate the loss of revenue incurred by the firm when it reduces the price of its product from $8 to $4.

A)$4
B)$8
C)$32
D)$16
E)$10

Question 28

The figures given below represent the revenue curves of a monopolist.Figure 11.2
TR: Total revenue curve
AR: Average revenue curve
MR: Marginal revenue curve
Refer to Figure 11.2. In order to maximize profits, what quantity should the monopolist produce?

A)B
B)E
C)Between B and E
D)Impossible to determine because we are not given the cost curves.
E)Impossible to determine because we are not given the demand curve.

Question 29

The table given below shows the prices charged and marginal cost incurred by a monopolist for different units of output.Table 11.3

If a monopolist is producing at the profit-maximizing level of output, what price will it charge?

A)The price given by the marginal-revenue curve at that level of output.
B)The price given by the marginal-cost curve at that level of output.
C)The price given by the average-cost curve at that level of output.
D)The price given by the average-revenue curve at that level of output.
E)The price given by the total revenue curve at that level of output.

Question 30

The table given below shows the price charged by a firm and the marginal cost incurred by it for different levels of the output.Table 11.2

The firm described in Table 11.2:

A)cannot be a monopoly.
B)must be a perfectly competitive firm.
C)cannot be a perfectly competitive firm.
D)cannot be a monopolistically competitive firm.
E)must be a duopolist.

Question 31

The following table shows the units of output sold at different price levels by Gizmo's Inc.Table 11.1

According to Table 11.1, Gizmo's cannot be:

A)a monopsonist.
B)a monopoly.
C)an oligopolistic firm.
D)a perfectly competitive firm.
E)a monopolistically competitive firm.

Question 32

The figures given below represent the revenue curves of a monopolist.Figure 11.2
TR: Total revenue curve
AR: Average revenue curve
MR: Marginal revenue curve
If a monopolist is producing at a point at which marginal revenue is greater than marginal cost, then it should:

A)continue producing at the current level.
B)raise its prices.
C)lower its prices.
D)increase the level of production.
E)decrease the level of production.

Question 33

The table given below shows the prices charged and marginal cost incurred by a monopolist for different units of output.Table 11.3

Assume that the firm described in Table 11.2 is incurring a total cost of $7,000 at the profit-maximizing output level. The firm will

A)lose $10,000 in the short run.
B)break even.
C)earn a profit of $3,800.
D)earn a profit of $3,500.
E)earn a profit of $5,500.

Question 34

The figures given below represent the revenue curves of a monopolist.Figure 11.2
TR: Total revenue curve
AR: Average revenue curve
MR: Marginal revenue curve
Refer to Figure 11.2. If the monopolist is selling a quantity between B and E,then to maximize total revenue, the monopolist should:

A)increase price because it is operating on the elastic portion of the demand curve.
B)decrease price because it is operating on the elastic portion of the demand curve.
C)increase price because it is operating on the inelastic portion of the demand curve.
D)decrease price because it is operating on the inelastic portion of the demand curve.
E)increase price because it is operating at the point at which price elasticity of demand is greater than 1.

Question 35

The figure given below shows the demand curve faced by a firm.Figure 11.1

Refer to Figure 11.1 and calculate the marginal revenue at the third unit of output.

A)$10
B)$12
C)$4
D)$6
E)$8

Question 36

The following table shows the units of output sold at different price levels by Gizmo's Inc.Table 11.1

According to Table 11.1, at what level of output is marginal revenue equal to $14?

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

Question 37

The table given below shows the price charged by a firm and the marginal cost incurred by it for different levels of the output.Table 11.2

What is the profit-maximizing level of output for the monopoly firm described in Table 11.2, if the firm is earning a positive economic profit?

A)1 unit
B)2 units
C)3 units
D)5 units
E)6 units

Question 38

The figures given below represent the revenue curves of a monopolist.Figure 11.2
TR: Total revenue curve
AR: Average revenue curve
MR: Marginal revenue curve
If at an output of 10 units a monopolist is earning a positive profit, marginal revenue is $6, and marginal cost is $4, then the monopolist:

A)is in equilibrium.
B)should increase output.
C)should reduce output.
D)should lower the price at the current output level.
E)should raise the price at the current output level.

Question 39

The following table shows the units of output sold at different price levels by Gizmo's Inc.Table 11.1

For a monopolist with a linear demand curve, total revenue is maximum when:

A)marginal revenue is positive.
B)marginal revenue is at its maximum.
C)the price elasticity of demand is greater than unity.
D)the price elasticity of demand is equal to unity.
E)marginal revenue is at its minimum.

Question 40

The table given below shows the prices charged and marginal cost incurred by a monopolist for different units of output.Table 11.3

What is the profit-maximizing output level for the monopoly firm described in Table 11.3, if the firm is earning a positive economic profit?

A)1 unit
B)3 units
C)5 units
D)8 units
E)9 units

Question 41

The table given below shows the price, marginal revenue and marginal cost of a monopolist at different levels of the output. The firm does not incur a fixed cost of production.Table 11.4

A monopolist can charge a high price if:

A)the quantity demanded of its product is positively related to price.
B)the demand for its product is relatively price-elastic.
C)the demand curve for its product is negatively sloped.
D)the demand for its product is relatively price-inelastic.
E)there exist a large number of substitutes for its product.

Question 42

The following table shows the marginal revenues earned by a price discriminating monopolist in two different markets.Table 11.5

Refer to Table 11.5. How would a price-discriminating monopolist allocate his or her product between market X and market Y if marginal cost is $40 in both markets?

A)4 units in market X; 1 unit in market Y
B)3 units in market X; 2 units in market Y
C)2 units in market X; 3 units in market Y
D)Nothing in market X; 5 units in market Y
E)5 units in market X; nothing in market Y

Question 43

The table given below shows the price, marginal revenue and marginal cost of a monopolist at different levels of the output. The firm does not incur a fixed cost of production.Table 11.4

To practice price discrimination, a firm:

A)must face a relatively elastic demand curve.
B)must have customers with different elasticities of demand.
C)must not be able to distinguish between customers based on elasticities of demand.
D)must not be able to prevent resale of the product.
E)must be a price taker.

Question 44

The table given below shows the price, marginal revenue and marginal cost of a monopolist at different levels of the output. The firm does not incur a fixed cost of production.Table 11.4

One of the popular myths about monopoly is that:

A)a monopolist is the single seller of a particular commodity.
B)a monopolist can charge any price for his/her good.
C)a monopolist is a price maker.
D)a monopolist may earn positive profits even in the long run.
E)a monopolist faces the market demand curve.

Question 45

The following figure shows the revenue and cost curves of a monopolist.Figure 11.3
D: Average Revenue
MR: Marginal Revenue
ATC: Average Total Cost
MC: marginal Cost
Consider the monopolist described in the Figure 11.3. If the firm engages in profit-maximizing behavior, economic profit per unit of output will be:

A)0.
B)P_2.
C)P₄ minus P_2.
D)P₅ minus P_4.
E)P₅ minus P_1.

Question 46

The table given below shows the price, marginal revenue and marginal cost of a monopolist at different levels of the output. The firm does not incur a fixed cost of production.Table 11.4

Which of the following is not a necessary condition for price discrimination?

A)​The firm must be a price maker.
B)​The firm must be able to distinguish between customers.
C)​The firm must be able to prevent resale of a product between customers.
D)​The firm must be able to produce homogeneous products.
E)​The firm must have a downward-sloping demand curve.

Question 47

The table given below shows the price, marginal revenue and marginal cost of a monopolist at different levels of the output. The firm does not incur a fixed cost of production.Table 11.4

Why is there a supply point and not a supply curve for a monopolist?

A)A monopolist cannot affect the market price by changing its supply.
B)A monopolist produces a homogeneous product having similar substitutes.
C)A monopolist equates the price which it charges with its marginal cost.
D)There is only one quantity and price at which a monopolist operates.
E)A monopolist supplies to a large number of consumers.

Question 48

The table given below shows the price, marginal revenue and marginal cost of a monopolist at different levels of the output. The firm does not incur a fixed cost of production.Table 11.4

If the monopolist's price happens to be greater than the average-variable cost but less than the average total cost, in the short run the monopolist will:

A)be forced to shut down to minimize the cost.
B)operate at a loss.
C)operate at an economic profit.
D)operate at a normal profit.
E)go out of business.

Question 49

The table given below shows the price, marginal revenue and marginal cost of a monopolist at different levels of the output. The firm does not incur a fixed cost of production.Table 11.4

Price discrimination is best described as a monopolist:

A)selling a product at the fixed market determined price.
B)charging buyers an excessive price for the product.
C)charging different customers different prices when the costs are equal.
D)selling a product for different prices during two different periods of time.
E)charging same prices to different customers when the costs are different.

Question 50

The table given below shows the price, marginal revenue and marginal cost of a monopolist at different levels of the output. The firm does not incur a fixed cost of production.Table 11.4

Grocery store coupons, mail-in rebates, senior discounts, and in-state versus out-of-state tuition fees are all examples of:

A)government intervention.
B)price neutrality.
C)arbitrage pricing.
D)price discrimination.
E)illegal business practice.

Question 51

The table given below shows the price, marginal revenue and marginal cost of a monopolist at different levels of the output. The firm does not incur a fixed cost of production.Table 11.4

Identify the correct statement.

A)A monopolist's pricing decision is limited by the demand for its product.
B)A monopolist is able to choose any price and quantity combination that it desires.
C)A monopolist can increase its profits by increasing price if the demand for its good is relatively elastic.
D)A monopolist does not suffer losses even in the short run.
E)A monopolist is not able to reap positive profits in the long run.

Question 52

The following figure shows the revenue and cost curves of a monopolist.Figure 11.3
D: Average Revenue
MR: Marginal Revenue
ATC: Average Total Cost
MC: marginal Cost
Consider the monopolist described in Figure 11.3. The firm can maximize profit by producing:

A)zero units.
B)Q₁ units.
C)Q₂ units.
D)Q₃ units.
E)Q₄ units.

Question 53

The table given below shows the price, marginal revenue and marginal cost of a monopolist at different levels of the output. The firm does not incur a fixed cost of production.Table 11.4

The ability of a firm to charge different customers different prices is called _____.

A)price ceiling
B)price discrimination
C)predatory pricing
D)price flooring
E)base point pricing

Question 54

The table given below shows the prices charged and marginal cost incurred by a monopolist for different units of output.Table 11.3

Suppose you inherit the only spring of mineral water in an area and want to maximize profits from this costless product. You would ask your customers to bring their containers with them and:

A)charge them the highest price possible to sell some output.
B)charge them the lowest price possible to sell as much as you can.
C)ask them how much they would like to pay and accept it.
D)charge the price at which MR is zero.
E)charge the price at which MR is maximum.

Question 55

The table given below shows the price, marginal revenue and marginal cost of a monopolist at different levels of the output. The firm does not incur a fixed cost of production.Table 11.4

Which of the following is true of a firm that can successfully practice price discrimination?

A)Its total revenue is often reduced.
B)It appropriates a part of the consumer surplus.
C)It has no way of distinguishing between types of customers.
D)It has no market power in the industry.
E)It must be a perfectly competitive firm.

Question 56

The table given below shows the price, marginal revenue and marginal cost of a monopolist at different levels of the output. The firm does not incur a fixed cost of production.Table 11.4

Refer to Table 11.4. Assuming that the monopolist is maximizing profits, the price the monopolist will charge is _____.

A)$13
B)$14
C)$12
D)$16
E)$15

Question 57

The table given below shows the price, marginal revenue and marginal cost of a monopolist at different levels of the output. The firm does not incur a fixed cost of production.Table 11.4

In Table 11.4, assume that total fixed cost is $20. What is the maximum profit the firm can earn at equilibrium?

A)$0
B)$4
C)$16
D)$30
E)$52

Question 58

The table given below shows the price, marginal revenue and marginal cost of a monopolist at different levels of the output. The firm does not incur a fixed cost of production.Table 11.4

Refer to Table 11.4 and calculate the total revenue earned by the monopolist at the profit maximizing level of output.

A)$60
B)$16
C)$52
D)$42
E)$30

Question 59

The following figure shows the revenue and cost curves of a monopolist.Figure 11.3
D: Average Revenue
MR: Marginal Revenue
ATC: Average Total Cost
MC: marginal Cost
Consider the monopolist described in Figure 11.3. If the firm engages in profit-maximizing behavior, what price will it charge?

A)P₁
B)P₂
C)P₃
D)P₄
E)P₅

Question 60

The table given below shows the prices charged and marginal cost incurred by a monopolist for different units of output.Table 11.3

If at the profit-maximizing level of output, a monopolist's average-total-cost curve lies above its demand curve, then:

A)the firm should shut down in the short run.
B)the firm would earn economic losses.
C)the firm would earn economic profits.
D)the firm should increase its output.
E)the firm should decrease its output.

Question 61

The following table shows the marginal revenues earned by a price discriminating monopolist in two different markets.Table 11.5

Movie theaters are able to offer discounts to senior citizens because:

A)the elderly deserve lower prices because of their contributions to society.
B)senior citizens have the most inelastic demand.
C)theaters can separate senior citizens from other customers, and it is easier to prevent resale.
D)senior citizens cannot see the movie very well because of poor eyesight.
E)senior citizens are frequent visitors to the movie theaters.

Question 62

The following figures show the demand and cost curves of a perfectly competitive firm and a monopoly respectively.Figure 11.7
D: Average Revenue
AC: Average cost
MC: Marginal cost
MR: Marginal cost
According to Figure 11.7, when the monopolist is maximizing profit:

A)its resources are not being used efficiently.
B)its price is higher than that charged by the perfectly competitive firm.
C)its price is equal to the price charged by the perfectly competitive firm.
D)a firm in perfect competition is earning above-normal profit.
E)a firm in perfect competition is incurring a loss.

Question 63

The figure given below shows the demand curves of two classes of buyers, for tickets to a football match.Figure 11.4
D₁: Demand curve of group 1
D₂: Demand curve of group 2
MR₁: Marginal revenue of group 1
MR₂: Marginal revenue of group 2
MC: Marginal cost
Compared with a perfectly competitive market with similar cost conditions, a monopolist will have:

A)a higher output and a lower price.
B)a lower output and a lower price.
C)equal output and a higher price.
D)a lower output and a higher price.

Question 64

The following figure shows the revenue curves of a monopolist:
Figure 11.6
D: Average revenue
MR: Marginal revenue
In Figure 11.6, assume that marginal costs are constant at $2,500 and fixed costs are zero. What price and output level would result from perfect competition?

A)P = $2,500, Q = 400
B)P = $2,500, Q = 200
C)P = $5,000, Q = 0
D)P = $4,000, Q = 400
E)P = $4,000, Q = 200

Question 65

The figure given below shows the demand curves of two classes of buyers, for tickets to a football match.Figure 11.4
D₁: Demand curve of group 1
D₂: Demand curve of group 2
MR₁: Marginal revenue of group 1
MR₂: Marginal revenue of group 2
MC: Marginal cost
Perfect price discrimination occurs when:

A)each customer is charged the maximum price that each is willing and able to pay.
B)two classes of customers are charged different prices as they have the same elasticities of demand.
C)senior citizens are offered restaurant discounts.
D)the firm sets MR < MC for each class of customers.
E)the firm charges same price to different customers so that it is equal to the equilibrium price.

Question 66

The following figure shows the revenue curves of a monopolist:
Figure 11.6
D: Average revenue
MR: Marginal revenue
Refer to Figure 11.6. Assume that marginal costs are constant at $2,500 and fixed costs are zero. Under a monopoly, consumer surplus would be:

A)$100,000.
B)$500,000.
C)$300,000.
D)$250,000.
E)$200,000.

Question 67

The figure below shows the market equilibrium (point B) at the intersection of demand and supply curves under perfect competition.Figure 11.5
D: Market demand curve
S: Market supply curve
Assume that in Figure 11.5, the market is originally perfectly competitive but then becomes a monopoly. Compared with perfect competition, a monopoly would have:

A)a price lower than P_PC.
B)a quantity more than Q_PC.
C)a greater consumer surplus.
D)a deadweight loss.
E)a lower producer surplus.

Question 68

The figure given below shows the demand curves of two classes of buyers, for tickets to a football match.Figure 11.4
D₁: Demand curve of group 1
D₂: Demand curve of group 2
MR₁: Marginal revenue of group 1
MR₂: Marginal revenue of group 2
MC: Marginal cost
The perfectly competitive market structure results in economic efficiency because:

A)price is equal to marginal revenue in the short run.
B)firms are producing at the minimum point of the average-total-cost curve in the short run.
C)a normal profit is being earned in the long run.
D)a normal profit is being earned in the short run.
E)in the long-run, price is equal to marginal cost and minimum average-total-cost.

Question 69

The following table shows the marginal revenues earned by a price discriminating monopolist in two different markets.Table 11.5

When practicing price discrimination, a firm can increase its revenue by:

A)charging a higher price to the customers with a more inelastic demand.
B)charging a higher price to the customers with a perfectly elastic demand.
C)supplying more in a market with a more inelastic demand.
D)supplying less in a market with lower elasticity of demand.
E)charging a lower price in a market dominated by wealthy consumers.

Question 70

The figure below shows the market equilibrium (point B) at the intersection of demand and supply curves under perfect competition.Figure 11.5
D: Market demand curve
S: Market supply curve
Refer to Figure 11.5. Assume that the curve labeled S represents the monopolist's marginal-cost curve and the curve labeled D represents the monopolist's demand curve. Which of the following will represent the consumer surplus?

A)The area P_PCBA
B)The area 0BP_PC
C)The area 0BA
D)An area that is less than P_PCBA
E)The area ABS

Question 71

The following table shows the marginal revenues earned by a price discriminating monopolist in two different markets.Table 11.5

Refer to Table 11.5. If marginal cost is $30 in both markets, what quantities will be supplied in each of the markets?

A)4 units in market X; 1 unit in market Y
B)4 units in market X; 2 units in market Y
C)2 units in market X; 3 units in market Y
D)3 units in market X; 3 units in market Y
E)3 units in market X; nothing in market Y

Question 72

The following figures show the demand and cost curves of a perfectly competitive firm and a monopoly respectively.Figure 11.7
D: Average Revenue
AC: Average cost
MC: Marginal cost
MR: Marginal cost
Refer to Figure 11.7. If the perfectly competitive industry and the monopoly produces the same quantity, then:

A)there are 10 firms in the perfectly competitive industry.
B)there are 800 firms in the perfectly competitive industry.
C)there are 1,000 firms in the perfectly competitive industry.
D)there are 2,000 firms in the perfectly competitive industry.
E)there are 100 firms in the perfectly competitive industry.

Question 73

The following figure shows the revenue curves of a monopolist:
Figure 11.6
D: Average revenue
MR: Marginal revenue
In Figure 11.6, assume that marginal costs are constant at $2,500 and fixed costs are 0. What would be the amount of consumer surplus if the market was perfectly competitive?

A)$1,000,000
B)$500,000
C)$300,000
D)$250,000
E)$350,000

Question 74

The figure given below shows the demand curves of two classes of buyers, for tickets to a football match.Figure 11.4
D₁: Demand curve of group 1
D₂: Demand curve of group 2
MR₁: Marginal revenue of group 1
MR₂: Marginal revenue of group 2
MC: Marginal cost
The long-run equilibrium price-output combination for a monopolist is economically inefficient because:

A)it does not operate on the minimum point of its marginal-cost curve.
B)it does not produce the level of output at which price equals marginal cost.
C)consumer surplus is maximized but not producer surplus.
D)producer surplus is maximized but not consumer surplus.
E)it operates on the downward sloping portion of the average-total-cost curve.

Question 75

The figure below shows the market equilibrium (point B) at the intersection of demand and supply curves under perfect competition.Figure 11.5
D: Market demand curve
S: Market supply curve
Refer to Figure 11.5. Which of the following regions on the graph represents consumer surplus in a perfectly competitive market?

A)The area P_PCBA
B)The area 0BP_PC
C)The area 0BA
D)Half of area P_PCBA
E)The area ABS

Question 76

The following figures show the demand and cost curves of a perfectly competitive firm and a monopoly respectively.Figure 11.7
D: Average Revenue
AC: Average cost
MC: Marginal cost
MR: Marginal cost
Refer to Figure 11.7. At the profit maximizing level of output, the monopolist will:

A)earn economic profit.
B)earn super-normal profit.
C)charge a price equal to the marginal cost of production.
D)charge a price lower than the price charged by a perfectly competitive firm.
E)zero profit.

Question 77

The figure given below shows the demand curves of two classes of buyers, for tickets to a football match.Figure 11.4
D₁: Demand curve of group 1
D₂: Demand curve of group 2
MR₁: Marginal revenue of group 1
MR₂: Marginal revenue of group 2
MC: Marginal cost
In Figure 11.4, the demand curve D₂:

A)has a price elasticity of demand greater than 1.
B)is relatively less price elastic than D₁.
C)is the inverse of the demand curve D₁.
D)has a price elasticity of demand less than 1.
E)represents the demand of the group that is more responsive to price changes.

Question 78

The figure given below shows the demand curves of two classes of buyers, for tickets to a football match.Figure 11.4
D₁: Demand curve of group 1
D₂: Demand curve of group 2
MR₁: Marginal revenue of group 1
MR₂: Marginal revenue of group 2
MC: Marginal cost
Refer to Figure 11.4. What price must be charged from each group to maximize profits?

A)Both groups must be charged P₁ .
B)Both groups must be charged P₂ .
C)Group 1 must be charged P₁ and group 2 must be charged P₂.
D)Group 1 must be charged P₂ and group 2 must be charged P₁.
E)Both the groups must be charged a price that is equal to the marginal cost.

Question 79

The figure below shows the market equilibrium (point B) at the intersection of demand and supply curves under perfect competition.Figure 11.5
D: Market demand curve
S: Market supply curve
The efficiency loss that occurs when a market is monopolized is known as:

A)a deadweight loss.
B)an inventory loss.
C)an economic loss.
D)a non-economic loss.
E)a capital loss.

Question 80

The following figures show the demand and cost curves of a perfectly competitive firm and a monopoly respectively.Figure 11.7
D: Average Revenue
AC: Average cost
MC: Marginal cost
MR: Marginal cost
According to Figure 11.7, which of the following statements is incorrect about the price P₁?

A)The monopolist is maximizing profit at P_1.
B)The price P₁ is not equal to the demand curve or marginal revenue for the perfectly competitive firm.
C)The monopolist is earning normal profit at P_1.
D)The monopolist sells 10,000 units of output at P_{1 .}
E)The perfectly competitive firm produces 10 units of output at P_1.