Question 1

If a firm wishes to engage in price discrimination,which of the following conditions must be met?

Accepted Answer

A) The demand curve must be horizontal. 
B) It must be possible to prevent resale of the good from low-paying to high-paying customers. 
C) The supply curve must be horizontal. 
D) Many identical firms in the market must each have a small share of total industry output. 
E) Price must be less than marginal cost.

Question 2

Price discrimination refers to

Accepted Answer

A) the actions of a single-price monopolist to determine the best price for its output 
B) selling the same product to different customers at different prices as a result of different production costs 
C) government regulation of public utility prices 
D) selling the same product to different customers at different prices for reasons unrelated to production costs 
E) charging a price just above average total cost in order to drive competing firms from the market

Question 3

-The monopoly represented in Figure 10-26 has constant marginal cost and no fixed costs.If the firm is a perfect price discriminator,economic profit will equal

Accepted Answer

A) the area PABP' 
B) the area PACP' 
C) the area TCQ**0 
D) the area TCP' 
E) zero

Question 4

-Suppose a firm is considering entering a market where it would face the demand and cost conditions shown in Figure 10-13.Which of the following statements is correct?

Accepted Answer

A) The firm should produce output level Q* and charge a single price equal to G. 
B) The firm should produce output level Q* and charge a single price equal to F. 
C) The firm should produce output level Q* and charge a single price equal to H. 
D) The firm should produce output level Q** and charge a single price equal to I. 
E) The firm is a natural monopolist that will suffer a long-run economic loss if it charges a single price.

Question 5

When a non-discriminating monopolist is maximizing profit,its marginal revenue

Accepted Answer

A) must be positive 
B) must be negative 
C) must equal zero 
D) may be either positive or negative 
E) must be upward sloping

Question 6

For the single-price monopoly,marginal revenue is

Accepted Answer

A) more important than marginal cost 
B) always more than marginal cost 
C) always less than average cost 
D) always less than the price of output 
E) more significant than total revenue

Question 7

Which of the following is a legal entry barrier established by government?

Accepted Answer

A) Patents. 
B) Copyrights. 
C) Government franchises. 
D) All of the above.

Question 8

-Figure 10-4 depicts a monopoly that does not price discriminate.What are the equilibrium price and output?

Accepted Answer

A) there is no equilibrium under monopoly 
B) P' and Q' 
C) P and Q 
D) P' and Q 
E) P and Q'

Question 9

As long as P>AVC,a monopolist maximizes profit by producing the quantity at which

Accepted Answer

A) MC=P. 
B) MC=MR. 
C) MR=P. 
D) MR=ATC.

Question 10

In the short run,a monopoly should shut down whenever

Accepted Answer

A) marginal revenue exceeds marginal cost 
B) price is less than average total cost 
C) total revenue is less than total cost 
D) price exceeds the ratio of marginal cost to average cost at the optimal output 
E) price is less than average variable cost everywhere

Question 11

If technology is fixed,monopolization of a competitive industry will lead to

Accepted Answer

A) lower prices and higher output 
B) higher prices and the same level of output 
C) lower output and the same level of price 
D) higher prices and lower output 
E) higher output and higher prices

Question 12

If a perfectly competitive industry is taken over by a monopolist,

Accepted Answer

A) output will always rise 
B) output will always fall 
C) market price will probably not change 
D) marginal cost will approach average variable cost in the long run 
E) market price could fall if there are large gains from technological changes under monopoly

Question 13

-In Figure 10-29,the monopolist will sell its output at a price of

Accepted Answer

A) $10. 
B) $15. 
C) $20. 
D) $25.

Question 14

For a monopoly,

Accepted Answer

A) price and output are closely-linked choices 
B) marginal revenue always exceeds marginal cost 
C) price always exceeds average total cost in the short run 
D) price is set independently from the output decision 
E) price is always the highest that the market will bear

Question 15

An example of a barrier to entry is

Accepted Answer

A) patent law 
B) government regulations 
C) cost of advertising 
D) economies of scale 
E) all of the above

Question 16

When electric utility companies lobby state legislatures for continued protection from competition,this is an example of rent-seeking behavior.

Accepted Answer

A) True 
 B)False

Question 17

A single-price monopolist is producing 500 units of output.At that level,price is $200,and average total cost is $150.In addition,both marginal cost and marginal revenue equal $120.Which of the following statements is correct in the short run?

Accepted Answer

A) The firm has total costs of $60,000. 
B) The firm could increase its profit by increasing output. 
C) The firm has a profit per unit of $50. 
D) The firm is suffering an economic loss of $15,000. 
E) The firm is earning an economic profit of $40,000.

Question 18

Suppose that a non-discriminating monopolist lowers its price from $75 to $70 in order to sell more output.Marginal revenue will

Accepted Answer

A) equal $75 
B) equal $70 
C) be between $75 and $70 
D) be less than $70 
E) be greater than $75

Question 19

The marginal revenue curve coincides with the demand curve of a firm that engages in perfect price discrimination.

Accepted Answer