Question 1

Natural monopolies:

Accepted Answer

A)  are the only monopolies that are efficient.
B)  can capture the lowest production costs possible for the industry.
C)  are always protected by government policy.
D)  All of these statements are true.E) None of the above
F) A) and D)

Question 2

The advantages of maintaining monopolies:

Accepted Answer

A)  always outweighs the total welfare costs due to lost surplus.
B)  sometimes outweighs the total welfare costs due to lost surplus.
C)  never outweighs the total welfare costs due to lost surplus.
D)  This is a normative argument that has no right answer.E) A) and C)
F) A) and B)

Question 3

This graph shows the cost and revenue curves faced by a monopoly. 
According to the graph shown,if this were a perfectly competitive market,the outcome would be:

Accepted Answer

A)  Q1,P1.
B)  Q1,P3.
C)  Q2,P2.
D)  The graph is of a monopoly,and therefore there is no way to determine a perfectly competitive outcome.E) A) and B)
F) A) and C)

Question 4

One reason a government might choose to protect monopoly rights in an industry is:

Accepted Answer

A)  because it is in the public's interest to do so.
B)  to benefit insiders.
C)  to encourage innovation.
D)  All of these may be true.E) All of the above
F) A) and B)

Question 5

The profit-maximizing decision for the monopoly is:

Accepted Answer

A)  to choose the quantity where marginal cost equals marginal revenue.
B)  the same as that of the perfectly competitive firm.
C)  to choose price according to demand.
D)  All of these statements are true.E) B) and D)
F) C) and D)

Question 6

For a monopoly,marginal revenue for all units greater than 1:

Accepted Answer

A)  is always less than price because of the price effect.
B)  is always more than price because of the price effect.
C)  is always more than price because of the quantity effect.
D)  is always less than price because of the quantity effect.E) C) and D)
F) All of the above

Question 7

Antitrust activities by the government:

Accepted Answer

A)  can cause inefficiencies.
B)  are accused of being politically motivated.
C)  sometimes increase efficiency to a market.
D)  All of these statements are true.E) A) and D)
F) A) and C)

Question 8

Protecting intellectual property rights:

Accepted Answer

A)  can reduce total surplus for society.
B)  never increases total surplus for society.
C)  never affects total surplus for society.
D)  always increases total surplus for society.E) None of the above
F) A) and C)

Question 9

The government should set the price for natural monopolies at their:

Accepted Answer

A)  average total cost.
B)  marginal cost.
C)  average variable cost.
D)  fixed cost.E) A) and C)
F) B) and C)

Question 10

Privatization of government agencies:

Accepted Answer

A)  has become more popular since the 1980s.
B)  has become less popular since the 1980s.
C)  has rarely occurred since the 1890s.
D)  happens more frequently during recessions.E) B) and C)
F) A) and B)

Question 11

This table represents the revenues faced by a monopolist. th unit is: A) higher than that of the 3rd unit. B) lower than that of the 3rd unit. C) the same as that of the 3rd unit. D) That cannot be calculated from the information given." class="answers-bank-image d-inline" rel="preload" >
Using the information in the table shown,the marginal revenue for the 4th unit is:

Accepted Answer

A)  higher than that of the 3rd unit.
B)  lower than that of the 3rd unit.
C)  the same as that of the 3rd unit.
D)  That cannot be calculated from the information given.E) B) and C)
F) A) and D)

Question 12

When a government splits a natural monopoly vertically,it is breaking the company up:

Accepted Answer

A)  along its stages of production.
B)  into smaller companies providing the same goods.
C)  in order to maximize its profits.
D)  in order to capture all efficiencies possible.E) A) and B)
F) A) and C)

Question 13

The monopolist is able to enjoy profits in the long run because:

Accepted Answer

A)  the firm's price is set above its marginal costs.
B)  there is no threat of competition.
C)  the firm can charge a price higher than its average total costs in the long run.
D)  All of these statements are true.E) A) and B)
F) All of the above

Question 14

In the real world,price discrimination is more difficult because:

Accepted Answer

A)  it is difficult to identify and verify different groups.
B)  to perfectly discriminate,the firm must read people's minds to know their willingness to pay.
C)  it can be challenging to prevent the resale of goods from one group to another.
D)  All of these statements are true.E) C) and D)
F) B) and D)

Question 15

One way a government might protect monopoly rights is by:

Accepted Answer

A)  granting a patent.
B)  heavily taxing alcohol and cigarettes.
C)  running unsubsidized state-owned enterprises that compete with private firms.
D)  All of these are ways the government protects monopoly rights.E) A) and C)
F) None of the above

Question 16

Perfect price discrimination:

Accepted Answer

A)  eliminates all consumer surplus.
B)  maximizes producer surplus.
C)  creates no deadweight loss.
D)  All of these statements are true.E) C) and D)
F) None of the above

Question 17

When government owns a natural monopoly,it can:

Accepted Answer

A)  lose the incentive to be efficient.
B)  continue to operate at a loss for a long time.
C)  make business decisions based on political pressures.
D)  All of these statements are true.E) None of the above
F) B) and D)

Question 18

This graph shows the cost and revenue curves faced by a monopoly. 
According to the graph,if the perfectly competitive outcome and monopoly outcome are compared,we can see that:

Accepted Answer

A)  the monopoly creates deadweight loss.
B)  the perfectly competitive firm would lose money in this industry.
C)  the perfectly competitive firm would produce Q1 units.
D)  the monopolist would charge P3 and the perfectly competitive firm would charge P1.E) A) and C)
F) B) and C)

Question 19

A market in which a single firm can produce,at a lower cost than multiple firms,the entire quantity of output demanded is called:

Accepted Answer

A)  a natural monopoly.
B)  diseconomies of scale.
C)  government intervention.
D)  price gouging.E) A) and B)
F) A) and C)

Question 20

Total revenues increase as output increases along sections of the demand curve that are:

Accepted Answer

A)  downward sloping.
B)  price elastic.
C)  price inelastic.
D)  upward sloping.E) A) and B)
F) A) and C)

Exam 14: Monopoly

In the real world,price discrimination is more difficult because:

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This table represents the revenues faced by a monopolist. Using the information in the table shown,the marginal revenue for the 4th unit is:

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The government should set the price for natural monopolies at their:

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A market in which a single firm can produce,at a lower cost than multiple firms,the entire quantity of output demanded is called:

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The advantages of maintaining monopolies:

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Perfect price discrimination:

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Privatization of government agencies:

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When government owns a natural monopoly,it can:

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Protecting intellectual property rights:

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This graph shows the cost and revenue curves faced by a monopoly. According to the graph shown,if this were a perfectly competitive market,the outcome would be:

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When a government splits a natural monopoly vertically,it is breaking the company up:

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One way a government might protect monopoly rights is by:

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For a monopoly,marginal revenue for all units greater than 1:

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The monopolist is able to enjoy profits in the long run because:

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Antitrust activities by the government:

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The profit-maximizing decision for the monopoly is:

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Total revenues increase as output increases along sections of the demand curve that are:

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Natural monopolies:

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One reason a government might choose to protect monopoly rights in an industry is:

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This graph shows the cost and revenue curves faced by a monopoly. According to the graph,if the perfectly competitive outcome and monopoly outcome are compared,we can see that:

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This table represents the revenues faced by a monopolist. Using the information in the table shown,the marginal revenue for the 4^th unit is:

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