Question 1

Monopoly pricing prevents some mutually beneficial trades from taking place. These unrealized, mutually beneficial trades are

Accepted Answer

A)   not a concern if a market is perfectly competitive.
B)   a deadweight loss to society.
C)   a function of the reduction in the quantity produced by a monopolist in comparison to a competitive market.
D)   All of the above are correct.E) C) and D)
F) A) and B)

Question 2

Economists assume that monopolists behave as

Accepted Answer

A)   cost minimizers.
B)   profit maximizers.
C)   price maximizers.
D)   maximizers of social welfare.E) All of the above
F) A) and D)

Question 3

A firm that is the sole seller of a product without close substitutes is

Accepted Answer

A)   perfectly competitive.
B)   monopolistically competitive.
C)   an oligopolist.
D)   a monopolist.E) A) and B)
F) A) and C)

Question 4

When a monopolist increases the number of units it sells, there are two effects on revenue. They are the

Accepted Answer

A)   demand effect and the supply effect.
B)   competition effect and the cost effect.
C)   competitive effect and the monopoly effect.
D)   output effect and the price effect.E) A) and B)
F) All of the above

Question 5

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

Accepted Answer

A) True 
 B)False

Question 6

Government intervention always reduces monopoly deadweight loss.

Accepted Answer

A) True 
 B)False

Question 7

What are the four ways that government policymakers can respond to the problem of monopoly?

Accepted Answer

First, the government can try to make mo...

Question 8

Reduced competition through merging of companies will raise social welfare

Accepted Answer

A)   if the social cost from the synergies exceeds the benefit of increased market power.
B)   if the benefit from the synergies exceeds the social cost of increased market power.
C)   always.
D)   never.E) None of the above
F) B) and C)

Question 9

A monopolist that practices perfect price discrimination

Accepted Answer

A)   creates no deadweight loss.
B)   charges one group of buyers a higher price than another group, such as offering a student discount.
C)   charges a higher price but produces the same monopoly level of output as when a single price is charged.
D)   charges some customers a price below marginal cost because costs are covered by the high-priced buyers.E) B) and D)
F) None of the above

Question 10

Scenario 15-2
Consider a local, privately-owned electrical cooperative named Poweshiek Power Company (PPCo) . PPCo has just completed a clean-coal-burning electrical power plant in Iowa. Currently, PPCo can meet the electricity needs of all residents in the county. In fact, its capacity far exceeds the needs of the county. After just a few years of operation, the shareholders of PPCo experienced incredibly high rates of return on their investment due to the profitability of the corporation.
-Refer to Scenario 15-2. Which of the following statements is most likely to be true?

Accepted Answer

A)   (i)  and (ii)  only
B)   (ii)  and (iii)  only
C)   (i)  and (iii)  only
D)   (i) , (ii) , and (iii) E) A) and B)
F) A) and C)

Question 11

When a firm operates under conditions of monopoly, its price is

Accepted Answer

A)   not constrained.
B)   constrained by marginal cost.
C)   constrained by demand.
D)   constrained only by its social agenda.E) B) and D)
F) A) and B)

Question 12

Table 15-2
Tanya has the following demand curve for selling taffy. Assume that Tanya has a marginal cost of $3 per unit. 
-Refer to Table 15-2. What is Tanya's profit-maximizing level of output?

Accepted Answer

A)   1
B)   2
C)   3
D)   4E) All of the above
F) B) and C)

Question 13

Which statement best describes the effect(s)  that occur when a monopoly firm reduces the price of its product?

Accepted Answer

A)   The "price effect" causes total revenue to fall.
B)   The "output effect" causes total revenue to rise.
C)   The "revenue effect" causes total revenue to remain constant.
D)   Both a and b are correct.E) C) and D)
F) All of the above

Question 14

Suppose a profit-maximizing monopolist faces a constant marginal cost of $20, produces an output level of 100 units, and charges a price of $50. The socially efficient level of output is 200 units. Assume that the demand curve and marginal revenue curve are the typical downward-sloping straight lines. The monopoly deadweight loss equals $1,500.

Accepted Answer

A) True 
 B)False

Question 15

Patent and copyright laws encourage

Accepted Answer

A)   creative activity.
B)   research and development.
C)   competition among firms.
D)   Both a and b are correct.E) A) and B)
F) C) and D)

Question 16

Table 15-9
Consider the following demand and cost information for a monopoly. 
-Refer to Table 15-9. What is the marginal revenue of the 3rd unit?

Accepted Answer

A)   $4
B)   $12
C)   $20
D)   $28E) A) and B)
F) A) and C)

Question 17

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 D)
F) None of the above

Question 18

Table 15-6
A monopolist faces the following demand curve: 
-Refer to Table 15-6. Suppose the monopolist has total fixed costs equal to $5 and a variable cost equal to $4 per unit for all units produced. What is the total profit if she operates at her profit-maximizing price?

Accepted Answer

A)   $1
B)   $7
C)   $9
D)   $11E) A) and B)
F) A) and C)

Question 19

A monopolist produces an output level where marginal revenue equals marginal cost and charges a price where marginal cost equals average total cost.

Accepted Answer

A) True 
 B)False

Question 20

Scenario 15-8
Mega Media Cable TV is able to purchase an exclusive right to sell a premium sports channel in its market area. Let's assume that Mega Media pays $100,000 a year for the exclusive marketing rights to the sports channel. Since Mega Media has already installed cable to all of the homes in its market area, the marginal cost of delivering the sports channel to subscribers is zero. The manager of Mega Media needs to know what price to charge for the sports channel service to maximize her profit. Before setting price, she hires an economist to estimate demand for the sports channel. The economist discovers that there are two types of subscribers who value premium sporting channels. First are the 3,000 die-hard sports fans who will pay as much as $150 a year for the new channel. Second, the premium sports channel will appeal to 20,000 occasional sports viewers who will pay as much as $25 a year for a subscription to it.
-Refer to Scenario 15-8. If Mega Media Cable TV is unable to price discriminate, what price will it choose to maximize its profit, and what is the amount of the profit?

Accepted Answer

A)   price = $25; profit = $575,000
B)   price = $25; profit = $475,000
C)   price = $150; profit = $450,000
D)   price = $150; profit = $350,000E) B) and C)
F) All of the above

Exam 15: Monopoly

A monopolist produces an output level where marginal revenue equals marginal cost and charges a price where marginal cost equals average total cost.

Correct Answer
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Which statement best describes the effect(s) that occur when a monopoly firm reduces the price of its product?

Correct Answer
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Reduced competition through merging of companies will raise social welfare

Correct Answer
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Table 15-2 Tanya has the following demand curve for selling taffy. Assume that Tanya has a marginal cost of $3 per unit. -Refer to Table 15-2. What is Tanya's profit-maximizing level of output?

Correct Answer
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Government intervention always reduces monopoly deadweight loss.

Correct Answer
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Table 15-6 A monopolist faces the following demand curve: -Refer to Table 15-6. Suppose the monopolist has total fixed costs equal to $5 and a variable cost equal to $4 per unit for all units produced. What is the total profit if she operates at her profit-maximizing price?

Correct Answer
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What are the four ways that government policymakers can respond to the problem of monopoly?

Correct Answer
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First, the government can try to make mo...
View Answer

Correct Answer
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For a firm to price discriminate,

Correct Answer
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A firm that is the sole seller of a product without close substitutes is

Correct Answer
verified

Patent and copyright laws encourage

Correct Answer
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Monopoly pricing prevents some mutually beneficial trades from taking place. These unrealized, mutually beneficial trades are

Correct Answer
verified

A monopolist that practices perfect price discrimination

Correct Answer
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Table 15-9 Consider the following demand and cost information for a monopoly. -Refer to Table 15-9. What is the marginal revenue of the 3rd unit?

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

Correct Answer
verified

When a firm operates under conditions of monopoly, its price is

Correct Answer
verified

Economists assume that monopolists behave as

Correct Answer
verified

When a monopolist increases the number of units it sells, there are two effects on revenue. They are the

Correct Answer
verified

Correct Answer
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Correct Answer
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Exam 15: Monopoly

A monopolist produces an output level where marginal revenue equals marginal cost and charges a price where marginal cost equals average total cost.

Correct AnswerverifiedShow Answer

Which statement best describes the effect(s) that occur when a monopoly firm reduces the price of its product?

Correct AnswerverifiedShow Answer

Reduced competition through merging of companies will raise social welfare

Correct AnswerverifiedShow Answer

Table 15-2 Tanya has the following demand curve for selling taffy. Assume that Tanya has a marginal cost of $3 per unit. -Refer to Table 15-2. What is Tanya's profit-maximizing level of output?

Correct AnswerverifiedShow Answer

Government intervention always reduces monopoly deadweight loss.

Correct AnswerverifiedShow Answer

Table 15-6 A monopolist faces the following demand curve: -Refer to Table 15-6. Suppose the monopolist has total fixed costs equal to $5 and a variable cost equal to $4 per unit for all units produced. What is the total profit if she operates at her profit-maximizing price?

Correct AnswerverifiedShow Answer

What are the four ways that government policymakers can respond to the problem of monopoly?

Correct AnswerverifiedFirst, the government can try to make mo...View AnswerShow Answer

Correct AnswerverifiedShow Answer

For a firm to price discriminate,

Correct AnswerverifiedShow Answer

A firm that is the sole seller of a product without close substitutes is

Correct AnswerverifiedShow Answer

Patent and copyright laws encourage

Correct AnswerverifiedShow Answer

Monopoly pricing prevents some mutually beneficial trades from taking place. These unrealized, mutually beneficial trades are

Correct AnswerverifiedShow Answer

A monopolist that practices perfect price discrimination

Correct AnswerverifiedShow Answer

Table 15-9 Consider the following demand and cost information for a monopoly. -Refer to Table 15-9. What is the marginal revenue of the 3rd unit?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

When a firm operates under conditions of monopoly, its price is

Correct AnswerverifiedShow Answer

Economists assume that monopolists behave as

Correct AnswerverifiedShow Answer

When a monopolist increases the number of units it sells, there are two effects on revenue. They are the

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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First, the government can try to make mo...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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