Question 1

If a perfectly competitive industry were taken over by a monopoly,the monopoly would usually produce more output and charge a higher price.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is an example of a natural monopoly?

Accepted Answer

A)  A local electricity supplier. 
B)  A dry cleaner in New York City. 
C)  An aircraft manufacturer. 
D)  A pharmaceutical company that holds a patent on a new drug.

Question 3

The demand curve faced by a monopolist is

Accepted Answer

A)  perfectly elastic 
B)  perfectly inelastic 
C)  undefined 
D)  the market demand curve 
E)  the sum of the demand curves for perfectly competitive firms in a similar industry

Question 4

A natural monopoly is producing an output level of 1,000 units per day.If the monopoly is broken up into 5 firms,then average total cost for each of the 5 firms

Accepted Answer

A)  will exceed the monopolist's average total cost 
B)  will equal the monopolist's average total cost 
C)  will fall below the monopolist's average total cost 
D)  may equal or fall below the monopolist's average total cost 
E)  may equal or exceed the monopolist's average total cost

Question 5

Which of the following goods would be most likely to be produced by a monopoly?

Accepted Answer

A)  Lotso-Sugar brand cereal 
B)  Pepsi 
C)  margarine 
D)  electricity 
E)  Ford automobiles

Question 6

-If the firm in Figure 10-21 were to shut down in the short run,it would have

Accepted Answer

A)  an economic loss of zero,instead of economic losses of $25,000 by producing 
B)  an economic loss of $18,750,instead of economic losses equal to $12,500 by producing 
C)  an economic loss of zero,instead of economic profits of $6,250 
D)  the same economic loss it would have if it continued to produce 
E)  an economic loss of $43,750,instead of economic losses equal to $37,500

Question 7

For a monopolist,marginal revenue is lower than price.

Accepted Answer

A) True 
 B)False

Question 8

The change in total revenue obtained by selling an additional unit of output is

Accepted Answer

A)  average revenue 
B)  business revenue 
C)  marginal revenue 
D)  overhead revenue 
E)  profit margin

Question 9

Network externalities

Accepted Answer

A)  explain why switching costs fall as the size of a network increases 
B)  are the service-industry equivalent of natural monopolies in goods-producing industries 
C)  are more important in the short run than in the long run 
D)  help explain why monopolies often do not last for very long 
E)  can explain the dominance of existing firms in some industries

Question 10

In the long run,

Accepted Answer

A)  monopolies will not incur economic losses 
B)  the demand curve facing the firm is horizontal under monopoly 
C)  economic profit and loss determines entry and exit into monopoly markets 
D)  competition always destroys monopoly 
E)  government always regulates monopoly

Question 11

Any costly activity firms undertake to protect their monopoly status is referred to as

Accepted Answer

A)  market power 
B)  price-setting behavior 
C)  rent seeking 
D)  economies of scale 
E)  legal intervention

Question 12

In which of the following markets are we most likely to find a monopoly?

Accepted Answer

A)  Automobile production. 
B)  Air travel. 
C)  First-class mail delivery. 
D)  Clothing production.

Question 13

Which of the following would be the most difficult consumer characteristic for firms to use in price discrimination?

Accepted Answer

A)  gender 
B)  age 
C)  height 
D)  educational attainment 
E)  weight

Question 14

-A single-price monopolist is producing 8,000 units of output.At that level,price equals $10,average total cost equals $12,and average variable cost equals $8.In addition,both marginal cost and marginal revenue equal $6.Which of the following statements is correct in the short run?

Accepted Answer

A)  The firm is earning total revenues equal to $96,000. 
B)  The firm could reduce its loss by shutting down. 
C)  The firm has a loss per unit equal to $4. 
D)  The firm is minimizing its economic loss at $16,000. 
E)  The firm is earning an economic profit equal to $16,000.

Question 15

The extent to which a firm is viewed by consumers as being a monopoly depends primarily on

Accepted Answer

A)  how the government defines a monopoly 
B)  whether they believe there are close substitutes for the good it produces 
C)  the level of profits earned by the firm 
D)  the difference between price and marginal cost of the good it produces 
E)  the size of the firm

Question 16

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 17

-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 18

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 19

Each of the following is a source of monopoly except:

Accepted Answer

A)  Patents. 
B)  Large economies of scale. 
C)  Small fixed costs. 
D)  Government franchise.

Question 20

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

Exam 10: Monopoly