Question 1

During the life of a drug patent,the monopoly pharmaceutical firm maximizes profit by producing the quantity at which marginal revenue equals marginal cost.

Accepted Answer

A) True 
 B)False

Question 2

Perfect price discrimination

Accepted Answer

A)   eliminates deadweight loss.
B)   reduces profits to the monopolist.
C)   decreases the total quantity sold by the monopolist.
D)   requires arbitrage in order for the monopolist to maximize profits.E) B) and C)
F) A) and D)

Question 3

Suppose when a monopolist produces 75 units its average revenue is $10 per unit,its marginal revenue is $5 per unit,its marginal cost is $6 per unit,and its average total cost is $5 per unit.What can we conclude about this monopolist?

Accepted Answer

A)   The monopolist is currently maximizing profits, and its total profits are $375.
B)   The monopolist is currently maximizing profits, and its total profits are $300.
C)   The monopolist is not currently maximizing profits; it should produce more units and charge a lower price to maximize profits.
D)   The monopolist is not currently maximizing profits; it should produce fewer units and charge a higher price to maximize profits.E) All of the above
F) A) and D)

Question 4

Selling a good at a price determined by the intersection of the demand curve and the marginal cost curve is consistent with the
(i) socially-optimal level of output.
(ii) market solution for profit-maximizing competitive firms.
(iii) market solution for a profit-maximizing monopoly.

Accepted Answer

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

Question 5

The laws governing patents and copyrights

Accepted Answer

A)   promote monopolies.
B)   are intended to serve private interests, not the public's interest.
C)   have costs but not benefits.
D)   eliminate the need for firms to engage in research and development.E) A) and D)
F) A) and B)

Question 6

When we compare economic welfare in a monopoly market to a competitive market,the profits earned by the monopolist represent

Accepted Answer

A)   a transfer of benefits from the consumer to the producer.
B)   a loss in total welfare.
C)   the higher marginal costs incurred by the monopolists in comparison to competitive firms.
D)   the higher marginal revenues gained by the monopolists in comparison to competitive firms.E) All of the above
F) A) and C)

Question 7

Scenario 15-5
An airline knows that there are two types of travelers: business travelers and vacationers. For a particular flight, there are 100 business travelers who will pay $600 for a ticket while there are 50 vacationers who will pay $300 for a ticket. There are 150 seats available on the plane. Suppose the cost to the airline of providing the flight is $20,000, which includes the cost of the pilots, flight attendants, fuel, etc.
-Refer to Scenario 15-5.How much profit will the airline earn if it sets the price of each ticket at $600?

Accepted Answer

A)   -$5,000
B)   $15,000
C)   $40,000
D)   $60,000E) B) and C)
F) C) and D)

Question 8

When we compare economic welfare in a monopoly market to a competitive market,the profits earned by the monopolist represent

Accepted Answer

A)   a loss in total welfare.
B)   a transfer of benefits from the buyer to the seller.
C)   the higher marginal costs incurred by the monopolists in comparison to competitive firms.
D)   All of the above are correct.E) B) and D)
F) A) and B)

Question 9

Figure 15-4
 
-Refer to Figure 15-4.A profit-maximizing monopoly's total cost is equal to

Accepted Answer

A)   P4 x Q3.
B)   P2 x Q3.
C)   P1 x Q3.
D)   (P4-P1)  x Q3.E) B) and D)
F) B) and C)

Question 10

A monopolist's profit is equal to (Price - Marginal Cost)* Quantity.

Accepted Answer

A) True 
 B)False

Question 11

If the government deems a newly-invented drug to be truly original,the pharmaceutical company is given the exclusive right to manufacture and sell the drug for 50 years.

Accepted Answer

A) True 
 B)False

Question 12

Figure 15-3
 
-Refer to Figure 15-3.Profit can always be increased by increasing the level of output by one unit if the monopolist is currently operating at
(i) Q0.
(ii) Q1.
(iii) Q2.
(iv) Q3.

Accepted Answer

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

Question 13

A monopolist maximizes profits by

Accepted Answer

A)   producing an output level where marginal revenue equals marginal cost.
B)   charging a price equal to marginal revenue and marginal cost.
C)   charging a price where marginal cost equals average total cost.
D)   Both a and b are correct.E) C) and D)
F) A) and D)

Question 14

Figure 15-1
 
-Refer to Figure 15-1.Considering the relationship between average total cost and marginal cost,the marginal cost curve for this firm must

Accepted Answer

A)   lie entirely above the average total cost curve.
B)   lie entirely below the average total cost curve.
C)   be U-shaped.
D)   be horizontal.E) C) and D)
F) None of the above

Question 15

Scenario 15-8
Mega Media Cable TV is able to purchase an exclusive right to sell a premium sports channel in its market area. Let's assume that Mega Media pays $100,000 a year for the exclusive marketing rights to the sports channel. Since Mega Media has already installed cable to all of the homes in its market area, the marginal cost of delivering the sports channel to subscribers is zero. The manager of Mega Media needs to know what price to charge for the sports channel service to maximize her profit. Before setting price, she hires an economist to estimate demand for the sports channel. The economist discovers that there are two types of subscribers who value premium sporting channels. First are the 3,000 die-hard sports fans who will pay as much as $150 a year for the new channel. Second, the premium sports channel will appeal to 20,000 occasional sports viewers who will pay as much as $25 a year for a subscription to it.
-Refer to Scenario 15-8.If Mega Media Cable TV is unable to price discriminate,what price will it choose to maximize its profit,and what is the amount of the profit?

Accepted Answer

A)   price = $25; profit = $575,000
B)   price = $25; profit = $475,000
C)   price = $150; profit = $450,000
D)   price = $150; profit = $350,000E) B) and D)
F) A) and B)

Question 16

Government intervention always reduces monopoly deadweight loss.

Accepted Answer

A) True 
 B)False

Question 17

Table 15-17
 
-Refer to Table 15-17.If a monopolist faces a constant marginal cost of $2,how much output should the firm produce?

Accepted Answer

A)   3 units
B)   4 units
C)   5 units
D)   6 unitsE) A) and B)
F) A) and D)

Question 18

Which of the following is not an example of a barrier to entry?

Accepted Answer

A)   Mighty Mitch's Mining Company owns a unique plot of land in Tanzania, under which lies the only large deposit of Tanzanite in the world.
B)   A pharmaceutical company obtains a patent for a specific high blood pressure medication.
C)   A musician obtains a copyright for her original song.
D)   An entrepreneur opens a popular new restaurant.E) None of the above
F) A) and C)

Question 19

Since natural monopolies have a declining average cost curve,regulating natural monopolies by setting price equal to marginal cost would

Accepted Answer

A)   cause the monopolist to operate at a loss.
B)   result in a less than optimal total surplus.
C)   maximize producer surplus.
D)   result in higher profits for the monopoly.E) A) and B)
F) B) and C)

Question 20

Price discrimination

Accepted Answer

A)   is illegal in the United States and Europe.
B)   can occur in both perfectly competitive and monopoly markets.
C)   is illogical because it does not maximize profits.
D)   can maximize profits if the seller can prevent the resale of goods between customers.E) A) and C)
F) A) and D)

Exam 15: Monopoly.

Perfect price discrimination

Correct Answer
verified

Figure 15-1 -Refer to Figure 15-1.Considering the relationship between average total cost and marginal cost,the marginal cost curve for this firm must

Correct Answer
verified

A monopolist's profit is equal to (Price - Marginal Cost)* Quantity.

Correct Answer
verified

Figure 15-4 -Refer to Figure 15-4.A profit-maximizing monopoly's total cost is equal to

Correct Answer
verified

Government intervention always reduces monopoly deadweight loss.

Correct Answer
verified

Suppose when a monopolist produces 75 units its average revenue is $10 per unit,its marginal revenue is $5 per unit,its marginal cost is $6 per unit,and its average total cost is $5 per unit.What can we conclude about this monopolist?

Correct Answer
verified

Price discrimination

Correct Answer
verified

When we compare economic welfare in a monopoly market to a competitive market,the profits earned by the monopolist represent

Correct Answer
verified

A monopolist maximizes profits by

Correct Answer
verified

Table 15-17 -Refer to Table 15-17.If a monopolist faces a constant marginal cost of $2,how much output should the firm produce?

Correct Answer
verified

Correct Answer
verified

Which of the following is not an example of a barrier to entry?

Correct Answer
verified

Figure 15-3 -Refer to Figure 15-3.Profit can always be increased by increasing the level of output by one unit if the monopolist is currently operating at (i) Q0. (ii) Q1. (iii) Q2. (iv) Q3.

Correct Answer
verified

The laws governing patents and copyrights

Correct Answer
verified

Selling a good at a price determined by the intersection of the demand curve and the marginal cost curve is consistent with the (i) socially-optimal level of output. (ii) market solution for profit-maximizing competitive firms. (iii) market solution for a profit-maximizing monopoly.

Correct Answer
verified

Correct Answer
verified

If the government deems a newly-invented drug to be truly original,the pharmaceutical company is given the exclusive right to manufacture and sell the drug for 50 years.

Correct Answer
verified

Since natural monopolies have a declining average cost curve,regulating natural monopolies by setting price equal to marginal cost would

Correct Answer
verified

When we compare economic welfare in a monopoly market to a competitive market,the profits earned by the monopolist represent

Correct Answer
verified

During the life of a drug patent,the monopoly pharmaceutical firm maximizes profit by producing the quantity at which marginal revenue equals marginal cost.

Correct Answer
verified

Exam 15: Monopoly.

Perfect price discrimination

Correct AnswerverifiedShow Answer

Figure 15-1 -Refer to Figure 15-1.Considering the relationship between average total cost and marginal cost,the marginal cost curve for this firm must

Correct AnswerverifiedShow Answer

A monopolist's profit is equal to (Price - Marginal Cost)* Quantity.

Correct AnswerverifiedShow Answer

Figure 15-4 -Refer to Figure 15-4.A profit-maximizing monopoly's total cost is equal to

Correct AnswerverifiedShow Answer

Government intervention always reduces monopoly deadweight loss.

Correct AnswerverifiedShow Answer

Suppose when a monopolist produces 75 units its average revenue is $10 per unit,its marginal revenue is $5 per unit,its marginal cost is $6 per unit,and its average total cost is $5 per unit.What can we conclude about this monopolist?

Correct AnswerverifiedShow Answer

Price discrimination

Correct AnswerverifiedShow Answer

When we compare economic welfare in a monopoly market to a competitive market,the profits earned by the monopolist represent

Correct AnswerverifiedShow Answer

A monopolist maximizes profits by

Correct AnswerverifiedShow Answer

Table 15-17 -Refer to Table 15-17.If a monopolist faces a constant marginal cost of $2,how much output should the firm produce?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is not an example of a barrier to entry?

Correct AnswerverifiedShow Answer

Figure 15-3 -Refer to Figure 15-3.Profit can always be increased by increasing the level of output by one unit if the monopolist is currently operating at (i) Q0. (ii) Q1. (iii) Q2. (iv) Q3.

Correct AnswerverifiedShow Answer

The laws governing patents and copyrights

Correct AnswerverifiedShow Answer

Selling a good at a price determined by the intersection of the demand curve and the marginal cost curve is consistent with the (i) socially-optimal level of output. (ii) market solution for profit-maximizing competitive firms. (iii) market solution for a profit-maximizing monopoly.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

If the government deems a newly-invented drug to be truly original,the pharmaceutical company is given the exclusive right to manufacture and sell the drug for 50 years.

Correct AnswerverifiedShow Answer

Since natural monopolies have a declining average cost curve,regulating natural monopolies by setting price equal to marginal cost would

Correct AnswerverifiedShow Answer

When we compare economic welfare in a monopoly market to a competitive market,the profits earned by the monopolist represent

Correct AnswerverifiedShow Answer

During the life of a drug patent,the monopoly pharmaceutical firm maximizes profit by producing the quantity at which marginal revenue equals marginal cost.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified