Question 1

Which of the following statements about a non-discriminating monopoly firm is correct?

Accepted Answer

A)  It charges a price greater than its marginal cost.
B)  Its high prices generate inflation.
C)  It charges a price that maximizes its total revenues.
D)  As a price setter,it can ignore market demand.
E)  It has no incentive to produce each output level at the lowest possible cost.F) A) and C)
G) D) and E)

Question 2

-Assuming no price discrimination,the firm represented by Figure 10-16 will have a per unit profit of

Accepted Answer

A)  $50
B)  $100
C)  $150
D)  $200
E)  $250F) B) and C)
G) None of the above

Question 3

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 industriesF) A) and B)
G) A) and C)

Question 4

Unlike firms operating in more competitive markets,monopolies never shut down in the short run.

Accepted Answer

A) True 
 B)False

Question 5

Which of the output levels shown in Figure 10-10 would a monopolist never produce?

Accepted Answer

A)  1 unit
B)  4 units
C)  7 units
D)  3 units
E)  5 unitsF) C) and D)
G) D) and E)

Question 6

Which of the following is not a requirement for price discrimination?

Accepted Answer

A)  The firm must be able to identify consumers who are willing to pay more for the product.
B)  The firm must be able to prevent resale of the product.
C)  There must be a downward-sloping demand curve for the product.
D)  The firm must face different costs for the goods sold to different consumers.E) A) and C)
F) A) and B)

Question 7

Price discrimination always benefits

Accepted Answer

A)  the owners of the price-discriminating firm
B)  the government
C)  society as a whole
D)  consumers
E)  competitorsF) B) and E)
G) A) and B)

Question 8

Marginal revenue is

Accepted Answer

A)  the change in total revenue obtained by selling an additional unit of output
B)  average revenue per unit of output
C)  the change in total revenue per unit of cost
D)  total revenue divided by average revenue
E)  average revenue divided by marginal costF) All of the above
G) C) and E)

Question 9

Economies of scale act as a barrier to entry because

Accepted Answer

A)  one large firm can supply the market at a higher average cost than many small firms could
B)  firms are not allowed by law to sell output below average cost
C)  large firms can hire inputs at a higher price than smaller firms could
D)  firms will not compete with a larger firm when there are differences in marginal cost
E)  one large firm can produce the market output at a lower average cost than many small firmsF) A) and C)
G) A) and E)

Question 10

Price discrimination can benefit some consumers when

Accepted Answer

A)  the additional profit realized by the monopolist equals the cost incurred
B)  the government comes in to regulate the market
C)  competitors are also able to price discriminate
D)  those consumers pay a price lower than the price they would have to pay a single-price monopolist
E)  those consumers pay a price higher than the price they would have to pay a single-price monopolistF) A) and D)
G) All of the above

Question 11

-Assuming no price discrimination,the firm depicted in Figure 10-16 will

Accepted Answer

A)  both d and e
B)  break even in the short run
C)  earn an economic profit in the short run
D)  suffer an economic loss if it produces
E)  shut down to minimize short-run lossesF) B) and E)
G) A) and D)

Question 12

Compared to perfectly competitive markets,monopoly produces

Accepted Answer

A)  higher output and lower price.
B)  lower output and higher price.
C)  lower output and lower price.
D)  higher output and higher price.E) B) and C)
F) C) and D)

Question 13

Patents and copyrights are designed to

Accepted Answer

A)  eliminate above-normal profit in the short run
B)  move monopoly prices closer to prices that would occur under perfect competition
C)  prevent the capitalization of monopoly profit
D)  allow a period of above-normal profit to encourage innovation
E)  limit a monopoly's rent-seeking activitiesF) All of the above
G) B) and D)

Question 14

A monopolist earns a profit whenever

Accepted Answer

A)  total revenue equals total cost
B)  marginal revenue equals marginal cost
C)  price exceeds average variable cost
D)  marginal revenue is positive
E)  price exceeds average total costF) All of the above
G) A) and B)

Question 15

The time and money spent by a monopoly firm on lobbying for favorable government policies is called

Accepted Answer

A)  the capitalized value of the firm
B)  limit pricing
C)  rent-seeking activity
D)  administered pricing
E)  implicit costF) C) and E)
G) B) and E)

Question 16

Which of the following conditions would prevent price discrimination?

Accepted Answer

A)  an economic profit
B)  a monopoly market structure
C)  profit maximization
D)  the inability to identify those customers willing to pay more
E)  the ability to prevent low-price customers from reselling to high-price customersF) A) and C)
G) A) and B)

Question 17

When car dealerships post high prices for their cars and then negotiate deals based on their estimate of how much each person will pay,

Accepted Answer

A)  the dealership will lose revenue
B)  marginal revenue and marginal cost are being used to set prices and output
C)  few dealerships will be able to survive
D)  rent-seeking behavior will lead new dealerships to enter the market
E)  this is a form of price discriminationF) A) and B)
G) All of the above

Question 18

To maximize profit,a monopolist should produce the level of output at which

Accepted Answer

A)  price equals marginal cost
B)  price equals marginal revenue and marginal cost
C)  price equals marginal revenue
D)  marginal revenue equals marginal cost
E)  price equals average total costF) C) and D)
G) A) and E)

Question 19

A monopoly exists because of

Accepted Answer

A)  barriers to entry
B)  the large number of buyers and sellers
C)  the absence of barriers to entry
D)  collusion among the dominant firms
E)  the absence of exclusive government franchisesF) A) and D)
G) C) and D)

Question 20

A firm's ability to successfully practice price discrimination is greater

Accepted Answer

A)  the more difficult it is to identify a customer's willingness to pay
B)  the more standardized the product offered by the firm
C)  the more difficult it is to transfer its product from person to person
D)  the more active the resale market is for their product
E)  in goods-producing markets than in service-producing marketsF) All of the above
G) A) and B)

Exam 11: Monopoly

Compared to perfectly competitive markets,monopoly produces

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Which of the output levels shown in Figure 10-10 would a monopolist never produce?

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Economies of scale act as a barrier to entry because

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Price discrimination always benefits

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-Assuming no price discrimination,the firm depicted in Figure 10-16 will

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A firm's ability to successfully practice price discrimination is greater

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Marginal revenue is

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Which of the following conditions would prevent price discrimination?

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To maximize profit,a monopolist should produce the level of output at which

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A monopoly exists because of

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The time and money spent by a monopoly firm on lobbying for favorable government policies is called

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Which of the following is not a requirement for price discrimination?

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A monopolist earns a profit whenever

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Patents and copyrights are designed to

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When car dealerships post high prices for their cars and then negotiate deals based on their estimate of how much each person will pay,

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Which of the following statements about a non-discriminating monopoly firm is correct?

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-Assuming no price discrimination,the firm represented by Figure 10-16 will have a per unit profit of

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Price discrimination can benefit some consumers when

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Unlike firms operating in more competitive markets,monopolies never shut down in the short run.

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Network externalities

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