Question 1

If a product can be produced by a natural monopoly,society will benefit in the form of lower prices if the monopolist is broken up into several smaller firms.

Accepted Answer

A) True 
 B)False

Question 2

Marginal revenue for a monopolist is computed as

Accepted Answer

A)   average revenue divided by quantity sold.
B)   average revenue times quantity divided by price.
C)   total revenue divided by quantity sold.
D)   change in total revenue per one unit increase in quantity sold.E) B) and D)
F) B) and C)

Question 3

Figure 14-7 
-Refer to Figure 14-7.What is the area of deadweight loss?

Accepted Answer

A)   the rectangle (F-
D)  xA
B)   the triangle 1/2[(F-
D)  x(B-
A)  ]
C)   the triangle 1/2[(F-G) x(B-
A)  ]
D)   the rectangle (F-
D)  xA plus the triangle 1/2[(F-
D)  x(B-
A)  ]E) A) and D)
F) A) and C)

Question 4

Table 14-3
Consider the following demand and cost information for a monopoly.
 
-Refer to Table 14-3.The marginal cost of the 4th unit is

Accepted Answer

A)   $7.
B)   $12.
C)   $25.
D)   $60.E) All of the above
F) A) and D)

Question 5

Table 14-7
Sally owns the only shoe store in town.She has the following cost and revenue information.
 
-Refer to Table 14-7.What is total profit at the profit-maximizing quantity?

Accepted Answer

A)   $100
B)   $245
C)   $265
D)   $395E) None of the above
F) B) and C)

Question 6

Scenario 14-6
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 14-6.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) A) and B)
F) A) and C)

Question 7

Table 14-2
Tanya has the following demand curve for selling taffy.Assume that Tanya has a marginal cost of $3 per unit.
 
-Refer to Table 14-2.What is Tanya's profit-maximizing price?

Accepted Answer

A)   $2
B)   $4
C)   $6
D)   $8E) A) and B)
F) A) and C)

Question 8

Table 14-4
A monopolist faces the following demand curve:
 
-Refer to Table 14-4.If the monopolist produces 5 units,what is its average revenue?

Accepted Answer

A)   $100
B)   $20
C)   $5
D)   $4E) A) and D)
F) A) and C)

Question 9

Scenario 14-5
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 14-5.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) None of the above
F) A) and D)

Question 10

For a monopolist,marginal revenue is

Accepted Answer

A)   equal to price,as it is for a perfectly competitive firm.
B)   less than price,as it is for a perfectly competitive firm.
C)   equal to price,whereas marginal revenue is less than price for a perfectly competitive firm.
D)   less than price,whereas marginal revenue is equal to price for a perfectly competitive firm.E) None of the above
F) A) and B)

Question 11

One method used to control the ability of firms to capture monopoly profit in the United States is through

Accepted Answer

A)   government purchase of products produced by monopolists.
B)   government distribution of a monopolist's excess production.
C)   enforcement of antitrust laws.
D)   regulation of firms in highly competitive markets.E) B) and C)
F) A) and C)

Question 12

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

Accepted Answer

A)   of little concern to society.
B)   a deadweight loss to society.
C)   a sunk cost to society.
D)   also observed in competitive markets.E) B) and C)
F) C) and D)

Question 13

The DeBeers company faces very little competition from other firms in the wholesale diamond market.Why isn't the price of the wholesale diamonds $10,000 per carat?

Accepted Answer

A)   because the government would not allow such a high price
B)   because stockholders would not allow such a high price
C)   because the company would sell so few copies that they would earn higher profits by selling at a lower price
D)   All of the above are correct.E) A) and B)
F) A) and C)

Question 14

For a monopoly firm,the shape and position of the demand curve play a role in determining the (i) profit-maximizing price.
(ii) shape and position of the marginal-cost curve.
(iii) shape and position of the marginal-revenue curve.

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 B)
F) A) and C)

Question 15

Declining average total cost with increased production is one of the defining characteristics of a natural monopoly.

Accepted Answer

A) True 
 B)False

Question 16

Figure 14-4 
-Refer to Figure 14-4.Profit on a typical unit sold for a profit-maximizing monopoly would equal

Accepted Answer

A)   P5-P0.
B)   P4-P2.
C)   P4-P1.
D)   P4-P3.E) B) and C)
F) None of the above

Question 17

Drug companies are allowed to be monopolists in the drugs they discover in order to

Accepted Answer

A)   allow drug companies to charge a price that is equal to their marginal cost.
B)   discourage new firms from entering the drug market.
C)   encourage research.
D)   allow the government to earn patent revenue.E) A) and D)
F) A) and C)

Question 18

Antitrust laws may

Accepted Answer

A)   enhance the ability of firms to capture profits from a concentration of market power.
B)   enhance the ability of firms to reduce economic losses.
C)   restrict the ability of firms to operate at the socially efficient level of production.
D)   restrict the ability of firms to merge.E) A) and D)
F) None of the above

Question 19

Which of the following is not one of the ways that antitrust laws promote competition?

Accepted Answer

A)   Antitrust laws allow the government to prevent mergers.
B)   Antitrust laws allow the government to break up companies into smaller ones.
C)   Antitrust laws prevent companies from coordinating their activities in ways that make markets less competitive.
D)   Antitrust laws allow the government to shut down any firm the government believes has monopoly power.E) A) and C)
F) C) and D)

Question 20

A monopolist maximizes profits by

Accepted Answer

A)   producing an output level where marginal revenue equals marginal cost.
B)   charging a price that is greater than marginal revenue.
C)   earning a profit of (P - M
C)  x Q.
D)   Both a and b are correct.E) B) and D)
F) A) and B)

Exam 14: Monopoly

Correct Answer
verified

For a monopoly firm,the shape and position of the demand curve play a role in determining the (i) profit-maximizing price. (ii) shape and position of the marginal-cost curve. (iii) shape and position of the marginal-revenue curve.

Correct Answer
verified

Figure 14-7 -Refer to Figure 14-7.What is the area of deadweight loss?

Correct Answer
verified

Table 14-2 Tanya has the following demand curve for selling taffy.Assume that Tanya has a marginal cost of $3 per unit. -Refer to Table 14-2.What is Tanya's profit-maximizing price?

Correct Answer
verified

Correct Answer
verified

For a monopolist,marginal revenue is

Correct Answer
verified

Table 14-4 A monopolist faces the following demand curve: -Refer to Table 14-4.If the monopolist produces 5 units,what is its average revenue?

Correct Answer
verified

If a product can be produced by a natural monopoly,society will benefit in the form of lower prices if the monopolist is broken up into several smaller firms.

Correct Answer
verified

The DeBeers company faces very little competition from other firms in the wholesale diamond market.Why isn't the price of the wholesale diamonds $10,000 per carat?

Correct Answer
verified

Declining average total cost with increased production is one of the defining characteristics of a natural monopoly.

Correct Answer
verified

Antitrust laws may

Correct Answer
verified

One method used to control the ability of firms to capture monopoly profit in the United States is through

Correct Answer
verified

Which of the following is not one of the ways that antitrust laws promote competition?

Correct Answer
verified

Figure 14-4 -Refer to Figure 14-4.Profit on a typical unit sold for a profit-maximizing monopoly would equal

Correct Answer
verified

Table 14-3 Consider the following demand and cost information for a monopoly. -Refer to Table 14-3.The marginal cost of the 4th unit is

Correct Answer
verified

A monopolist maximizes profits by

Correct Answer
verified

Table 14-7 Sally owns the only shoe store in town.She has the following cost and revenue information. -Refer to Table 14-7.What is total profit at the profit-maximizing quantity?

Correct Answer
verified

Drug companies are allowed to be monopolists in the drugs they discover in order to

Correct Answer
verified

Marginal revenue for a monopolist is computed as

Correct Answer
verified

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

Correct Answer
verified

Exam 14: Monopoly

Correct AnswerverifiedShow Answer

For a monopoly firm,the shape and position of the demand curve play a role in determining the (i) profit-maximizing price. (ii) shape and position of the marginal-cost curve. (iii) shape and position of the marginal-revenue curve.

Correct AnswerverifiedShow Answer

Figure 14-7 -Refer to Figure 14-7.What is the area of deadweight loss?

Correct AnswerverifiedShow Answer

Table 14-2 Tanya has the following demand curve for selling taffy.Assume that Tanya has a marginal cost of $3 per unit. -Refer to Table 14-2.What is Tanya's profit-maximizing price?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

For a monopolist,marginal revenue is

Correct AnswerverifiedShow Answer

Table 14-4 A monopolist faces the following demand curve: -Refer to Table 14-4.If the monopolist produces 5 units,what is its average revenue?

Correct AnswerverifiedShow Answer

If a product can be produced by a natural monopoly,society will benefit in the form of lower prices if the monopolist is broken up into several smaller firms.

Correct AnswerverifiedShow Answer

The DeBeers company faces very little competition from other firms in the wholesale diamond market.Why isn't the price of the wholesale diamonds $10,000 per carat?

Correct AnswerverifiedShow Answer

Declining average total cost with increased production is one of the defining characteristics of a natural monopoly.

Correct AnswerverifiedShow Answer

Antitrust laws may

Correct AnswerverifiedShow Answer

One method used to control the ability of firms to capture monopoly profit in the United States is through

Correct AnswerverifiedShow Answer

Which of the following is not one of the ways that antitrust laws promote competition?

Correct AnswerverifiedShow Answer

Figure 14-4 -Refer to Figure 14-4.Profit on a typical unit sold for a profit-maximizing monopoly would equal

Correct AnswerverifiedShow Answer

Table 14-3 Consider the following demand and cost information for a monopoly. -Refer to Table 14-3.The marginal cost of the 4th unit is

Correct AnswerverifiedShow Answer

A monopolist maximizes profits by

Correct AnswerverifiedShow Answer

Table 14-7 Sally owns the only shoe store in town.She has the following cost and revenue information. -Refer to Table 14-7.What is total profit at the profit-maximizing quantity?

Correct AnswerverifiedShow Answer

Drug companies are allowed to be monopolists in the drugs they discover in order to

Correct AnswerverifiedShow Answer

Marginal revenue for a monopolist is computed as

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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