Question 1

Which is true of a price-discriminating pure monopolist?

Accepted Answer

A)  P > MR for the last unit sold.
B)  Profit will be higher than in the nondiscriminating case.
C)  The average price will be higher than in the nondiscriminating case.
D)  Allocative inefficiency will be greater than in the nondiscriminating case.

Question 2

The supply curve for a monopolist is

Accepted Answer

A)  perfectly elastic.
B)  upsloping.
C)  that portion of the marginal cost curve lying above minimum average variable cost.
D)  nonexistent.

Question 3

Comparing a pure monopoly and a purely competitive firm with identical costs, we would find in long-run equilibrium that the pure monopolist's

Accepted Answer

A)  price, output, and average total cost would all be higher.
B)  price and average total cost would be higher, but output would be lower.
C)  price, output, and average total cost would all be lower.
D)  price and output would be lower, but average total cost would be higher.

Question 4

Given a linear demand curve, at which combination of price and marginal revenue (P, MR)  is the price elasticity of demand greater than 1?

Accepted Answer

A)  P = 15, MR = 8
B)  P = 12, MR = 0
C)  P = 8, MR = −2
D)  P = 4, MR = −4

Question 5

A monopolist can sell 20 toys per day for $8.00 each.To sell 21 toys per day, the price must be cut to $7.00.The marginal revenue of the 21st toy is

Accepted Answer

A)  âˆ'$10.
B)  âˆ'$13.
C)  +$7.
D)  +$21.

Question 6

Economic profit in the long run is

Accepted Answer

A)  possible for both a pure monopoly and a pure competitor.
B)  possible for a pure monopoly but not for a pure competitor.
C)  impossible for both a pure monopolist and a pure competitor.
D)  only possible when barriers to entry are nonexistent.

Question 7

Which case best represents a case of price discrimination?

Accepted Answer

A)  An insurance company offers discounts to safe drivers.
B)  A major airline sells tickets to senior citizens at lower prices than to other passengers.
C)  A professional baseball team pays two players with identical batting averages different salaries.
D)  A utility company charges less for electricity used during off-peak hours, when it does not have to operate its less-efficient generating plants.

Question 8

Any activity designed to transfer income or wealth to a particular individual or firm at society's expense is called

Accepted Answer

A)  patent protection.
B)  X-inefficiency.
C)  price discrimination.
D)  rent-seeking.

Question 9

Assume a pure monopolist is currently operating at a price-quantity combination on the inelastic segment of its demand curve.If the monopolist is seeking maximum profits, it should

Accepted Answer

A)  retain its current price-quantity combination.
B)  increase both price and quantity sold.
C)  charge a lower price.
D)  charge a higher price.

Question 10

There is some evidence to suggest that X-inefficiency is

Accepted Answer

A)  absent whenever two or more producers are competing with one another.
B)  not encountered in either competitive or monopolistic firms.
C)  more likely to occur in monopolistic firms than in competitive firms.
D)  more likely to occur in competitive firms than in monopolistic firms.

Question 11

If a pure monopolist is producing more output than the MR = MC output,

Accepted Answer

A)  the firm may, or may not, be maximizing profits.
B)  it will be in the interest of the firm, but not necessarily of society, to reduce output.
C)  it will be in the interest of the firm and society to increase output.
D)  it will be in the interest of the firm and society to reduce output.

Question 12

A monopoly is most likely to emerge and be sustained when

Accepted Answer

A)  output demand is relatively elastic.
B)  firms have U-shaped average-total-cost curves.
C)  fixed capital costs are small relative to total costs.
D)  economies of scale are large relative to market demand.

Question 13

Under which of the following situations would a monopolist increase profits by lowering price (and increasing output) ?

Accepted Answer

A)  if it discovered that it was producing where MC = MR
B)  if it discovered that it was producing where its MC curve intersects its demand curve
C)  if it discovered that it was producing where MC 
D)  under none of these circumstances because a monopolist would never lower price

Question 14

What do economies of scale, the ownership of essential raw materials, and patents have in common?

Accepted Answer

A)  They must all be present before price discrimination can be practiced.
B)  They are all barriers to entry.
C)  They all help explain why a monopolist's demand and marginal revenue curves coincide.
D)  They all help explain why the long-run average cost curve is U-shaped.

Question 15

The supply curve for a monopoly is

Accepted Answer

A)  the portion of the marginal cost curve that lies above the average variable cost curve.
B)  the portion of the marginal cost curve that lies above the average total cost curve.
C)  the portion of the marginal cost curve that lies above the average fixed cost curve.
D)  not clearly defined.

Question 16

One feature of pure monopoly is that the demand curve

Accepted Answer

A)  is vertical.
B)  is horizontal.
C)  slopes upward.
D)  slopes downward.

Question 17

A pure monopolist's short-run profit-maximizing or loss-minimizing position is such that price

Accepted Answer

A)  equals marginal revenue.
B)  will vertically intersect demand where MR = MC.
C)  will always equal ATC.
D)  always exceeds ATC.

Question 18

Society suffers a deadweight loss in a pure-monopoly market because

Accepted Answer

A)  output is less, while price is more, than is socially optimal.
B)  output is more, while price is less, than is socially optimal.
C)  both output and price are higher than is socially optimal.
D)  both output and price are lower than is socially optimal.

Question 19

Which of the following is not a precondition for price discrimination?

Accepted Answer

A)  The commodity involved must be a durable good.
B)  The good or service cannot be profitably resold by original buyers.
C)  The seller must be able to segment the market, that is, to distinguish buyers with different elasticities of demand.
D)  The seller must possess some degree of monopoly power.

Question 20

The practice of price discrimination is associated with pure monopoly because

Accepted Answer

A)  it can be practiced whenever a firm's demand curve is downsloping.
B)  monopolists have considerable ability to control output and price.
C)  monopolists usually realize economies of scale.
D)  most monopolists sell differentiated products.

Exam 12: Pure Monopoly

Which case best represents a case of price discrimination?

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The supply curve for a monopoly is

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What do economies of scale, the ownership of essential raw materials, and patents have in common?

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Society suffers a deadweight loss in a pure-monopoly market because

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The supply curve for a monopolist is

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There is some evidence to suggest that X-inefficiency is

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The practice of price discrimination is associated with pure monopoly because

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Which is true of a price-discriminating pure monopolist?

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Comparing a pure monopoly and a purely competitive firm with identical costs, we would find in long-run equilibrium that the pure monopolist's

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If a pure monopolist is producing more output than the MR = MC output,

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One feature of pure monopoly is that the demand curve

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Assume a pure monopolist is currently operating at a price-quantity combination on the inelastic segment of its demand curve.If the monopolist is seeking maximum profits, it should

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Which of the following is not a precondition for price discrimination?

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A pure monopolist's short-run profit-maximizing or loss-minimizing position is such that price

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A monopolist can sell 20 toys per day for $8.00 each.To sell 21 toys per day, the price must be cut to $7.00.The marginal revenue of the 21st toy is

Correct AnswerverifiedShow Answer

Given a linear demand curve, at which combination of price and marginal revenue (P, MR) is the price elasticity of demand greater than 1?

Correct AnswerverifiedShow Answer

Any activity designed to transfer income or wealth to a particular individual or firm at society's expense is called

Correct AnswerverifiedShow Answer

Economic profit in the long run is

Correct AnswerverifiedShow Answer

A monopoly is most likely to emerge and be sustained when

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Under which of the following situations would a monopolist increase profits by lowering price (and increasing output) ?

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