Question 1

Refer to the demand and cost data for a pure monopolist given in the table. If the monopolist perfectly price-discriminated and sold each unit of the product at the maximum price the buyer of that unit would be willing to pay, and if the monopolist maximized profits, then the total profit received would be

Accepted Answer

A)  $700.
B)  $190.
C)  $540.
D)  $70.

Question 2

Refer to the diagrams. If $4 is Firm B's profit-maximizing price, its

Accepted Answer

A)  ATC must be $4.
B)  MC must be $4.
C)  MR must be $4.
D)  MC must be zero.

Question 3

An argument for making regulated monopolies adopt marginal-cost pricing is that this would

Accepted Answer

A)  increase productive efficiency by making price equal average cost.
B)  benefit higher-income groups by making monopoly products more affordable.
C)  increase managerial incentives to reduce employment and production.
D)  make the marginal cost equal to society's valuation of the marginal benefit.

Question 4

With respect to the pure monopolist's demand curve, it can be said that

Accepted Answer

A)  the stronger the barriers to entry, the more elastic is the monopolist's demand curve.
B)  price exceeds marginal revenue at all outputs greater than 1.
C)  demand is perfectly inelastic.
D)  marginal revenue equals price at all outputs.

Question 5

Answer the question on the basis of the accompanying demand schedule.  The marginal revenue obtained from selling the third unit of output is

Accepted Answer

A)  $1.
B)  $5.
C)  $10.
D)  $20.

Question 6

Which of the following is characteristic of a pure monopolist's demand curve?

Accepted Answer

A)  Average revenue is less than price.
B)  Its elasticity coefficient is 1 at all levels of output.
C)  Price and marginal revenue are equal at all levels of output.
D)  It is the same as the market demand curve.

Question 7

Explain the relationship between the price elasticity of demand and price discrimination.

Accepted Answer

The price-discriminating monopolist maxi...

Question 8

Other things equal, in which of the following cases would economic profit be the greatest?

Accepted Answer

A)  an unregulated monopolist that is able to engage in price discrimination
B)  an unregulated, nondiscriminating monopolist
C)  a regulated monopolist charging a price equal to average total cost
D)  a regulated monopolist charging a price equal to marginal cost

Question 9

With a natural monopoly, the fair-return price

Accepted Answer

A)  is allocatively efficient; the socially optimal price is allocatively inefficient.
B)  is allocatively inefficient; the socially optimal price is allocatively efficient.
C)  and the socially optimal price are both allocatively inefficient.
D)  and the socially optimal price are both allocatively efficient.

Question 10

Why is a monopolist a price maker?

Accepted Answer

All imperfect competitors, whether pure ...

Question 11

Refer to the diagram. At the profit-maximizing level of output, the firm will realize

Accepted Answer

A)  an economic profit of ABHJ.
B)  an economic profit of ACGJ.
C)  a loss of GH per unit.
D)  a loss of JH per unit.

Question 12

Refer to the graph. At its equilibrium level of output, this monopolist earns

Accepted Answer

A)  positive economic profits.
B)  negative economic profits.
C)  zero economic profits.
D)  zero revenues.

Question 13

To maximize profit, a pure monopolist must

Accepted Answer

A)  maximize its total revenue.
B)  maximize the difference between marginal revenue and marginal cost.
C)  maximize the difference between total revenue and total cost.
D)  produce where average total cost is at a minimum.

Question 14

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.

Question 15

Answer the question on the basis of the accompanying table, which shows the demand schedule facing a nondiscriminating monopolist.  The monopolist will select its profit-maximizing level of output somewhere within the

Accepted Answer

A)  3-5 unit range of output.
B)  1-3 unit range of output.
C)  1-4 unit range of output.
D)  2-4 unit range of output.

Question 16

What are the major barriers to entry that explain the existence of monopoly?

Accepted Answer

The major barriers to entry ar...

Question 17

One of the economic effects of monopoly is an income transfer from consumers to the firm.

Accepted Answer

A) True 
 B)False

Question 18

Refer to the diagram for a pure monopolist. Monopoly output will be

Accepted Answer

A)  between f and g.
B)  h.
C)  g.
D)  f.

Question 19

A pure monopoly firm will never charge a price in the inelastic range of its demand curve because lowering price to get into this region will

Accepted Answer

A)  increase total revenue, increase total cost, and decrease profit.
B)  decrease total revenue, increase total cost, and decrease profit.
C)  increase total revenue, decrease total cost, and decrease profit.
D)  decrease total revenue, total cost, and profit.

Question 20

The gains to monopolists from exercising market power

Accepted Answer

A)  exceed the losses to consumers in monopoly markets, resulting in a net gain to society.
B)  equal the losses to consumers in monopoly markets, resulting in no net change for society.
C)  are less than the losses to consumers in monopoly markets, resulting in a net loss to society.
D)  create smaller deadweight losses than occur in purely competitive industries.

Exam 12: Pure Monopoly

Which of the following is characteristic of a pure monopolist's demand curve?

Correct Answer
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One of the economic effects of monopoly is an income transfer from consumers to the firm.

Correct Answer
verified

Why is a monopolist a price maker?

Correct Answer
verified
All imperfect competitors, whether pure ...
View Answer

The gains to monopolists from exercising market power

Correct Answer
verified

Answer the question on the basis of the accompanying table, which shows the demand schedule facing a nondiscriminating monopolist. The monopolist will select its profit-maximizing level of output somewhere within the

Correct Answer
verified

Refer to the diagram. At the profit-maximizing level of output, the firm will realize

Correct Answer
verified

Refer to the diagram for a pure monopolist. Monopoly output will be

Correct Answer
verified

With respect to the pure monopolist's demand curve, it can be said that

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

To maximize profit, a pure monopolist must

Correct Answer
verified

Explain the relationship between the price elasticity of demand and price discrimination.

Correct Answer
verified
The price-discriminating monopolist maxi...
View Answer

What are the major barriers to entry that explain the existence of monopoly?

Correct Answer
verified
The major barriers to entry ar...
View Answer

Other things equal, in which of the following cases would economic profit be the greatest?

Correct Answer
verified

With a natural monopoly, the fair-return price

Correct Answer
verified

An argument for making regulated monopolies adopt marginal-cost pricing is that this would

Correct Answer
verified

Answer the question on the basis of the accompanying demand schedule. The marginal revenue obtained from selling the third unit of output is

Correct Answer
verified

Refer to the diagrams. If $4 is Firm B's profit-maximizing price, its

Correct Answer
verified

A pure monopoly firm will never charge a price in the inelastic range of its demand curve because lowering price to get into this region will

Correct Answer
verified

Refer to the graph. At its equilibrium level of output, this monopolist earns

Correct Answer
verified

Exam 12: Pure Monopoly

Which of the following is characteristic of a pure monopolist's demand curve?

Correct AnswerverifiedShow Answer

One of the economic effects of monopoly is an income transfer from consumers to the firm.

Correct AnswerverifiedShow Answer

Why is a monopolist a price maker?

Correct AnswerverifiedAll imperfect competitors, whether pure ...View AnswerShow Answer

The gains to monopolists from exercising market power

Correct AnswerverifiedShow Answer

Answer the question on the basis of the accompanying table, which shows the demand schedule facing a nondiscriminating monopolist. The monopolist will select its profit-maximizing level of output somewhere within the

Correct AnswerverifiedShow Answer

Refer to the diagram. At the profit-maximizing level of output, the firm will realize

Correct AnswerverifiedShow Answer

Refer to the diagram for a pure monopolist. Monopoly output will be

Correct AnswerverifiedShow Answer

With respect to the pure monopolist's demand curve, it can be said that

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

To maximize profit, a pure monopolist must

Correct AnswerverifiedShow Answer

Explain the relationship between the price elasticity of demand and price discrimination.

Correct AnswerverifiedThe price-discriminating monopolist maxi...View AnswerShow Answer

What are the major barriers to entry that explain the existence of monopoly?

Correct AnswerverifiedThe major barriers to entry ar...View AnswerShow Answer

Other things equal, in which of the following cases would economic profit be the greatest?

Correct AnswerverifiedShow Answer

With a natural monopoly, the fair-return price

Correct AnswerverifiedShow Answer

An argument for making regulated monopolies adopt marginal-cost pricing is that this would

Correct AnswerverifiedShow Answer

Answer the question on the basis of the accompanying demand schedule. The marginal revenue obtained from selling the third unit of output is

Correct AnswerverifiedShow Answer

Refer to the diagrams. If $4 is Firm B's profit-maximizing price, its

Correct AnswerverifiedShow Answer

A pure monopoly firm will never charge a price in the inelastic range of its demand curve because lowering price to get into this region will

Correct AnswerverifiedShow Answer

Refer to the graph. At its equilibrium level of output, this monopolist earns

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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All imperfect competitors, whether pure ...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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The price-discriminating monopolist maxi...
View Answer

Correct Answer
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The major barriers to entry ar...
View Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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