Question 1

If the distribution of water is a natural monopoly,then
(i) multiple firms would likely each have to pay large fixed costs to develop their own network of pipes.
(ii) allowing for competition among different firms in the water-distribution industry is efficient.
(iii) a single firm can serve the market at the lowest possible average total cost.

Accepted Answer

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

Question 2

Compared to the monopoly outcome with a single price,imperfect price discrimination
(i) sometimes raises total surplus.
(ii) sometimes lowers total surplus.
(iii) always leads to a lower quantity of output.

Accepted Answer

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

Question 3

Which of the following is an example of a barrier to entry?

Accepted Answer

A)   Tom charges a higher price than his competitors for his house-painting services.
B)   Dick obtains a copyright for the new computer game that he invented.
C)   Harry offers free concerts on Sunday afternoons as a form of advertising.
D)   Larry charges a lower price than his competitors for his lawn-mowing services.E) B) and D)
F) B) and C)

Question 4

Like competitive firms,monopolies choose to produce a quantity in which marginal revenue equals marginal cost.

Accepted Answer

A) True 
 B)False

Question 5

If the ABC company owns the exclusive rights to mine land in Afghanistan for Lapis Lazuli,a rare stone used in jewelry which is found only in Afghanistan,the company benefits from a barrier to entry.

Accepted Answer

A) True 
 B)False

Question 6

A monopoly chooses to supply the market with a quantity of a product that is determined by the intersection of the

Accepted Answer

A)   marginal cost and demand curves.
B)   average total cost and demand curves.
C)   marginal revenue and average total cost curves.
D)   marginal revenue and marginal cost curves.E) A) and C)
F) B) and C)

Question 7

Suppose a firm has a monopoly on the sale of a computer game and faces a downward-sloping demand curve.When selling the 50ᵗʰ game,the firm will always receive

Accepted Answer

A)   less marginal revenue on the 50th game than it received on the 49th game.
B)   more average revenue on the 50th game than it received on the 49th game.
C)   more total revenue on the 50 game than it received on the first 49 game.
D)   Both b)  and c)  are correct.E) None of the above
F) A) and C)

Question 8

For a monopoly,

Accepted Answer

A)   average revenue exceeds marginal revenue.
B)   average revenue equals marginal revenue.
C)   average revenue is less than marginal revenue.
D)   price equals marginal revenue.E) A) and B)
F) None of the above

Question 9

Figure 15-8
 
-Refer to Figure 15-8.The monopolist's maximum profit

Accepted Answer

A)   is $800.
B)   is $1,000.
C)   is $1,250.
D)   cannot be determined from the diagram.E) B) and D)
F) B) and C)

Question 10

Monopoly firms have

Accepted Answer

A)   downward-sloping demand curves, and they can sell as much output as they desire at the market price.
B)   downward-sloping demand curves, and they can sell only a limited quantity of output at each price.
C)   horizontal demand curves, and they can sell as much output as they desire at the market price.
D)   horizontal demand curves, and they can sell only a limited quantity of output at each price.E) A) and C)
F) A) and B)

Question 11

The socially efficient level of production occurs where the marginal cost curve intersects

Accepted Answer

A)   average variable cost.
B)   average total cost.
C)   demand.
D)   marginal revenue.E) All of the above
F) A) and B)

Question 12

Due to the nature of the patent laws on pharmaceuticals,the market for such drugs

Accepted Answer

A)   always remains a competitive market.
B)   always remains a monopolistic market.
C)   switches from competitive to monopolistic once the firm's patent runs out.
D)   switches from monopolistic to competitive once the firm's patent runs out.E) A) and B)
F) A) and C)

Question 13

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 C)
F) C) and D)

Question 14

Scenario 15-2
Consider a local, privately-owned electrical cooperative named Minny County Megawatts (MCM, LLC) . MCM has just completed a natural-gas-burning electrical power plant in the Midwest. Currently, MCM 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 MCM experienced incredible 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 MCM currently has.
(ii) MCM is most likely experiencing rising marginal cost.
(iii) MCM is most likely experiencing declining average total cost.
(iv) MCM is a natural monopoly.

Accepted Answer

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

Question 15

If government officials break a natural monopoly up into several smaller firms,then

Accepted Answer

A)   competition will force firms to attain economic profits rather than accounting profits.
B)   competition will force firms to produce surplus output, which drives up price.
C)   the average costs of production will increase.
D)   the average costs of production will decrease.E) A) and B)
F) A) and D)

Question 16

A patent gives a single person or firm the exclusive right to sell some good or service for a specific period of time.

Accepted Answer

A) True 
 B)False

Question 17

Because a monopolist must lower its price in order to sell another unit of output,

Accepted Answer

A)   marginal revenue is less than price.
B)   long-term economic profits will be zero.
C)   total revenue increases as price increases.
D)   average revenue is less than price.E) All of the above
F) A) and D)

Question 18

Monopolists can achieve any level of profit they desire because they have unlimited market power.

Accepted Answer

A) True 
 B)False

Question 19

A monopolist earns higher profits by charging one price than by practicing price discrimination.

Accepted Answer

A) True 
 B)False

Question 20

What do economists call the business practice of selling the same good at difference prices to different customers?

Accepted Answer

A)   price discrimination
B)   collusion
C)   compensating differential
D)   Both a and b are correctE) B) and D)
F) C) and D)

Exam 15: Monopoly.

Monopolists can achieve any level of profit they desire because they have unlimited market power.

Correct Answer
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Correct Answer
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If the ABC company owns the exclusive rights to mine land in Afghanistan for Lapis Lazuli,a rare stone used in jewelry which is found only in Afghanistan,the company benefits from a barrier to entry.

Correct Answer
verified

Like competitive firms,monopolies choose to produce a quantity in which marginal revenue equals marginal cost.

Correct Answer
verified

The socially efficient level of production occurs where the marginal cost curve intersects

Correct Answer
verified

Correct Answer
verified

If government officials break a natural monopoly up into several smaller firms,then

Correct Answer
verified

Because a monopolist must lower its price in order to sell another unit of output,

Correct Answer
verified

A monopoly chooses to supply the market with a quantity of a product that is determined by the intersection of the

Correct Answer
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For a firm to price discriminate,

Correct Answer
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Monopoly firms have

Correct Answer
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Due to the nature of the patent laws on pharmaceuticals,the market for such drugs

Correct Answer
verified

Which of the following is an example of a barrier to entry?

Correct Answer
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Compared to the monopoly outcome with a single price,imperfect price discrimination (i) sometimes raises total surplus. (ii) sometimes lowers total surplus. (iii) always leads to a lower quantity of output.

Correct Answer
verified

What do economists call the business practice of selling the same good at difference prices to different customers?

Correct Answer
verified

A monopolist earns higher profits by charging one price than by practicing price discrimination.

Correct Answer
verified

Figure 15-8 -Refer to Figure 15-8.The monopolist's maximum profit

Correct Answer
verified

A patent gives a single person or firm the exclusive right to sell some good or service for a specific period of time.

Correct Answer
verified

For a monopoly,

Correct Answer
verified

Suppose a firm has a monopoly on the sale of a computer game and faces a downward-sloping demand curve.When selling the 50ᵗʰ game,the firm will always receive

Correct Answer
verified

Exam 15: Monopoly.

Monopolists can achieve any level of profit they desire because they have unlimited market power.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the ABC company owns the exclusive rights to mine land in Afghanistan for Lapis Lazuli,a rare stone used in jewelry which is found only in Afghanistan,the company benefits from a barrier to entry.

Correct AnswerverifiedShow Answer

Like competitive firms,monopolies choose to produce a quantity in which marginal revenue equals marginal cost.

Correct AnswerverifiedShow Answer

The socially efficient level of production occurs where the marginal cost curve intersects

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If government officials break a natural monopoly up into several smaller firms,then

Correct AnswerverifiedShow Answer

Because a monopolist must lower its price in order to sell another unit of output,

Correct AnswerverifiedShow Answer

A monopoly chooses to supply the market with a quantity of a product that is determined by the intersection of the

Correct AnswerverifiedShow Answer

For a firm to price discriminate,

Correct AnswerverifiedShow Answer

Monopoly firms have

Correct AnswerverifiedShow Answer

Due to the nature of the patent laws on pharmaceuticals,the market for such drugs

Correct AnswerverifiedShow Answer

Which of the following is an example of a barrier to entry?

Correct AnswerverifiedShow Answer

Compared to the monopoly outcome with a single price,imperfect price discrimination (i) sometimes raises total surplus. (ii) sometimes lowers total surplus. (iii) always leads to a lower quantity of output.

Correct AnswerverifiedShow Answer

What do economists call the business practice of selling the same good at difference prices to different customers?

Correct AnswerverifiedShow Answer

A monopolist earns higher profits by charging one price than by practicing price discrimination.

Correct AnswerverifiedShow Answer

Figure 15-8 -Refer to Figure 15-8.The monopolist's maximum profit

Correct AnswerverifiedShow Answer

A patent gives a single person or firm the exclusive right to sell some good or service for a specific period of time.

Correct AnswerverifiedShow Answer

For a monopoly,

Correct AnswerverifiedShow Answer

Suppose a firm has a monopoly on the sale of a computer game and faces a downward-sloping demand curve.When selling the 50ᵗʰ game,the firm will always receive

Correct AnswerverifiedShow Answer

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