Question 1

If a monopolist's marginal costs increase by $1 for all levels of output,then the monopoly price will

Accepted Answer

A)   rise by $1.
B)   rise by more than $1.
C)   rise by less than $1.
D)   not change,but profits will decrease.E) A) and D)
F) A) and C)

Question 2

Table 14-6
A monopolist faces the following demand curve:
 
-Refer to Table 14-6.What is the marginal revenue from the sale of the 3rd unit?

Accepted Answer

A)   $-3
B)   $3
C)   $9
D)   $24E) A) and B)
F) B) and D)

Question 3

Scenario 14-3
A monopoly firm maximizes its profit by producing Q = 500 units of output.At that level of output,its marginal revenue is $30,its average revenue is $60,and its average total cost is $34.
-Refer to Scenario 14-3.At Q = 500,the firm's marginal cost is

Accepted Answer

A)   less than $30.
B)   $30.
C)   $34.
D)   greater than $34.E) A) and B)
F) A) and C)

Question 4

A monopolist's profits with price discrimination will be

Accepted Answer

A)   lower than if the firm charged a single,profit-maximizing price
B)   the same as if the firm charged a single,profit-maximizing price.
C)   higher than if the firm charged just one price because the firm will capture more consumer surplus.
D)   higher than if the firm charged a single price because the costs of selling the good will be lower.E) B) and C)
F) A) and D)

Question 5

Angelo is a wholesale meatball distributor.He sells his meatballs to all the finest Italian restaurants in town.Nobody can make meatballs like Angelo.As a result,his is the only business in town that sells meatballs to restaurants.Assuming that Angelo is maximizing his profit,which of the following statements is true?

Accepted Answer

A)   Meatball prices will be less than marginal cost.
B)   Meatball prices will equal marginal cost.
C)   Meatball prices will exceed marginal cost.
D)   Costs are irrelevant to Angelo because he is a monopolist.E) B) and D)
F) B) and C)

Question 6

Scenario 14-1
Consider a transportation corporation named C.R.Evans that has just completed the development of a new subway system in a medium-sized town in the Northwest.Currently,there are plenty of seats on the subway,and it is never crowded.Its capacity far exceeds the needs of the city.After just a few years of operation,the shareholders of C.R.Evans experienced incredible rates of return on their investment due to the profitability of the corporation.
-Refer to Scenario 14-1.Which of the following statements is most likely to be true? (i) New entrants to the market know they will have a smaller market share than C.R.Evans currently has.
(ii) C.R.Evans is most likely experiencing decreasing average total cost.
(iii) C.R.Evans is a natural monopoly.

Accepted Answer

A)   (i) and (ii) only
B)   (ii) and (iii) only
C)   (i) and (iii) only
D)   (i) ,(ii) ,and (iii) E) C) and D)
F) None of the above

Question 7

Because a monopolist does not face competition from other firms,the outcome in a market with a monopoly

Accepted Answer

A)   does not illustrate profit maximization.
B)   is often not in the best interest of society.
C)   is characterized by unlimited profits.
D)   would be improved if the government produced the product rather than a private firm.E) B) and C)
F) C) and D)

Question 8

Figure 14-8 
-Refer to Figure 14-8.To maximize its profit,a monopolist would choose which of the following outcomes?

Accepted Answer

A)   100 units of output and a price of $10 per unit
B)   100 units of output and a price of $20 per unit
C)   150 units of output and a price of $15 per unit
D)   200 units of output and a price of $20 per unitE) None of the above
F) A) and B)

Question 9

Suppose a profit-maximizing monopolist faces a constant marginal cost of $10,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 $2,000.

Accepted Answer

A) True 
 B)False

Question 10

Monopolies are inefficient because they (i) eliminate barriers to entry.
(ii) price their product at a level where marginal revenue exceeds marginal cost.
(iii) restrict output below the socially efficient level of production.

Accepted Answer

A)   (i) and (ii) only
B)   (ii) and (iii) only
C)   (iii) only
D)   (i) ,(ii) ,and (iii) E) C) and D)
F) All of the above

Question 11

Which of the following statements is not correct?

Accepted Answer

A)   The government may use antitrust laws to break up an existing company to improve competition.
B)   The government may break up a natural monopoly to lower the price charged to customers.
C)   Private ownership is typically preferred to public ownership.
D)   Sometimes the best strategy is for the government to do nothing about monopoly inefficiency because the "fix" may be worse than the problem.E) B) and C)
F) A) and D)

Question 12

Table 14-5
A monopolist faces the following demand curve:
 
-Refer to Table 14-5.The monopolist has total fixed costs of $60 and has a constant marginal cost of $15.What is the profit-maximizing price?

Accepted Answer

A)   $4
B)   $39
C)   $36
D)   $42E) B) and C)
F) All of the above

Question 13

The simplest way for a monopoly to arise is for a single firm to

Accepted Answer

A)   decrease its price below its competitors' prices.
B)   decrease production to increase demand for its product.
C)   make pricing decisions jointly with other firms.
D)   own a key resource.E) All of the above
F) B) and D)

Question 14

Which of the following statements is correct?

Accepted Answer

A)   Two examples of early antitrust laws are the Clinton and Stigler Antitrust Acts.
B)   Antitrust laws automatically prevent mergers between companies that produce similar products.
C)   Antitrust laws reduce the government's power to regulate private companies.
D)   Antitrust laws can reduce social welfare if they prevent mergers that would lower costs through more efficient joint production.E) All of the above
F) C) and D)

Question 15

Customers who purchase an audio CD from Sally's Sounds are charged 20% more than customers who purchase the audio CD from the Sally's Sounds website.This is an example of

Accepted Answer

A)   perfect price discrimination.
B)   price discrimination.
C)   deadweight loss.
D)   socially inefficient output.E) None of the above
F) A) and D)

Question 16

In order to sell more of its product,a monopolist must

Accepted Answer

A)   sell to the government.
B)   sell in international markets.
C)   lower its price.
D)   use its market power to force up the price of complementary products.E) B) and D)
F) B) and C)

Question 17

The fundamental cause of monopolies is barriers to entry.

Accepted Answer

A) True 
 B)False

Question 18

Scenario 14-5
An airline knows that there are two types of travelers: business travelers and vacationers.For a particular flight,there are 100 business travelers who will pay $600 for a ticket while there are 50 vacationers who will pay $300 for a ticket.There are 150 seats available on the plane.Suppose the cost to the airline of providing the flight is $20,000,which includes the cost of the pilots,flight attendants,fuel,etc.
-Refer to Scenario 14-5.How much profit will the airline earn if it engages in price discrimination?

Accepted Answer

A)   -$5,000
B)   $40,000
C)   $55,000
D)   $75,000E) B) and D)
F) C) and D)

Question 19

In order for a firm to maximize profits through price discrimination,the firm must have some market power and be able to prevent arbitrage.

Accepted Answer

A) True 
 B)False

Question 20

A natural monopoly has economies of scale for most if not all of its range of output.

Accepted Answer

A) True 
 B)False

Exam 14: Monopoly

Monopolies are inefficient because they (i) eliminate barriers to entry. (ii) price their product at a level where marginal revenue exceeds marginal cost. (iii) restrict output below the socially efficient level of production.

Correct Answer
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Correct Answer
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Customers who purchase an audio CD from Sally's Sounds are charged 20% more than customers who purchase the audio CD from the Sally's Sounds website.This is an example of

Correct Answer
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Table 14-5 A monopolist faces the following demand curve: -Refer to Table 14-5.The monopolist has total fixed costs of $60 and has a constant marginal cost of $15.What is the profit-maximizing price?

Correct Answer
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The fundamental cause of monopolies is barriers to entry.

Correct Answer
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Which of the following statements is not correct?

Correct Answer
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Which of the following statements is correct?

Correct Answer
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Scenario 14-3 A monopoly firm maximizes its profit by producing Q = 500 units of output.At that level of output,its marginal revenue is $30,its average revenue is $60,and its average total cost is $34. -Refer to Scenario 14-3.At Q = 500,the firm's marginal cost is

Correct Answer
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A natural monopoly has economies of scale for most if not all of its range of output.

Correct Answer
verified

Because a monopolist does not face competition from other firms,the outcome in a market with a monopoly

Correct Answer
verified

In order to sell more of its product,a monopolist must

Correct Answer
verified

The simplest way for a monopoly to arise is for a single firm to

Correct Answer
verified

Correct Answer
verified

In order for a firm to maximize profits through price discrimination,the firm must have some market power and be able to prevent arbitrage.

Correct Answer
verified

If a monopolist's marginal costs increase by $1 for all levels of output,then the monopoly price will

Correct Answer
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Table 14-6 A monopolist faces the following demand curve: -Refer to Table 14-6.What is the marginal revenue from the sale of the 3rd unit?

Correct Answer
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Figure 14-8 -Refer to Figure 14-8.To maximize its profit,a monopolist would choose which of the following outcomes?

Correct Answer
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Correct Answer
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Correct Answer
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A monopolist's profits with price discrimination will be

Correct Answer
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Exam 14: Monopoly

Monopolies are inefficient because they (i) eliminate barriers to entry. (ii) price their product at a level where marginal revenue exceeds marginal cost. (iii) restrict output below the socially efficient level of production.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Customers who purchase an audio CD from Sally's Sounds are charged 20% more than customers who purchase the audio CD from the Sally's Sounds website.This is an example of

Correct AnswerverifiedShow Answer

Table 14-5 A monopolist faces the following demand curve: -Refer to Table 14-5.The monopolist has total fixed costs of $60 and has a constant marginal cost of $15.What is the profit-maximizing price?

Correct AnswerverifiedShow Answer

The fundamental cause of monopolies is barriers to entry.

Correct AnswerverifiedShow Answer

Which of the following statements is not correct?

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Scenario 14-3 A monopoly firm maximizes its profit by producing Q = 500 units of output.At that level of output,its marginal revenue is $30,its average revenue is $60,and its average total cost is $34. -Refer to Scenario 14-3.At Q = 500,the firm's marginal cost is

Correct AnswerverifiedShow Answer

A natural monopoly has economies of scale for most if not all of its range of output.

Correct AnswerverifiedShow Answer

Because a monopolist does not face competition from other firms,the outcome in a market with a monopoly

Correct AnswerverifiedShow Answer

In order to sell more of its product,a monopolist must

Correct AnswerverifiedShow Answer

The simplest way for a monopoly to arise is for a single firm to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In order for a firm to maximize profits through price discrimination,the firm must have some market power and be able to prevent arbitrage.

Correct AnswerverifiedShow Answer

If a monopolist's marginal costs increase by $1 for all levels of output,then the monopoly price will

Correct AnswerverifiedShow Answer

Table 14-6 A monopolist faces the following demand curve: -Refer to Table 14-6.What is the marginal revenue from the sale of the 3rd unit?

Correct AnswerverifiedShow Answer

Figure 14-8 -Refer to Figure 14-8.To maximize its profit,a monopolist would choose which of the following outcomes?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A monopolist's profits with price discrimination will be

Correct AnswerverifiedShow Answer

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