Question 1

Which is a major criticism of a monopoly as a source of allocative inefficiency?

Accepted Answer

A)   A monopolist fails to expand output to the level where the consumers' valuation of an additional unit is just equal to its opportunity cost.
B)   A monopolist has no incentive to produce efficiently, because even the inefficient monopolist can be assured of economic profits.
C)   A monopolist will always earn profits, and that means that prices are too high.
D)   A monopolist has an unfair advantage because it can purchase labor at a lower price than competitive firms can.E) A) and D)
F) B) and D)

Question 2

Answer the question on the basis of the provided demand and cost data for a pure monopolist.   \quad \quad \quad \quad      Cost Data 	ext { Cost Data } Cost Data        \quad \quad \quad     Demand Data 	ext { Demand Data } Demand Data   
  Price  Quartity  Dernarded  Output  Total Cost 55.5033$5.015.84446.014.50556.503.85667.503.35779.012.908811.812.509914.81\begin{array} { | c | c | c | c| } \hline 	ext { Price } & \begin{array} { c } 	ext { Quartity } \	ext { Dernarded }\end{array} & 	ext { Output } & 	ext { Total Cost } \\hline 55.50 & 3 & 3 & \$ 5.01 \\hline 5.84 & 4 & 4 & 6.01 \\hline 4.50 & 5 & 5 & 6.50 \\hline 3.85 & 6 & 6 & 7.50 \\hline 3.35 & 7 & 7 & 9.01 \\hline 2.90 & 8 & 8 & 11.81 \\hline 2.50 & 9 & 9 & 14.81 \\hline\end{array} Price 55.505.844.503.853.352.902.50​ Quartity  Dernarded ​3456789​ Output 3456789​ Total Cost $5.016.016.507.509.0111.8114.81​​  The profit-maximizing price for the monopolist will be

Accepted Answer

A)   $5.00.
B)   $2.90.
C)   $3.35.
D)   $4.50. E) None of the above
F) B) and C)

Question 3

Consumers who clip and redeem discount coupons

Accepted Answer

A)   exhibit the same price elasticity of demand for a given product than consumers who do not clip and redeem coupons.
B)   exhibit a higher price elasticity of demand for a given product than consumers who do not clip and redeem coupons.
C)   exhibit a lower price elasticity of demand for a given product than consumers who do not clip and redeem coupons.
D)   cause total revenue to decrease for firms that issue coupons for their products.E) B) and C)
F) C) and D)

Question 4

Answer the question on the basis of the provided demand and cost data for a pure monopolist.   \quad \quad \quad \quad      Cost Data 	ext { Cost Data } Cost Data        \quad \quad \quad     Demand Data 	ext { Demand Data } Demand Data   
  Price  Quartity  Dernarded  Output  Total Cost 55.5033$5.015.84446.014.50556.503.85667.503.35779.012.908811.812.509914.81\begin{array} { | c | c | c | c| } \hline 	ext { Price } & \begin{array} { c } 	ext { Quartity } \	ext { Dernarded }\end{array} & 	ext { Output } & 	ext { Total Cost } \\hline 55.50 & 3 & 3 & \$ 5.01 \\hline 5.84 & 4 & 4 & 6.01 \\hline 4.50 & 5 & 5 & 6.50 \\hline 3.85 & 6 & 6 & 7.50 \\hline 3.35 & 7 & 7 & 9.01 \\hline 2.90 & 8 & 8 & 11.81 \\hline 2.50 & 9 & 9 & 14.81 \\hline\end{array} Price 55.505.844.503.853.352.902.50​ Quartity  Dernarded ​3456789​ Output 3456789​ Total Cost $5.016.016.507.509.0111.8114.81​​  The profit-maximizing level of output will be

Accepted Answer

A)   4 units.
B)   7 units.
C)   6 units.
D)   5 units. E) A) and C)
F) A) and D)

Question 5

In an unregulated monopoly at equilibrium, the output level is higher than the economically efficient level.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following statements is true of price discrimination?

Accepted Answer

A)   Successful price discrimination will provide the firm with lower total profits than if it did not discriminate.
B)   Successful price discrimination will provide the firm with more profit than if it did not discriminate.
C)   Successful price discrimination will generally result in a lower level of output than would be the case under a single-price monopoly.
D)   Successful price discrimination occurs when there are differences in the costs of producing for different groups of buyers.E) All of the above
F) A) and B)

Question 7

The demand curve faced by a pure monopolist

Accepted Answer

A)   may be either more or less elastic than that faced by a single purely competitive firm.
B)   is less elastic than that faced by a single purely competitive firm.
C)   has the same elasticity as that faced by a single purely competitive firm.
D)   is more elastic than that faced by a single purely competitive firm.E) B) and D)
F) All of the above

Question 8

Answer the question on the basis of the accompanying demand schedule.   Price Quantity Demanded $7162534435\begin{array} { | c | c| } \hline 	ext { Price } & 	ext {Quantity Demanded } \\hline \$ 7 & 1 \\hline 6 & 2 \\hline 5 & 3 \\hline 4 & 4 \\hline 3 & 5 \\hline\end{array} Price $76543​Quantity Demanded 12345​​  At the point where 3 units are being sold, the coefficient of price elasticity of demand

Accepted Answer

A)   cannot be estimated.
B)   suggests that the market is purely competitive.
C)   is less than unity (one) .
D)   is greater than unity (one) . E) A) and C)
F) A) and B)

Question 9

Which phrase would be most characteristic of pure monopoly?

Accepted Answer

A)   close substitutes
B)   efficient advertiser
C)   price taker
D)   sole sellerE) A) and C)
F) A) and D)

Question 10

What is the meaning of the phrase "dilemma of regulation"?

Accepted Answer

A)   Natural monopolies achieve economies of scale but charge high prices when there is no government regulation; government regulation reduces prices but results in diseconomies of scale.
B)   Natural monopolies are profitable, but only if the government permits price discrimination; government regulation to restrict price discrimination reduces monopoly prices, but the regulation also reduces monopoly output.
C)   The fair-return price achieves allocative efficiency but may produce economic losses; the socially optimal price yields a normal profit but may not be allocatively efficient.
D)   The socially optimal price achieves allocative efficiency but may produce economic losses; the fair-return price yields a normal profit but may not be allocatively efficient.E) A) and B)
F) B) and D)

Question 11

Which of the following statements is correct?

Accepted Answer

A)   Monopoly firms tend to be more internally efficient than competitive firms because they have a single goal of profit maximization.
B)   Monopoly firms are sheltered from competitive forces, and such an environment makes them subject to X-inefficiency.
C)   Monopoly firms are in industries with low barriers to entry that tend to lower the cost of producing products.
D)   Competitive firms tend to be more efficient than monopolist firms because they maximize per unit profits, not total profits.E) C) and D)
F) A) and B)

Question 12

One of the economic effects of monopoly is an income transfer from consumers to the firm.

Accepted Answer

A) True 
 B)False

Question 13

The gains to monopolists from exercising market power

Accepted Answer

A)   exceed the losses to consumers in monopoly markets, resulting in a net gain to society.
B)   equal the losses to consumers in monopoly markets, resulting in no net change for society.
C)   are less than the losses to consumers in monopoly markets, resulting in a net loss to society.
D)   create smaller deadweight losses than occur in purely competitive industries.E) B) and D)
F) B) and C)

Question 14

The marginal revenue curve for a monopolist

Accepted Answer

A)   is a straight, upsloping curve.
B)   rises at first, reaches a maximum, and then declines.
C)   becomes negative when output increases beyond some particular level.
D)   is a straight line, parallel to the horizontal axis.E) A) and B)
F) A) and C)

Question 15

In most cases, a monopolist practicing price discrimination will end up earning less economic profits than a nondiscriminating monopolist.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following is correct?

Accepted Answer

A)   Both purely competitive and monopolistic firms are "price takers."
B)   Both purely competitive and monopolistic firms are "price makers."
C)   A purely competitive firm is a "price taker," while a monopolist is a "price maker."
D)   A purely competitive firm is a "price maker," while a monopolist is a "price taker."E) B) and D)
F) B) and C)

Question 17

Compared to the purely competitive industry, a pure monopoly

Accepted Answer

A)   is able to use barriers to entry and maintain positive economic profits in the long run.
B)   produces an equal amount of output, but charges higher prices to cover all costs in the market.
C)   is often more efficient from society's perspective because it has big plants and it uses the newest technology.
D)   will always become competitive in the long run because positive economic profits will entice competitors into the market.E) B) and C)
F) A) and B)

Question 18

One feature of pure monopoly is that the firm is

Accepted Answer

A)   a producer of products with close substitutes.
B)   one of several producers of a product.
C)   a price taker.
D)   a price maker.E) A) and B)
F) C) and D)

Question 19

The problem with socially optimal pricing regulation of a natural monopoly is that

Accepted Answer

A)   P 
B)   P 
C)   P 
D)   P < MR.E) None of the above
F) C) and D)

Question 20

Society suffers a deadweight loss in a pure-monopoly market because

Accepted Answer

A)   output is less, while price is more, than is socially optimal.
B)   output is more, while price is less, than is socially optimal.
C)   both output and price are higher than is socially optimal.
D)   both output and price are lower than is socially optimal.E) All of the above
F) A) and D)

Exam 12: Pure Monopoly

The problem with socially optimal pricing regulation of a natural monopoly is that

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Which of the following is correct?

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The demand curve faced by a pure monopolist

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Which of the following statements is correct?

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What is the meaning of the phrase "dilemma of regulation"?

Correct Answer
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The gains to monopolists from exercising market power

Correct Answer
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The marginal revenue curve for a monopolist

Correct Answer
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One of the economic effects of monopoly is an income transfer from consumers to the firm.

Correct Answer
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In most cases, a monopolist practicing price discrimination will end up earning less economic profits than a nondiscriminating monopolist.

Correct Answer
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Which of the following statements is true of price discrimination?

Correct Answer
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Society suffers a deadweight loss in a pure-monopoly market because

Correct Answer
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One feature of pure monopoly is that the firm is

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Consumers who clip and redeem discount coupons

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Which phrase would be most characteristic of pure monopoly?

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Compared to the purely competitive industry, a pure monopoly

Correct Answer
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In an unregulated monopoly at equilibrium, the output level is higher than the economically efficient level.

Correct Answer
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Which is a major criticism of a monopoly as a source of allocative inefficiency?

Correct Answer
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Exam 12: Pure Monopoly

The problem with socially optimal pricing regulation of a natural monopoly is that

Correct AnswerverifiedShow Answer

Which of the following is correct?

Correct AnswerverifiedShow Answer

The demand curve faced by a pure monopolist

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

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What is the meaning of the phrase "dilemma of regulation"?

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The gains to monopolists from exercising market power

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The marginal revenue curve for a monopolist

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Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

One of the economic effects of monopoly is an income transfer from consumers to the firm.

Correct AnswerverifiedShow Answer

In most cases, a monopolist practicing price discrimination will end up earning less economic profits than a nondiscriminating monopolist.

Correct AnswerverifiedShow Answer

Which of the following statements is true of price discrimination?

Correct AnswerverifiedShow Answer

Society suffers a deadweight loss in a pure-monopoly market because

Correct AnswerverifiedShow Answer

One feature of pure monopoly is that the firm is

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Consumers who clip and redeem discount coupons

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Correct AnswerverifiedShow Answer

Which phrase would be most characteristic of pure monopoly?

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Compared to the purely competitive industry, a pure monopoly

Correct AnswerverifiedShow Answer

In an unregulated monopoly at equilibrium, the output level is higher than the economically efficient level.

Correct AnswerverifiedShow Answer

Which is a major criticism of a monopoly as a source of allocative inefficiency?

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