Question 1

Which of the following is not a possible source of natural monopoly?

Accepted Answer

A)  large-scale network effects
B)  simultaneous consumption
C)  greater use of specialized inputs
D)  rent-seeking behavior

Question 2

In which one of the following market models is X-inefficiency least likely to be present?

Accepted Answer

A)  pure competition
B)  oligopoly
C)  monopolistic competition
D)  pure monopoly

Question 3

The nondiscriminating monopolist's demand curve

Accepted Answer

A)  is less elastic than a purely competitive firm's demand curve.
B)  is perfectly elastic.
C)  coincides with its marginal revenue curve.
D)  is perfectly inelastic.

Question 4

One feature of pure monopoly is that the firm is

Accepted Answer

A)  a producer of products with close substitutes.
B)  one of several producers of a product.
C)  a price taker.
D)  a price maker.

Question 5

A pure monopolist will maximize profits by producing at that output where price and marginal cost are equal.

Accepted Answer

A) True 
 B)False

Question 6

Pure monopolists may obtain economic profits in the long run because

Accepted Answer

A)  of advertising.
B)  marginal revenue is constant as sales increase.
C)  of barriers to entry.
D)  of rising average fixed costs.

Question 7

A monopoly results in productive inefficiency because at the profit-maximizing output level,

Accepted Answer

A)  P > MC.
B)  ATC is not at its minimum level.
C)  MC is not at its minimum level.
D)  P > AVC.

Question 8

Suppose that a monopolist calculates that at its present output level, marginal revenue is $1.00 and marginal cost is $2.00.It could maximize profits or minimize losses by

Accepted Answer

A)  decreasing price and increasing output.
B)  increasing price and decreasing output.
C)  decreasing price and leaving output unchanged.
D)  decreasing output and leaving price unchanged.

Question 9

Successful price discrimination requires that buyers charged the different prices be physically separated.

Accepted Answer

A) True 
 B)False

Question 10

When a firm is on the inelastic segment of its demand curve, it can

Accepted Answer

A)  increase total revenue by reducing price.
B)  decrease total costs by decreasing price.
C)  increase profits by increasing price.
D)  increase total revenue by more than the increase in total cost by increasing price.

Question 11

The nondiscriminating pure monopolist's demand curve

Accepted Answer

A)  is the industry demand curve.
B)  shows a direct or positive relationship between price and quantity demanded.
C)  tends to be inelastic at high prices and elastic at low prices.
D)  is identical to its marginal revenue curve.

Question 12

A price-discriminating monopolist will set a higher price where demand is more elastic and a lower price where demand is less elastic.

Accepted Answer

A) True 
 B)False

Question 13

Possible reasons for X-inefficiency include the following, except

Accepted Answer

A)  managers having other goals besides maximizing profits.
B)  workers being poorly motivated or poorly supervised.
C)  costs of materials rising due to tight supply conditions.
D)  the firm being lethargic due to the absence of competition.

Question 14

(Consider This)  Children are charged less than adults for admission to professional baseball games but are charged the same prices as adults at the concession stands.This pricing system occurs because

Accepted Answer

A)  children have an elastic demand for game tickets but an inelastic demand for concession items.
B)  children have an inelastic demand for game tickets but an elastic demand for concession items.
C)  the seller can prevent children from buying game tickets for adults but cannot prevent children from buying concession items for adults.
D)  children can personally "consume" only a single game ticket but can personally consume more than one concession item.

Question 15

Barriers to entry

Accepted Answer

A)  usually result in pure competition.
B)  can result from government regulation.
C)  exist in economic theory but not in the real world.
D)  are typically the result of wrongdoing on the part of a firm.

Question 16

Price discrimination is more common in service industries because

Accepted Answer

A)  low-price buyers will find it virtually impossible to resell the products of such industries to high-price buyers.
B)  the costs of providing such industries' products to different groups of buyers vary dramatically.
C)  the price elasticity of demand is the same for all groups of buyers in these industries.
D)  all firms in these industries have significant monopoly power over price.

Question 17

In many large U.S.cities, taxicab companies operate as near monopolies because of

Accepted Answer

A)  patents.
B)  licenses.
C)  economies of scale.
D)  strategic pricing.

Question 18

Network effects and simultaneous consumption tend to foster the development of

Accepted Answer

A)  pure competition.
B)  monopoly power.
C)  net social benefits.
D)  allocative efficiency.

Question 19

Price discrimination is

Accepted Answer

A)  always legal.
B)  always illegal.
C)  only illegal if it hurts consumers more than nondiscrimination.
D)  only illegal if used to lessen or eliminate competition.

Question 20

If a regulatory commission imposes upon a nondiscriminating natural monopoly a price that is equal to marginal cost and below average total cost at the resulting output, then

Accepted Answer

A)  the firm will realize an economic profit.
B)  the firm will earn only a normal profit.
C)  allocative efficiency will be worsened.
D)  the firm must be subsidized or it will go bankrupt.

Exam 12: Pure Monopoly

The nondiscriminating monopolist's demand curve

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One feature of pure monopoly is that the firm is

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Suppose that a monopolist calculates that at its present output level, marginal revenue is $1.00 and marginal cost is $2.00.It could maximize profits or minimize losses by

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(Consider This) Children are charged less than adults for admission to professional baseball games but are charged the same prices as adults at the concession stands.This pricing system occurs because

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A price-discriminating monopolist will set a higher price where demand is more elastic and a lower price where demand is less elastic.

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In many large U.S.cities, taxicab companies operate as near monopolies because of

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Network effects and simultaneous consumption tend to foster the development of

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In which one of the following market models is X-inefficiency least likely to be present?

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Barriers to entry

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Possible reasons for X-inefficiency include the following, except

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The nondiscriminating pure monopolist's demand curve

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When a firm is on the inelastic segment of its demand curve, it can

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If a regulatory commission imposes upon a nondiscriminating natural monopoly a price that is equal to marginal cost and below average total cost at the resulting output, then

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Price discrimination is more common in service industries because

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Which of the following is not a possible source of natural monopoly?

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Pure monopolists may obtain economic profits in the long run because

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A pure monopolist will maximize profits by producing at that output where price and marginal cost are equal.

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Successful price discrimination requires that buyers charged the different prices be physically separated.

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Price discrimination is

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A monopoly results in productive inefficiency because at the profit-maximizing output level,

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