Question 1

The supply curve for a monopoly is given by

Accepted Answer

A)   the firm's marginal cost curve above the average variable cost curve.
B)   the one point on the demand curve that corresponds to the quantity for which price is equal to marginal cost.
C)   the entire demand curve above the point where price is equal to average cost.
D)   the monopolist does not have a well-defined supply curve.E) All of the above
F) B) and C)

Question 2

All monopolies exist because of

Accepted Answer

A)   firms' desire to maximize profits.
B)   failure of antitrust laws.
C)   barriers to entry.
D)   natural selection.E) A) and B)
F) A) and C)

Question 3

Which might be a possible reason a cable television operator want to bundle channels together in packages ("tiers") ?

Accepted Answer

A)   delivering many channels to the consumer is not much more costly than delivering a few.
B)   simplifies the consumer's choice and perhaps lowers administrative costs.
C)   allows the firm to extract revenue from a consumer even if it does not know exactly which channels the consumer likes the most..
D)   all of the above.E) A) and B)
F) C) and D)

Question 4

Consider the same monopoly situation as in the previous question.The deadweight loss associated with this monopoly is

Accepted Answer

A)   966
B)   1,058
C)   2,484
D)   3,680E) None of the above
F) A) and B) B

Question 5

A price-discriminating monopolist having identical costs in two markets should charge a higher price in that market

Accepted Answer

A)   which has a higher demand.
B)   which has a more elastic demand.
C)   which has a less elastic demand.
D)   which has a higher marginal revenue.E) A) and D)
F) A) and B)

Question 6

If a monopoly is maximizing profits

Accepted Answer

A)   price will always be greater than average cost.
B)   price will always equal marginal cost.
C)   price will always be greater than marginal cost.
D)   price will always equal marginal revenue.E) A) and C)
F) C) and D)

Question 7

Possible benefits of a monopoly include which of the following (choose all that apply) ?

Accepted Answer

A)   a savings of fixed costs because only one firm supplies quantity demanded.
B)   greater opportunities for research due to long-run positive economic profits.
C)   the government is better able to ensure that it follows laws and guidelines because there is only one firm to monitor.
D)   goods and services are provided at a lower price than under perfect competition because of a monopoly's decreasing average cost curve.E) B) and D)
F) A) and D)

Question 8

A monopolist has total cost TC = Q2 + 10Q + 100 and marginal cost MC = 2Q + 10.It faces demand Q = 130- P (so its marginal revenue is MR = 130 - 2Q) .Its profit-maximizing output is

Accepted Answer

A)   30
B)   25
C)   20
D)   10E) B) and D)
F) C) and D) A

Question 9

The Soup Nut serves his signature minestrone soup in two different bowl sizes,large and small.What strategy should he use to extract the most surplus possible out of customers who come in two types,regular and big eaters,when he cannot distinguish between the two types by observation?

Accepted Answer

A)   Distort the size of the small bowl downward to make it less attractive to the big eaters, allowing him to raise the price of the large bowl.
B)   Distort the size of the large bowl downward to make it attractive to both big and regular eaters.
C)   Distort the size of the small bowl upward to make it harder for regular eaters to separate themselves from big eaters.
D)   Distort the size of the large bowl upward to make big eaters less likely to consume the small bowl.E) B) and C)
F) None of the above

Question 10

For the practice of price discrimination to be successful,the monopoly must

Accepted Answer

A)   be able to prevent resale of its product.
B)   face similar demand curves for various markets.
C)   have similar costs among markets.
D)   have a downward sloping marginal cost curve.E) A) and B)
F) A) and C)

Question 11

A monopoly's economic profits are represented by

Accepted Answer

A)   [price minus marginal cost] times number of units sold.
B)   [price minus average cost] times number of units sold.
C)   [marginal revenue minus price] times number of units sold.
D)   [marginal cost minus price] times number of units sold.E) A) and B)
F) B) and C)

Question 12

Which of the following is not a technical barrier to entry in a monopolized market?

Accepted Answer

A)   A patent.
B)   Decreasing average cost.
C)   A low cost method of production known only by monopolist.
D)   Increasing returns to scale.E) All of the above
F) None of the above

Question 13

Consider the same monopoly situation as in the previous question.The deadweight loss (compared to a single firm behaving as if it were perfectly competitive) is about

Accepted Answer

A)   667
B)   333
C)   1,000
D)   1,333E) A) and B)
F) A) and C)

Question 14

Perfect price discrimination

Accepted Answer

A)   is a common occurrence in situations with many buyers.
B)   occurs fairly often in situations with only a few buyers.
C)   is only observed in competitive markets.
D)   rarely occurs because firms do not have sufficient power to differentiate among specific buyers.E) A) and B)
F) A) and C)

Question 15

A natural monopoly

Accepted Answer

A)   is a monopoly in the production of raw materials.
B)   occurs when one firm can supply the entire market more cheaply than can a number of firms.
C)   is one result of a patent.
D)   results from decreasing returns to scale.E) B) and C)
F) B) and D)

Question 16

The principal difference between economic profits for a monopolist and for a competitive firm is that

Accepted Answer

A)   monopoly profits create major problems of equity whereas competitive profits do not.
B)   competitive profits exist only in the short run whereas monopoly profits may exist in the long run as well.
C)   monopoly profits represent a transfer out of consumer surplus whereas competitive profits do not.
D)   monopoly profits are considered a deadweight loss but competitive profits are not.E) A) and B)
F) A) and C)

Question 17

Consider the same monopoly situation as in the previous question.The firm's profit will be

Accepted Answer

A)   1,760
B)   1,660
C)   2,264
D)   6,728E) B) and C)
F) All of the above

Question 18

If the government requires a natural monopoly to price at marginal cost,

Accepted Answer

A)   monopoly firms will earn zero economic profits because the price of the good equals the cost of producing that good.
B)   monopoly firms will operate at a loss because P 
C)   more firms will be able to enter the market.
D)   producer surplus will increase because quantity supplied is greater.E) A) and B)
F) B) and C)

Question 19

The "deadweight loss" from a monopoly refers to

Accepted Answer

A)   the portion of a monopolist's profits that are above the competitive profit level.
B)   the increase in price due to the monopolization of a market.
C)   the inefficient use of factors of production by a monopoly.
D)   the loss of consumer surplus due to the monopolization of a market that is not transferred to another economic actor.E) All of the above
F) B) and C) D

Question 20

From the point of view of economic efficiency,output in a monopolized market is

Accepted Answer

A)   too high.
B)   perfect.
C)   too low.
D)   undesirable.E) B) and D)
F) B) and C)

Exam 11: Monopoly

The supply curve for a monopoly is given by

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All monopolies exist because of

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Which might be a possible reason a cable television operator want to bundle channels together in packages ("tiers") ?

Correct AnswerverifiedShow Answer

Consider the same monopoly situation as in the previous question.The deadweight loss associated with this monopoly is

Correct AnswerverifiedB

A price-discriminating monopolist having identical costs in two markets should charge a higher price in that market

Correct AnswerverifiedShow Answer

If a monopoly is maximizing profits

Correct AnswerverifiedShow Answer

Possible benefits of a monopoly include which of the following (choose all that apply) ?

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A monopolist has total cost TC = Q2 + 10Q + 100 and marginal cost MC = 2Q + 10.It faces demand Q = 130- P (so its marginal revenue is MR = 130 - 2Q) .Its profit-maximizing output is

Correct AnswerverifiedA

The Soup Nut serves his signature minestrone soup in two different bowl sizes,large and small.What strategy should he use to extract the most surplus possible out of customers who come in two types,regular and big eaters,when he cannot distinguish between the two types by observation?

Correct AnswerverifiedShow Answer

For the practice of price discrimination to be successful,the monopoly must

Correct AnswerverifiedShow Answer

A monopoly's economic profits are represented by

Correct AnswerverifiedShow Answer

Which of the following is not a technical barrier to entry in a monopolized market?

Correct AnswerverifiedShow Answer

Consider the same monopoly situation as in the previous question.The deadweight loss (compared to a single firm behaving as if it were perfectly competitive) is about

Correct AnswerverifiedShow Answer

Perfect price discrimination

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A natural monopoly

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The principal difference between economic profits for a monopolist and for a competitive firm is that

Correct AnswerverifiedShow Answer

Consider the same monopoly situation as in the previous question.The firm's profit will be

Correct AnswerverifiedShow Answer

If the government requires a natural monopoly to price at marginal cost,

Correct AnswerverifiedShow Answer

The "deadweight loss" from a monopoly refers to

Correct AnswerverifiedD

From the point of view of economic efficiency,output in a monopolized market is

Correct AnswerverifiedShow Answer

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B

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A monopolist has total cost TC = Q² + 10Q + 100 and marginal cost MC = 2Q + 10.It faces demand Q = 130- P (so its marginal revenue is MR = 130 - 2Q) .Its profit-maximizing output is

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A

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D

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