Question 1

The loss of the profit motive by a publicly owned natural monopoly could:

Accepted Answer

A)   increase the motivation to improve efficiency.
B)   reduce the motivation to improve efficiency.
C)   increase the incentive to provide better service.
D)   increase the incentive to lower costs.E) A) and B)
F) A) and C)

Question 2

For a monopolist,at the profit-maximizing level of output:

Accepted Answer

A)   price is greater than marginal revenue.
B)   marginal revenue is greater than average revenue.
C)   average revenue is greater than price.
D)   price is equal to marginal revenue.E) A) and D)
F) B) and D)

Question 3

Unregulated natural monopolies:

Accepted Answer

A)   never capture lowest costs per unit possible.
B)   can capture profits by restricting output.
C)   create no problems for policy-makers.
D)   are always protected by government policy.E) B) and C)
F) B) and D)

Question 4

A perfect monopoly:

Accepted Answer

A)   can be a single seller or small group of firms.
B)   can offer a product at the lowest cost possible.
C)   controls 100 percent of the market for a product.
D)   always engages in price discrimination.E) A) and B)
F) B) and C)

Question 5

Some argue the best response to monopolies is no response at all because:

Accepted Answer

A)   the creation of regulation may be too difficult.
B)   political mishandling may make the situation even worse.
C)   the regulation of monopolies may not be able to be managed effectively.
D)   All of these statements are true.E) B) and C)
F) C) and D)

Question 6

For a monopoly producing any output level greater than one,the average revenue curve:

Accepted Answer

A)   lies below the demand curve.
B)   lies above the marginal revenue curve.
C)   is the same as the marginal revenue curve.
D)   lies above the demand curve.E) B) and C)
F) A) and D)

Question 7

A monopolist can maximize profits by:

Accepted Answer

A)   selling as much as he can produce.
B)   producing at the level of output at which MR = 0.
C)   following the same rules as a perfectly competitive firm.
D)   selling an output where P = ATC.E) A) and B)
F) None of the above

Question 8

At any quantity of output below the intersection of the marginal revenue and marginal cost curves:

Accepted Answer

A)   ATC is lower than AVC.
B)   MC is higher than MR.
C)   MR is higher than MC.
D)   the firm would lose profits producing the units.E) A) and C)
F) B) and C)

Question 9

Natural monopolies are the natural result of:

Accepted Answer

A)   competition in markets where economies of scale exist over the relevant range of output.
B)   geographical happenstance.
C)   fierce competition from firms in a market.
D)   government regulations intended to encourage competition.E) A) and D)
F) B) and C)

Question 10

Protecting intellectual property rights:

Accepted Answer

A)   always benefits society.
B)   never benefits society.
C)   rarely affects society overall.
D)   is hotly debated as to whether it benefits or costs society overall.E) C) and D)
F) None of the above

Question 11

Predatory pricing is:

Accepted Answer

A)   temporarily slashing prices below cost to force competitors out of the market.
B)   an aggressive business move to maintain market power.
C)   used to discourage competitors.
D)   All of these statements are true.E) A) and B)
F) All of the above

Question 12

If a monopoly wishes to sell more output,it must:

Accepted Answer

A)   find a more cost effective way to produce its goods.
B)   lower the price.
C)   be in the economies of scale range of its ATC.
D)   eliminate its existing competition.E) All of the above
F) B) and D)

Question 13

Price discrimination:

Accepted Answer

A)   can benefit consumers with a lower willingness to pay when compared to other consumers in the market
B)   can be a successful strategy for any firm in a competitive market
C)   tends to decrease the profits of the firm.
D)   is more successful if resale of the product is possible from one consumer to another.E) A) and B)
F) A) and C)

Question 14

The regulation of natural monopolies is common in all of the industries except the:

Accepted Answer

A)   tap water industry.
B)   electricity industry.
C)   natural gas industry.
D)   oil and gas industry.E) A) and C)
F) A) and B)

Question 15

A natural monopoly is a market in which a single firm:

Accepted Answer

A)   owns a key resource or input into the production of the good.
B)   can produce the entire market quantity at a lower cost than multiple firms.
C)   is protected from competition through government legislation.
D)   gains market share over time through aggressive tactics.E) B) and C)
F) None of the above

Question 16

An example of a public policy response to a monopoly is:

Accepted Answer

A)   antitrust laws.
B)   public ownership.
C)   doing nothing.
D)   All of these are examples.E) B) and C)
F) A) and C)

Question 17

When a perfectly competitive firm increases output,total revenue:

Accepted Answer

A)   increases, because there is no price effect.
B)   decreases, because there is no price effect.
C)   increases, because there is no quantity effect.
D)   decreases, because there is no quantity effect.E) B) and C)
F) A) and D)

Question 18

For a monopoly,when the price effect outweighs the quantity effect of increased production:

Accepted Answer

A)   total revenues will increase.
B)   the demand must be price inelastic.
C)   marginal revenue must be increasing.
D)   All of these statements are true.E) C) and D)
F) A) and B)

Question 19

Which of the following is not considered a barrier to entry into a monopoly market?

Accepted Answer

A)   having a natural monopoly.
B)   ownership of a key resource.
C)   government intervention.
D)   an new product-type is offered.E) B) and C)
F) None of the above

Question 20

Protecting intellectual property rights:

Accepted Answer

A)   gives no incentive to innovate.
B)   encourages research and development.
C)   will increase total surplus for society.
D)   only benefits producers in society.E) A) and D)
F) C) and D)

Exam 14: Monopoly

The loss of the profit motive by a publicly owned natural monopoly could:

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A natural monopoly is a market in which a single firm:

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If a monopoly wishes to sell more output,it must:

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Which of the following is not considered a barrier to entry into a monopoly market?

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For a monopoly producing any output level greater than one,the average revenue curve:

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When a perfectly competitive firm increases output,total revenue:

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For a monopoly,when the price effect outweighs the quantity effect of increased production:

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Protecting intellectual property rights:

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A perfect monopoly:

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Protecting intellectual property rights:

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Price discrimination:

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Some argue the best response to monopolies is no response at all because:

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For a monopolist,at the profit-maximizing level of output:

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Natural monopolies are the natural result of:

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Predatory pricing is:

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At any quantity of output below the intersection of the marginal revenue and marginal cost curves:

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A monopolist can maximize profits by:

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The regulation of natural monopolies is common in all of the industries except the:

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Unregulated natural monopolies:

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An example of a public policy response to a monopoly is:

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