Question 1

A natural monopoly occurs when

Accepted Answer

A)   the product is sold in its natural state,such as water or diamonds.
B)   there are economies of scale over the relevant range of output.
C)   the firm is characterized by a rising marginal cost curve.
D)   production requires the use of free natural resources,such as water or air.E) A) and B)
F) A) and C)

Question 2

Scenario 14-4
Suppose a monopolist has a demand curve that can be expressed as P=90-Q.The monopolist's marginal revenue curve can be expressed as MR=90-2Q.The monopolist has constant marginal costs and average total costs of $10.
-Refer to Scenario 14-4.The profit-maximizing monopolist will earn profits of

Accepted Answer

A)   $6,400.
B)   $3,200.
C)   $1,600.
D)   $800.E) C) and D)
F) B) and C)

Question 3

A government-created monopoly arises when

Accepted Answer

A)   government spending in a certain industry gives rise to monopoly power.
B)   the government exercises its market control by encouraging competition among sellers.
C)   the government gives a firm the exclusive right to sell some good or service.
D)   Both a and c are correct.E) C) and D)
F) All of the above

Question 4

Table 14-8
The following table provides information on the price,quantity,and average total cost for a monopoly.
 
-Refer to Table 14-8.What is the additional cost to the firm when the monopolist lowers the price from $18 to $12?

Accepted Answer

A)   The firm saves $15.
B)   $15
C)   $30
D)   $40E) B) and C)
F) A) and D)

Question 5

When a firm has a natural monopoly,the firm's

Accepted Answer

A)   marginal cost always exceeds its average total cost.
B)   total cost curve is horizontal.
C)   average total cost curve is downward sloping.
D)   marginal cost curve must lie above the firm's average total cost curve.E) All of the above
F) B) and C)

Question 6

Figure 14-4 
-Refer to Figure 14-4.A profit-maximizing monopoly will produce an output level of

Accepted Answer

A)   Q1.
B)   Q2.
C)   Q3.
D)   Q4.E) B) and C)
F) A) and B)

Question 7

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) B) and C)

Question 8

Table 14-1
 
-Refer to Table 14-1.When 4 units of output are produced and sold,what is average revenue?

Accepted Answer

A)   $17
B)   $21
C)   $23
D)   $26E) A) and C)
F) C) and D)

Question 9

Which of the following statements is correct? Monopolies are socially inefficient because they (i) charge a price above marginal cost.
(ii) produce too little output.
(iii) earn profits at the expense of consumers.
(iv) 
Maximize the market's total surplus.

Accepted Answer

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

Question 10

Government intervention always reduces monopoly deadweight loss.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is not an example of price discrimination by a firm?

Accepted Answer

A)   children's meals at a restaurant
B)   a natural gas company charging customers a higher rate in the winter than in the summer
C)   a senior citizens' discount
D)   coupons in the Sunday newspaperE) B) and D)
F) All of the above

Question 12

A perfectly price-discriminating monopolist is able to

Accepted Answer

A)   maximize profit and produce a socially-optimal level of output.
B)   maximize profit,but not produce a socially-optimal level of output.
C)   produce a socially-optimal level of output,but not maximize profit.
D)   exercise illegal preferences regarding the race and/or gender of its employees.E) B) and C)
F) A) and B)

Question 13

Scenario 14-6
The concert promoters of a heavy-metal band,WeR2Loud,know that there are two types of concert-goers: die-hard fans and casual fans.For a particular WeR2Loud concert,there are 1,000 die-hard fans who will pay $150 for a ticket and 500 casual fans who will pay $50 for a ticket.There are 1,500 seats available at the concert venue.Suppose the cost of putting on the concert is $50,000,which includes the cost of the band,lighting,security,etc.
-Refer to Scenario 14-6.How much additional profit can the concert promoters earn by charging each customer their willingness to pay relative to charging a flat price of $150 per ticket?

Accepted Answer

A)   $25,000
B)   $50,000
C)   $75,000
D)   $100,000E) All of the above
F) A) and C)

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

Scenario 14-7
Black Box Cable TV is able to purchase an exclusive right to sell a premium movie channel (PMC) in its market area.Let's assume that Black Box Cable pays $150,000 a year for the exclusive marketing rights to PMC.Since Black Box has already installed cable to all of the homes in its market area,the marginal cost of delivering PMC to subscribers is zero.The manager of Black Box needs to know what price to charge for the PMC service to maximize her profit.Before setting price,she hires an economist to estimate demand for the PMC service.The economist discovers that there are two types of subscribers who value premium movie channels.First are the 4,000 die-hard TV viewers who will pay as much as $150 a year for the new PMC premium channel.Second,the PMC channel will appeal to 20,000 occasional TV viewers who will pay as much as $20 a year for a subscription to PMC.
-Refer to Scenario 14-7.If Black Box Cable TV is able to price discriminate,what would be the maximum amount of profit it could generate?

Accepted Answer

A)   $500,000
B)   $600,000
C)   $850,000
D)   $925,000E) A) and B)
F) All of the above

Question 16

If the government regulates the price that a natural monopolist can charge to be equal to the firm's marginal cost,the firm will

Accepted Answer

A)   earn zero profits.
B)   earn positive profits,causing other firms to enter the industry.
C)   earn negative profits,causing the firm to exit the industry.
D)   minimize costs in order to lower the price that it charges.E) All of the above
F) B) and C)

Question 17

A monopolist will choose to increase output when

Accepted Answer

A)   market price increases.
B)   at all levels of output,marginal cost increases.
C)   at the present level of output,marginal revenue exceeds marginal cost.
D)   the demand curve shifts to the left.E) B) and C)
F) B) and D)

Question 18

Patents,copyrights,and trademarks

Accepted Answer

A)   are examples of government-created monopolies.
B)   are examples of barriers to entry.
C)   allow their owners to charge higher prices.
D)   All of the above are correct.E) A) and D)
F) B) and D)

Question 19

Figure 14-10 
-Refer to Figure 14-10.Which area represents the deadweight loss from monopoly?

Accepted Answer

A)   J
B)   H
C)   A+B+C+D+F+I+J+H
D)   J+HE) B) and C)
F) C) and D)

Question 20

Average revenue for a monopoly is the total revenue divided by the quantity produced.

Accepted Answer

A) True 
 B)False

Exam 14: Monopoly

Table 14-1 -Refer to Table 14-1.When 4 units of output are produced and sold,what is average revenue?

Correct Answer
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A government-created monopoly arises when

Correct Answer
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Figure 14-10 -Refer to Figure 14-10.Which area represents the deadweight loss from monopoly?

Correct Answer
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If the government regulates the price that a natural monopolist can charge to be equal to the firm's marginal cost,the firm will

Correct Answer
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A natural monopoly occurs when

Correct Answer
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Economists assume that monopolists behave as

Correct Answer
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Figure 14-4 -Refer to Figure 14-4.A profit-maximizing monopoly will produce an output level of

Correct Answer
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When a firm has a natural monopoly,the firm's

Correct Answer
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Correct Answer
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Correct Answer
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Average revenue for a monopoly is the total revenue divided by the quantity produced.

Correct Answer
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Patents,copyrights,and trademarks

Correct Answer
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A monopolist will choose to increase output when

Correct Answer
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Which of the following statements is correct? Monopolies are socially inefficient because they (i) charge a price above marginal cost. (ii) produce too little output. (iii) earn profits at the expense of consumers. (iv) Maximize the market's total surplus.

Correct Answer
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Government intervention always reduces monopoly deadweight loss.

Correct Answer
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Correct Answer
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Which of the following is not an example of price discrimination by a firm?

Correct Answer
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A perfectly price-discriminating monopolist is able to

Correct Answer
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Correct Answer
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Table 14-8 The following table provides information on the price,quantity,and average total cost for a monopoly. -Refer to Table 14-8.What is the additional cost to the firm when the monopolist lowers the price from $18 to $12?

Correct Answer
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Exam 14: Monopoly

Table 14-1 -Refer to Table 14-1.When 4 units of output are produced and sold,what is average revenue?

Correct AnswerverifiedShow Answer

A government-created monopoly arises when

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Figure 14-10 -Refer to Figure 14-10.Which area represents the deadweight loss from monopoly?

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If the government regulates the price that a natural monopolist can charge to be equal to the firm's marginal cost,the firm will

Correct AnswerverifiedShow Answer

A natural monopoly occurs when

Correct AnswerverifiedShow Answer

Economists assume that monopolists behave as

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Figure 14-4 -Refer to Figure 14-4.A profit-maximizing monopoly will produce an output level of

Correct AnswerverifiedShow Answer

When a firm has a natural monopoly,the firm's

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Average revenue for a monopoly is the total revenue divided by the quantity produced.

Correct AnswerverifiedShow Answer

Patents,copyrights,and trademarks

Correct AnswerverifiedShow Answer

A monopolist will choose to increase output when

Correct AnswerverifiedShow Answer

Which of the following statements is correct? Monopolies are socially inefficient because they (i) charge a price above marginal cost. (ii) produce too little output. (iii) earn profits at the expense of consumers. (iv) Maximize the market's total surplus.

Correct AnswerverifiedShow Answer

Government intervention always reduces monopoly deadweight loss.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is not an example of price discrimination by a firm?

Correct AnswerverifiedShow Answer

A perfectly price-discriminating monopolist is able to

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Table 14-8 The following table provides information on the price,quantity,and average total cost for a monopoly. -Refer to Table 14-8.What is the additional cost to the firm when the monopolist lowers the price from $18 to $12?

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