Question 1

Assume that a monopolist faces a linear demand curve and that it produces the output quantity where total revenue is maximized. At that output, the price elasticity of demand for the product is

Accepted Answer

A)  greater or equal to one.
B)  less than one.
C)  equal to one.
D)  impossible to determine.

Question 2

Which of the diagrams correctly portrays a nondiscriminating pure monopolist's demand (D) and marginal revenue (MR) curves?

Accepted Answer

A)  A
B)  B
C)  C
D)  D

Question 3

3, the monopolist would A) maximize profits. B) increase output beyond the profit-maximizing level. C) reduce output below the profit-maximizing level. D) be unable to make a normal profit." class="answers-bank-image d-inline" rel="preload" > Refer to the diagram for a natural monopolist. If a regulatory commission were to set a maximum price of P3, the monopolist would

Accepted Answer

A)  maximize profits.
B)  increase output beyond the profit-maximizing level.
C)  reduce output below the profit-maximizing level.
D)  be unable to make a normal profit.

Question 4

Allocative inefficiency happens in a monopoly because at the profit-maximizing output level,

Accepted Answer

A)  P > ATC.
B)  P > MR.
C)  P > MC.
D)  P > AVC.

Question 5

Price discrimination occurs whenever a firm sells a good for two different prices.

Accepted Answer

A) True 
 B)False

Question 6

In order to maximize profits, the monopolist will produce the output level where MR = MC and charge a price equal to MR and MC.

Accepted Answer

A) True 
 B)False

Question 7

Under pure monopoly, a profit-maximizing firm will produce

Accepted Answer

A)  in the inelastic range of its demand curve.
B)  in the elastic range of its demand curve.
C)  only where marginal costs are decreasing.
D)  only where marginal revenue is increasing.

Question 8

In the accompanying diagram, demand is relatively elastic

Accepted Answer

A)  in the P₂ P₁ price range.
B)  in the 0 P₁ price range.
C)  in the P₂ P₄ price range.
D)  only at price P₂.

Question 9

In the graph, what is the profit-maximizing level of output for this pure monopolist?

Accepted Answer

A)  A
B)  B
C)  C
D)  D

Question 10

Answer the question on the basis of the demand and cost data for a pure monopolist. The profit-maximizing quantity of output for the monopolist will be

Accepted Answer

A)  4.
B)  6.
C)  5.
D)  7.

Question 11

Refer to the diagram for a natural monopolist. If a regulatory commission set a maximum price of P ₁, the monopolist would produce output

Accepted Answer

A)  Q₂ and realize a normal profit.
B)  Q₄ and realize a normal profit.
C)  Q₃ and realize an economic profit.
D)  Q₄ and realize a loss.

Question 12

Refer to the graph for a pure monopoly. If the government regulated the monopoly and made the firm set a fair-return price, what price and quantity levels would we observe in the short run?

Accepted Answer

A)  P₁ and Q₁
B)  P₂ and Q₃
C)  P₃ and Q₂
D)  P₄ and Q₁

Question 13

The table shows the demand schedule facing Nina, a monopolist selling baskets. What is the change in total revenue if she lowers the price from $20 to $18?

Accepted Answer

A)  $10
B)  $20
C)  $30
D)  $40

Question 14

The quantitative difference between areas Q ₁ bcQ ₂ and P ₁ P ₂ ba in the diagram measures

Accepted Answer

A)  marginal cost.
B)  total revenue.
C)  marginal revenue.
D)  average revenue.

Question 15

Which is not true of price discrimination?

Accepted Answer

A)  Successful price discrimination requires that different segments of the market have different demand elasticities.
B)  Successful price discrimination will provide the firm with more profit than if it does not discriminate.
C)  Successful price discrimination implies that the producer can separate customers into easily identifiable groups.
D)  Successful price discrimination will generally result in a lower level of output than would be the case under a single-price monopoly.

Question 16

One major barrier to entry under pure monopoly arises from

Accepted Answer

A)  the availability of close substitutes for a product.
B)  ownership of essential resources.
C)  the price taking ability of the firm.
D)  diseconomies of scale.

Question 17

If a nondiscriminating imperfectly competitive firm is selling its 100th unit of output for $35, its marginal revenue

Accepted Answer

A)  may be either greater or less than $35.
B)  will also be $35.
C)  will be less than $35.
D)  will be greater than $35.

Question 18

Refer to the graph, which shows a total revenue curve for a monopolist. If total revenue declines as output expands, demand is

Accepted Answer

A)  elastic.
B)  inelastic.
C)  perfectly inelastic.
D)  perfectly elastic.

Question 19

Refer to the diagrams. With the industry structures represented by diagram

Accepted Answer

A)  (
A)  , there will be only a normal profit in the long run, while in (
B)  an economic profit can persist.
B)  (
A)  , price exceeds marginal cost, resulting in allocative inefficiency.
C)  (
B)  , price equals marginal cost, resulting in allocative efficiency.
D)  (
B)  , equilibrium price and quantity will be e and h, respectively.

Question 20

If you want to enjoy a Major League Baseball game at the stadium in St Louis, you must patronize the Cardinals. This makes the Cardinals organization a

Accepted Answer

A)  purely competitive firm in St Louis.
B)  monopoly firm in St Louis.
C)  monopoly firm in Major League Baseball.
D)  purely competitive firm in Major League Baseball.

Exam 12: Pure Monopoly

Assume that a monopolist faces a linear demand curve and that it produces the output quantity where total revenue is maximized. At that output, the price elasticity of demand for the product is

Correct AnswerverifiedShow Answer

Refer to the graph, which shows a total revenue curve for a monopolist. If total revenue declines as output expands, demand is

Correct AnswerverifiedShow Answer

The table shows the demand schedule facing Nina, a monopolist selling baskets. What is the change in total revenue if she lowers the price from $20 to $18?

Correct AnswerverifiedShow Answer

In the graph, what is the profit-maximizing level of output for this pure monopolist?

Correct AnswerverifiedShow Answer

In the accompanying diagram, demand is relatively elastic

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Price discrimination occurs whenever a firm sells a good for two different prices.

Correct AnswerverifiedShow Answer

The quantitative difference between areas Q ₁ bcQ ₂ and P ₁ P ₂ ba in the diagram measures

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Allocative inefficiency happens in a monopoly because at the profit-maximizing output level,

Correct AnswerverifiedShow Answer

If you want to enjoy a Major League Baseball game at the stadium in St Louis, you must patronize the Cardinals. This makes the Cardinals organization a

Correct AnswerverifiedShow Answer

Which is not true of price discrimination?

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Refer to the diagram for a natural monopolist. If a regulatory commission were to set a maximum price of P3, the monopolist would

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If a nondiscriminating imperfectly competitive firm is selling its 100th unit of output for $35, its marginal revenue

Correct AnswerverifiedShow Answer

Refer to the diagram for a natural monopolist. If a regulatory commission set a maximum price of P ₁, the monopolist would produce output

Correct AnswerverifiedShow Answer

Under pure monopoly, a profit-maximizing firm will produce

Correct AnswerverifiedShow Answer

Refer to the graph for a pure monopoly. If the government regulated the monopoly and made the firm set a fair-return price, what price and quantity levels would we observe in the short run?

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In order to maximize profits, the monopolist will produce the output level where MR = MC and charge a price equal to MR and MC.

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Which of the diagrams correctly portrays a nondiscriminating pure monopolist's demand (D) and marginal revenue (MR) curves?

Correct AnswerverifiedShow Answer

One major barrier to entry under pure monopoly arises from

Correct AnswerverifiedShow Answer

Answer the question on the basis of the demand and cost data for a pure monopolist. The profit-maximizing quantity of output for the monopolist will be

Correct AnswerverifiedShow Answer

Refer to the diagrams. With the industry structures represented by diagram

Correct AnswerverifiedShow Answer

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Refer to the diagram for a natural monopolist. If a regulatory commission were to set a maximum price of P₃, the monopolist would

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