Question 1

Which of the following is a characteristic of a natural monopoly?

Accepted Answer

A)  Average cost exceeds marginal cost over large regions of output.
B)  Increasing the number of firms increases each firm's average total cost.
C)  One firm can supply output at a lower cost than two firms.
D)  All of the above are correct.E) A) and B)
F) C) and D)

Question 2

​Suppose that a market that is a natural monopoly has three producers providing the good to this market. This situation will

Accepted Answer

A)  ​result in lower prices for consumers under all circumstances.
B)  ​result in higher average costs for each producer than if there were only a single producer.
C)  ​result in all firms taking full advantage of economies of scale in the production of the good.
D)  result in a more efficient outcome than the market with fewer producers.E) B) and C)
F) All of the above

Question 3

If a monopolist is able to perfectly price discriminate,

Accepted Answer

A)  consumer surplus is always increased.
B)  total surplus is always decreased.
C)  consumer surplus and deadweight losses are transformed into monopoly profits.
D)  the price effect dominates the output effect on monopoly revenue.E) None of the above
F) A) and B)

Question 4

Which of the following statements is correct for both a monopolist and a perfectly competitive firm?
(i) The firm maximizes profits by equating marginal revenue with marginal cost.
(ii) The firm maximizes profits by equating price with marginal cost.
(iii) Demand equals marginal revenue.
(iv) Average revenue equals price.

Accepted Answer

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

Question 5

If the government regulates the price a natural monopolist can charge to be equal to the firm's average total cost, the firm has no incentive to reduce costs.

Accepted Answer

A) True 
 B)False

Question 6

By selling hardcover books to die-hard fans and paperback books to less enthusiastic readers, the publisher is able to price discriminate and raise its profits.

Accepted Answer

A) True 
 B)False

Question 7

Which type of public policy toward monopolies is much more common in Europe than in the United States?

Accepted Answer

A)  antitrust laws
B)  regulation
C)  public ownership
D)  "do nothing"E) A) and C)
F) A) and B)

Question 8

​Figure 15-22
The diagram depicts the market situation for a monopoly pastry shop called Bearclaws. 
-Refer to Figure 15-22. Based upon the information shown, what is the deadweight loss created by Bearclaws?​

Accepted Answer

A)  ​$140.
B)  ​$60.
C)  ​$70.
D)  ​$14.E) A) and B)
F) B) and D)

Question 9

The defining characteristic of a natural monopoly is

Accepted Answer

A)  constant marginal cost over the relevant range of output.
B)  economies of scale over the relevant range of output.
C)  constant returns to scale over the relevant range of output.
D)  diseconomies of scale over the relevant range of output.E) A) and D)
F) None of the above

Question 10

Table 15-7
Sally owns the only shoe store in town. She has the following cost and revenue information. 
-Refer to Table 15-7. Sally will maximize her profits by selling

Accepted Answer

A)  3 pairs of shoes.
B)  4 pairs of shoes.
C)  6 pairs of shoes.
D)  7 pairs of shoes.E) All of the above
F) A) and B)

Question 11

Scenario 15-9
Suppose executives at an art museum know that 100 adults are willing to pay $12 for admission to the museum on a weekday. Suppose the executives also know that 200 students are willing to pay $8 for admission on a weekday. The cost of operating the museum on a weekday is $2,000.
-Refer to Scenario 15-9. How much additional profit will the museum earn if it engages in price discrimination compared to charging each customer $8 for admission?

Accepted Answer

A)  $0
B)  $200
C)  $400
D)  $800E) None of the above
F) A) and D)

Question 12

A benefit to society of the patent and copyright laws is that those laws

Accepted Answer

A)  help to keep prices down.
B)  help to prevent a single firm from acquiring ownership of a key resource.
C)  encourage creative activity.
D)  discourage the production of inefficient products.E) B) and D)
F) A) and B)

Question 13

Table 15-8
The following table provides information on the price, quantity, and average total cost for a monopoly. 
-Refer to Table 15-8. How much extra revenue does the monopolist earn when he lowers the price from $18 to $12?

Accepted Answer

A)  $10
B)  $12
C)  $30
D)  $41E) B) and C)
F) A) and D)

Question 14

For a firm to price discriminate,

Accepted Answer

A)  it must be a natural monopoly.
B)  it must be regulated by the government.
C)  it must have some market power.
D)  consumers must tell the firm what they are willing to pay for the product.E) A) and D)
F) None of the above

Question 15

Monopoly pricing prevents some mutually beneficial trades from taking place. These unrealized, mutually beneficial trades are

Accepted Answer

A)  less of a concern for a monopoly than competitive market.
B)  offset by the higher profits earned by a monopolist.
C)  a function of the reduction in the quantity produced by a monopolist in comparison to a competitive market.
D)  All of the above are correct.E) A) and C)
F) B) and D)

Question 16

Scenario 15-6
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 15-6. How much profit will the concert promoters earn if they set the price of each ticket at $50?

Accepted Answer

A)  $25,000
B)  $75,000
C)  $100,000
D)  $150,000E) All of the above
F) B) and C)

Question 17

Figure 15-4 
-Refer to Figure 15-4. Profit can always be increased by increasing the level of output by one unit if the monopolist is currently operating at
(i) Q1.
(ii) Q2.
(iii) Q3.
(iv) Q4.

Accepted Answer

A)  (ii)  only
B)  (i)  or (ii)  only
C)  (i)  only
D)  (i) , (ii) , or (iii)  onlyE) None of the above
F) A) and D)

Question 18

Figure 15-3    
-Refer to Figure 15-3. Which of the following statements is correct?

Accepted Answer

A)  Panel B represents the typical demand curve for a perfectly competitive firm.
B)  Panel A represents the typical demand curve for a monopoly.
C)  Panel A represents the typical demand curve for a perfectly competitive industry.
D)  All of the above are correct.E) None of the above
F) All of the above

Question 19

Deadweight loss measures the loss in society's welfare that occurs because a monopolist can earn profits without the concern of new firms entering its industry.

Accepted Answer

A) True 
 B)False

Question 20

Scenario 15-2
Consider a local, privately-owned electrical cooperative named Poweshiek Power Company (PPCo) . PPCo has just completed a clean-coal-burning electrical power plant in Iowa. Currently, PPCo can meet the electricity needs of all residents in the county. In fact, its capacity far exceeds the needs of the county. After just a few years of operation, the shareholders of PPCo experienced incredibly high rates of return on their investment due to the profitability of the corporation.
-Refer to Scenario 15-2. Which of the following statements is most likely to be true?
(i) New entrants to the market know they will have a smaller market share than PPCo currently has.
(ii) PPCo is most likely experiencing rising marginal cost.
(iii) PPCo is a natural monopoly.
(iv) PPCo is most likely experiencing declining average total cost.

Accepted Answer

A)  (i)  and (ii)  only
B)  (i) , (ii) , and (iii)  only
C)  (i) , (iii)  and (iv)  only
D)  (i) , (ii) , (iii) , and (iv) E) A) and D)
F) All of the above

Exam 15: Monopoly

Deadweight loss measures the loss in society's welfare that occurs because a monopolist can earn profits without the concern of new firms entering its industry.

Correct Answer
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Correct Answer
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Which of the following is a characteristic of a natural monopoly?

Correct Answer
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If the government regulates the price a natural monopolist can charge to be equal to the firm's average total cost, the firm has no incentive to reduce costs.

Correct Answer
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Figure 15-4 -Refer to Figure 15-4. Profit can always be increased by increasing the level of output by one unit if the monopolist is currently operating at (i) Q1. (ii) Q2. (iii) Q3. (iv) Q4.

Correct Answer
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Figure 15-3 -Refer to Figure 15-3. Which of the following statements is correct?

Correct Answer
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Table 15-7 Sally owns the only shoe store in town. She has the following cost and revenue information. -Refer to Table 15-7. Sally will maximize her profits by selling

Correct Answer
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Correct Answer
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A benefit to society of the patent and copyright laws is that those laws

Correct Answer
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Correct Answer
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If a monopolist is able to perfectly price discriminate,

Correct Answer
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Correct Answer
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Which type of public policy toward monopolies is much more common in Europe than in the United States?

Correct Answer
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By selling hardcover books to die-hard fans and paperback books to less enthusiastic readers, the publisher is able to price discriminate and raise its profits.

Correct Answer
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Suppose that a market that is a natural monopoly has three producers providing the good to this market. This situation will

Correct Answer
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For a firm to price discriminate,

Correct Answer
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Figure 15-22 The diagram depicts the market situation for a monopoly pastry shop called Bearclaws. -Refer to Figure 15-22. Based upon the information shown, what is the deadweight loss created by Bearclaws?

Correct Answer
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Table 15-8 The following table provides information on the price, quantity, and average total cost for a monopoly. -Refer to Table 15-8. How much extra revenue does the monopolist earn when he lowers the price from $18 to $12?

Correct Answer
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Monopoly pricing prevents some mutually beneficial trades from taking place. These unrealized, mutually beneficial trades are

Correct Answer
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The defining characteristic of a natural monopoly is

Correct Answer
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Exam 15: Monopoly

Deadweight loss measures the loss in society's welfare that occurs because a monopolist can earn profits without the concern of new firms entering its industry.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is a characteristic of a natural monopoly?

Correct AnswerverifiedShow Answer

If the government regulates the price a natural monopolist can charge to be equal to the firm's average total cost, the firm has no incentive to reduce costs.

Correct AnswerverifiedShow Answer

Figure 15-4 -Refer to Figure 15-4. Profit can always be increased by increasing the level of output by one unit if the monopolist is currently operating at (i) Q1. (ii) Q2. (iii) Q3. (iv) Q4.

Correct AnswerverifiedShow Answer

Figure 15-3 -Refer to Figure 15-3. Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Table 15-7 Sally owns the only shoe store in town. She has the following cost and revenue information. -Refer to Table 15-7. Sally will maximize her profits by selling

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A benefit to society of the patent and copyright laws is that those laws

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If a monopolist is able to perfectly price discriminate,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which type of public policy toward monopolies is much more common in Europe than in the United States?

Correct AnswerverifiedShow Answer

By selling hardcover books to die-hard fans and paperback books to less enthusiastic readers, the publisher is able to price discriminate and raise its profits.

Correct AnswerverifiedShow Answer

​Suppose that a market that is a natural monopoly has three producers providing the good to this market. This situation will

Correct AnswerverifiedShow Answer

For a firm to price discriminate,

Correct AnswerverifiedShow Answer

​Figure 15-22 The diagram depicts the market situation for a monopoly pastry shop called Bearclaws. -Refer to Figure 15-22. Based upon the information shown, what is the deadweight loss created by Bearclaws?​

Correct AnswerverifiedShow Answer

Table 15-8 The following table provides information on the price, quantity, and average total cost for a monopoly. -Refer to Table 15-8. How much extra revenue does the monopolist earn when he lowers the price from $18 to $12?

Correct AnswerverifiedShow Answer

Monopoly pricing prevents some mutually beneficial trades from taking place. These unrealized, mutually beneficial trades are

Correct AnswerverifiedShow Answer

The defining characteristic of a natural monopoly is

Correct AnswerverifiedShow Answer

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Suppose that a market that is a natural monopoly has three producers providing the good to this market. This situation will

Correct Answer
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Figure 15-22 The diagram depicts the market situation for a monopoly pastry shop called Bearclaws. -Refer to Figure 15-22. Based upon the information shown, what is the deadweight loss created by Bearclaws?

Correct Answer
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Correct Answer
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