Question 1

One problem with government operation of monopolies is that

Accepted Answer

A)   a benevolent government is likely to be interested in generating profits for political gain.
B)   monopolies typically have rising average costs.
C)   the government typically has little incentive to reduce costs.
D)   a government-regulated outcome will increase the profitability of the monopoly.E) A) and B)
F) A) and D)

Question 2

Figure 15-13 
-Refer to Figure 15-13. A profit-maximizing monopolist would create a deadweight loss to society valued at

Accepted Answer

A)   $12.
B)   $24.
C)   $42.
D)   $84.E) A) and C)
F) All of the above

Question 3

The monopolist's profit-maximizing quantity of output is determined by the intersection of which of the following two curves?

Accepted Answer

A)   marginal cost and demand
B)   marginal cost and marginal revenue
C)   average total cost and marginal revenue
D)   average variable cost and average revenueE) B) and D)
F) B) and C)

Question 4

Table 15-8
The following table provides information on the price, quantity, and average total cost for a monopoly.
 
-Refer to Table 15-8. How much extra revenue does the monopolist earn when he lowers the price from $18 to $12?

Accepted Answer

A)   $10
B)   $12
C)   $30
D)   $41E) B) and D)
F) A) and C)

Question 5

Which of the following is the preferred strategy for the government to follow to remedy the inefficient allocation of resources associated with monopolies?

Accepted Answer

A)   preventing mergers through antitrust laws
B)   regulating the prices that monopolies can charge
C)   doing nothing
D)   None of the above strategies is preferred. Each is a viable strategy.E) All of the above
F) B) and C)

Question 6

Competitive firms have

Accepted Answer

A)   downward-sloping demand curves, and they can sell as much output as they desire at the market price.
B)   downward-sloping demand curves, and they can sell only a limited quantity of output at each price.
C)   horizontal demand curves, and they can sell as much output as they desire at the market price.
D)   horizontal demand curves, and they can sell only a limited quantity of output at each price.E) B) and C)
F) A) and D)

Question 7

In reality, perfect price discrimination is

Accepted Answer

A)   used by about 75 percent of all monopolies.
B)   used by about 50 percent of all monopolies.
C)   seldom used by monopolies because it leads to lower profits.
D)   rarely possible.E) B) and D)
F) A) and D)

Question 8

For a firm to price discriminate,

Accepted Answer

A)   it must be a natural monopoly.
B)   it must be regulated by the government.
C)   it must have some market power.
D)   consumers must tell the firm what they are willing to pay for the product.E) B) and C)
F) B) and D)

Question 9

A natural monopoly arises when

Accepted Answer

A)   there are constant returns to scale over the relevant range of output.
B)   there are economies of scale over the relevant range of output.
C)   one firm owns a key natural resource.
D)   the government gives a single firm the exclusive right to produce a particular good or service.E) A) and B)
F) A) and C)

Question 10

Some companies merge in order to lower costs through efficient joint production.

Accepted Answer

A) True 
 B)False

Question 11

Table 15-10
The monopolist faces the following demand curve:
 
-Refer to Table 15-10. If the monopolist has total fixed costs of $40 and a constant marginal cost of $5, what is the profit-maximizing level of output?

Accepted Answer

A)   7 units
B)   16 units
C)   23 units
D)   31 unitsE) A) and D)
F) All of the above

Question 12

A monopolist maximizes profits by

Accepted Answer

A)   producing an output level where marginal revenue equals marginal cost.
B)   charging a price equal to marginal revenue and marginal cost.
C)   charging a price where marginal cost equals average total cost.
D)   Both a and b are correct.E) None of the above
F) B) and D)

Question 13

In a monopoly market, the socially efficient quantity of output is typically higher than the profit-maximizing quantity of output for the monopolist.

Accepted Answer

A) True 
 B)False

Question 14

Perfect price discrimination

Accepted Answer

A)   eliminates deadweight loss.
B)   reduces profits to the monopolist.
C)   decreases the total quantity sold by the monopolist.
D)   requires arbitrage in order for the monopolist to maximize profits.E) A) and B)
F) None of the above

Question 15

Which of the following statements is not correct?

Accepted Answer

A)   The competitive firm produces where P = MC.
B)   The monopolist produces where P = MC.
C)   The competitive firm produces where MR = MC.
D)   The monopolist produces where MR = Md.E) A) and D)
F) B) and C)

Question 16

Table 15-22
 
-Refer to Table 15-22. The marginal revenue becomes negative with the production of which unit of output?

Accepted Answer

The answer of Table 15-22
 
-Refer to Table 15-22. The...

Question 17

A monopolist's profit is equal to (Price - Marginal Cost) × Quantity.

Accepted Answer

A) True 
 B)False

Question 18

Figure 15-21 
-Refer to Figure 15-21. What is the price and quantity for this natural monopolist under fair return pricing?

Accepted Answer

A)   A and J
B)   E and J
C)   F and K
D)   H and LE) C) and D)
F) None of the above

Question 19

Figure 15-8 
-Refer to Figure 15-8. What is the area of deadweight loss?

Accepted Answer

A)   the rectangle (A-
C)  *X
B)   the triangle 1/2[(A-
C)  *(Y-X) ]
C)   the triangle 1/2[(A-
B)  *(Y-X) ]
D)   the rectangle (A-
C)  *X plus the triangle 1/2[(A-
C)  *(Y-X) ]E) A) and C)
F) All of the above

Question 20

For a monopoly market, total surplus can be defined as the value of the good to

Accepted Answer

A)   producers minus the cost incurred by consumers.
B)   producers plus the cost incurred by consumers.
C)   consumers minus the costs of producing the good.
D)   consumers plus the cost of producing the good.E) B) and D)
F) None of the above

Exam 15: Monopoly

A natural monopoly arises when

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In reality, perfect price discrimination is

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Which of the following statements is not correct?

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Perfect price discrimination

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Table 15-10 The monopolist faces the following demand curve: -Refer to Table 15-10. If the monopolist has total fixed costs of $40 and a constant marginal cost of $5, what is the profit-maximizing level of output?

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A monopolist maximizes profits by

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In a monopoly market, the socially efficient quantity of output is typically higher than the profit-maximizing quantity of output for the monopolist.

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Table 15-22 -Refer to Table 15-22. The marginal revenue becomes negative with the production of which unit of output?

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Figure 15-21 -Refer to Figure 15-21. What is the price and quantity for this natural monopolist under fair return pricing?

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The monopolist's profit-maximizing quantity of output is determined by the intersection of which of the following two curves?

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A monopolist's profit is equal to (Price - Marginal Cost) × Quantity.

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Some companies merge in order to lower costs through efficient joint production.

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Figure 15-13 -Refer to Figure 15-13. A profit-maximizing monopolist would create a deadweight loss to society valued at

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For a monopoly market, total surplus can be defined as the value of the good to

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Which of the following is the preferred strategy for the government to follow to remedy the inefficient allocation of resources associated with monopolies?

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Figure 15-8 -Refer to Figure 15-8. What is the area of deadweight loss?

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Competitive firms have

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One problem with government operation of monopolies is that

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For a firm to price discriminate,

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Table 15-8 The following table provides information on the price, quantity, and average total cost for a monopoly. -Refer to Table 15-8. How much extra revenue does the monopolist earn when he lowers the price from $18 to $12?

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