Question 1

The equilibrium price and quantity in a monopoly market:

Accepted Answer

A)  is efficient.
B)  is the same as in a perfectly competitive market.
C)  causes a loss of total surplus.
D)  causes no welfare costs.E) A) and D)
F) A) and C)

Question 2

Unregulated natural monopolies:

Accepted Answer

A)  never capture the lowest costs per unit possible.
B)  can capture profits by restricting output.
C)  never create problems for policymakers.
D)  are always protected by government policies.E) None of the above
F) A) and D)

Question 3

A firm that is the sole producer of a good or service with no close substitutes is called a(n) :

Accepted Answer

A)  perfectly competitive firm.
B)  monopolist.
C)  oligopolist.
D)  monopolistically competitive firm.E) All of the above
F) B) and C)

Question 4

With regard to monopolies, economists believe:

Accepted Answer

A)  the government should never intervene in a natural monopoly market.
B)  the reduction in efficiency can be offset by increases in equity.
C)  the gains from maintaining a monopoly never outweigh the total welfare costs due to lost surplus.
D)  whether or not to maintain a monopoly is a normative argument that has no right answer.E) A) and D)
F) None of the above

Question 5

The monopolist's outcome in the long run differs from that of the perfectly competitive firm in that the monopolist:

Accepted Answer

A)  earns zero profits.
B)  charges a price that is higher than average total costs.
C)  charges a price where marginal cost equals average revenue.
D)  charges a price equal to marginal cost.E) None of the above
F) B) and D)

Question 6

What is one reason a firm may lose some of its monopoly power?

Accepted Answer

A)  Antitrust laws
B)  Vertical or horizontal splits
C)  Pressure from consumers
D)  All of these are reasons a firm may lose some of its monopoly power.E) None of the above
F) All of the above

Question 7

Which of the following statements describes how a monopolist's revenue curves compare to those of a perfectly competitive firm?

Accepted Answer

A)  The monopolist's marginal revenue curve is downward sloping, while the perfectly competitive firm's is flat.
B)  The monopolist's average revenue curve is not equal to price, as it is for a perfectly competitive firm.
C)  The monopolist's marginal revenue curve is flat, while the perfectly competitive firm's is downward sloping.
D)  The monopolist's total revenue curve is linear, while the perfectly competitive firm's is convex.E) A) and B)
F) A) and C)

Question 8

Protecting intellectual property rights:

Accepted Answer

A)  always benefits society.
B)  never benefits society.
C)  rarely affects society overall.
D)  may or may not benefit society overall.E) A) and D)
F) A) and C)

Question 9

Some argue that the best government response to monopolies is no response at all. This is because:

Accepted Answer

A)  the creation of regulation may be too difficult.
B)  political mishandling may make the situation even worse.
C)  it is difficult to manage the regulation of monopolies effectively.
D)  All of these are true.E) B) and C)
F) B) and D)

Question 10

Government regulations:

Accepted Answer

A)  always seek to increase competition.
B)  sometimes protect monopoly power in certain industries.
C)  never protect monopoly rights.
D)  usually are ineffective.E) All of the above
F) A) and B)

Question 11

With a monopolist's outcome, consumer surplus is _______ that of a competitive market.

Accepted Answer

A)  higher than
B)  lower than
C)  the same as
D)  Any of these is possible.E) C) and D)
F) B) and D)

Question 12

When government agencies become privatized:

Accepted Answer

A)  they are sold to private companies.
B)  stock is created and sold to the public.
C)  private stock is sold to private households.
D)  they are rarely regulated.E) All of the above
F) C) and D)

Question 13

Economists assume maximizing efficiency over other goals:

Accepted Answer

A)  is a guiding principle of policy-making.
B)  is always the best approach.
C)  should never be done.
D)  may not bring about the best outcome for society.E) B) and C)
F) A) and D)

Question 14

The table shown represents the revenues faced by a monopolist.

What is the firm's marginal revenue for the third unit?

Accepted Answer

A)  $100
B)  $800
C)  $600
D)  $500E) A) and B)
F) A) and C)

Question 15

A government-owned monopoly is more likely to:

Accepted Answer

A)  provide a greater quantity of output than a private monopoly.
B)  provide output at a lower price than a private monopoly.
C)  serve public interest than maximize profit.
D)  All of these are true.E) All of the above
F) A) and B)

Question 16

A natural monopolist that sets prices equal to marginal cost will:

Accepted Answer

A)  set a price that is greater than average total costs.
B)  be inefficient.
C)  incur losses.
D)  earn zero accounting profits.E) A) and D)
F) A) and C)

Question 17

Which of the following is a potential barrier to entry into a monopoly market?

Accepted Answer

A)  Fixed costs are large relative to variable costs.
B)  Large economies of scale exist.
C)  The required infrastructure for an industry is high cost.
D)  All of these are potential barriers to entry.E) None of the above
F) C) and D)

Question 18

The graph shown represents the cost and revenue curves faced by a monopoly.  If 120 units are being produced, the monopolist:

Accepted Answer

A)  could increase profits by decreasing production.
B)  is maximizing its profits.
C)  is earning negative profits.
D)  could increase profits by increasing production.E) All of the above
F) B) and C)

Question 19

Monopoly power in a market allows:

Accepted Answer

A)  monopolists to earn profit through higher prices.
B)  consumers to gain surplus.
C)  market surplus to be constant.
D)  governments to ban monopolies.E) C) and D)
F) A) and C)

Question 20

Price discrimination is:

Accepted Answer

A)  the practice of charging customers different prices for the same good.
B)  the practice of charging customers the same price for a variety of similar goods.
C)  choosing which prices to charge for certain items.
D)  the process of customers choosing items based on price.E) B) and C)
F) A) and C)

Exam 14: Monopoly

A firm that is the sole producer of a good or service with no close substitutes is called a(n) :

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The equilibrium price and quantity in a monopoly market:

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What is one reason a firm may lose some of its monopoly power?

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A government-owned monopoly is more likely to:

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With a monopolist's outcome, consumer surplus is _______ that of a competitive market.

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The graph shown represents the cost and revenue curves faced by a monopoly. If 120 units are being produced, the monopolist:

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Unregulated natural monopolies:

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A natural monopolist that sets prices equal to marginal cost will:

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Price discrimination is:

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Which of the following statements describes how a monopolist's revenue curves compare to those of a perfectly competitive firm?

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When government agencies become privatized:

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Which of the following is a potential barrier to entry into a monopoly market?

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Some argue that the best government response to monopolies is no response at all. This is because:

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Economists assume maximizing efficiency over other goals:

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The table shown represents the revenues faced by a monopolist. What is the firm's marginal revenue for the third unit?

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Protecting intellectual property rights:

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Monopoly power in a market allows:

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Government regulations:

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With regard to monopolies, economists believe:

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The monopolist's outcome in the long run differs from that of the perfectly competitive firm in that the monopolist:

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