Question 1

In most cases,a monopolist practicing price discrimination will earn more economic profit.

Accepted Answer

A) True 
 B)False

Question 2

Other things equal,which reduces competition in an industry?

Accepted Answer

A)   Patent laws
B)   Freedom of entry for new firms
C)   An increase in the number of producers
D)   An increase in the number of buyersE) All of the above
F) None of the above

Question 3

Refer to the above graph.Consider a monopolist in short-run equilibrium.This monopolist has total fixed cost equal to area:

Accepted Answer

A)   BEFC.
B)   ABED.
C)   ADFC.
D)   0CFQ.E) A) and B)
F) B) and D)

Question 4

At the profit-maximizing level of output,a monopolist will always operate where:

Accepted Answer

A)   price is greater than marginal cost.
B)   price is greater than average revenue.
C)   average total cost equals marginal cost.
D)   total revenue is greater than total cost.E) A) and B)
F) All of the above

Question 5

The supply curve for a pure monopolist:

Accepted Answer

A)   is the portion of the marginal cost curve that lies above the average variable cost curve.
B)   is perfectly price-elastic at the market price.
C)   is upsloping across all relevant ranges of output.
D)   does not exist because there is no fixed relationship between price and quantity supplied.E) C) and D)
F) None of the above

Question 6

The data below relate to a pure monopolist and the product it produces.What is the profit-maximizing output and price for this monopolist?

Accepted Answer

A)   P = $12;Q = 5
B)   P = $14;Q = 4
C)   P = $16;Q = 3
D)   P = $18;Q = 2To maximize profit,the monopolist sets MC equal to or less than MR.This occurs at Q = 4,where MC = $7 .E) C) and D)
F) B) and D)

Question 7

Price discrimination is:

Accepted Answer

A)   always legal.
B)   always illegal.
C)   only illegal if it hurts consumers more than nondiscrimination.
D)   only illegal if used to lessen or eliminate competition.E) None of the above
F) A) and B)

Question 8

A profit-maximizing firm should shut down in the short run if the average revenue it receives is less than:

Accepted Answer

A)   average variable cost.
B)   average total cost.
C)   average fixed cost.
D)   marginal cost.E) None of the above
F) All of the above

Question 9

If a monopolist discovers that it is operating at a level of output where price is less than average variable costs,it will continue to operate in the short run.

Accepted Answer

A) True 
 B)False

Question 10

Based on the graph above,what is the difference between the purely competitive equilibrium level of output and the pure monopolist equilibrium level of output?

Accepted Answer

A)   5
B)   20
C)   70
D)   90The purely competitive equilibrium output occurs where the demand curve crosses the MC curve,that is,110 units.The monopoly equilibrium output occurs where MC = MR,that is,90 units.The difference is 20 units.E) B) and D)
F) C) and D)

Question 11

Suppose that a monopolist calculates that at present output and sales,marginal cost is $1.00 and marginal revenue is $2.00.He could maximize profits by:

Accepted Answer

A)   decreasing price and increasing output.
B)   increasing price and decreasing output.
C)   decreasing price and leaving output unchanged.
D)   decreasing output and leaving prices unchanged.E) B) and C)
F) A) and D)

Question 12

In general,the amount of X-inefficiency in an industry:

Accepted Answer

A)   increases as the amount of competition increases.
B)   increases as the amount of competition decreases.
C)   decreases as the amount of competition stays the same.
D)   has no relationship to the amount of competition in an industry.E) None of the above
F) B) and C)

Question 13

Monopolists are said to be allocatively inefficient because:

Accepted Answer

A)   they produce where MR > MC.
B)   at the profit-maximizing output,price is greater than AVC.
C)   they produce only the type of product they desire and do not consider the consumer.
D)   at the profit-maximizing output,the marginal benefit to society from increasing output is greater than the marginal cost to society.E) None of the above
F) A) and B)

Question 14

When marginal costs decrease,a monopolist will usually lower its price and increase its level of output.

Accepted Answer

A) True 
 B)False

Question 15

One defining characteristic of pure monopoly is that:

Accepted Answer

A)   the monopolist is a price taker.
B)   the monopolist uses advertising.
C)   the monopolist produces a product with no close substitutes.
D)   there is relatively easy entry into the industry,but exit is difficult.E) B) and C)
F) A) and D)

Question 16

To practice long-run price discrimination,a monopolist must:

Accepted Answer

A)   be a natural monopoly.
B)   charge one price to all buyers.
C)   permit the resale of the product by the original buyers.
D)   be able to separate buyers into different markets with different price elasticities.E) None of the above
F) B) and C) D

Question 17

The supply curve for the pure monopolist is upsloping.

Accepted Answer

A) True 
 B)False

Question 18

Which would be evidence of price discrimination at a local bar called Heaters?

Accepted Answer

A)   Charging higher prices than under perfect competition
B)   Charging higher prices for imported than for domestic beer
C)   Charging lower prices to customers wearing Heaters t-shirts
D)   Charging lower prices during Happy Hour from 5 to 6 p.m.E) B) and C)
F) All of the above C

Question 19

Refer to the above graph.Consider a monopolist in short-run equilibrium.This monopolist:

Accepted Answer

A)   has total fixed costs equal to area BEFC.
B)   has total variable costs equal to area 0CFQ.
C)   earns economic profit equal to area ABED.
D)   will cease production since its economic profits are negative.E) A) and B)
F) C) and D) B

Question 20

Refer to the figures above.Suppose the graphs represent the demand for use of a local golf course for which there is no significant competition (it has a local monopoly) .P denotes the price of a round of golf and Q is the quantity of rounds sold each day.If the left graph represents the demand during weekdays and the right graph the weekend demand,this profit-maximizing golf course should:

Accepted Answer

A)   charge $9 for each round,regardless of the day of the week.
B)   charge $7 for each round,regardless of the day of the week.
C)   charge $7 for each round on weekdays,and $10 during the weekend.
D)   charge $9 for each round on weekdays,and $10 during the weekend.The monopolist should set MC = MR in both markets.That means the weekday output should be 200 per day with a price of $7 and the weekend output should be 100 per day with a price of $10.E) None of the above
F) B) and C)

Exam 8: Pure Monopoly

In most cases,a monopolist practicing price discrimination will earn more economic profit.

Correct Answer
verified

Other things equal,which reduces competition in an industry?

Correct Answer
verified

Refer to the above graph.Consider a monopolist in short-run equilibrium.This monopolist has total fixed cost equal to area:

Correct Answer
verified

At the profit-maximizing level of output,a monopolist will always operate where:

Correct Answer
verified

The supply curve for a pure monopolist:

Correct Answer
verified

The data below relate to a pure monopolist and the product it produces.What is the profit-maximizing output and price for this monopolist?

Correct Answer
verified

Price discrimination is:

Correct Answer
verified

A profit-maximizing firm should shut down in the short run if the average revenue it receives is less than:

Correct Answer
verified

If a monopolist discovers that it is operating at a level of output where price is less than average variable costs,it will continue to operate in the short run.

Correct Answer
verified

Based on the graph above,what is the difference between the purely competitive equilibrium level of output and the pure monopolist equilibrium level of output?

Correct Answer
verified

Suppose that a monopolist calculates that at present output and sales,marginal cost is $1.00 and marginal revenue is $2.00.He could maximize profits by:

Correct Answer
verified

In general,the amount of X-inefficiency in an industry:

Correct Answer
verified

Monopolists are said to be allocatively inefficient because:

Correct Answer
verified

When marginal costs decrease,a monopolist will usually lower its price and increase its level of output.

Correct Answer
verified

One defining characteristic of pure monopoly is that:

Correct Answer
verified

To practice long-run price discrimination,a monopolist must:

Correct Answer
verified
D

The supply curve for the pure monopolist is upsloping.

Correct Answer
verified

Which would be evidence of price discrimination at a local bar called Heaters?

Correct Answer
verified
C

Refer to the above graph.Consider a monopolist in short-run equilibrium.This monopolist:

Correct Answer
verified
B

Correct Answer
verified

Exam 8: Pure Monopoly

In most cases,a monopolist practicing price discrimination will earn more economic profit.

Correct AnswerverifiedShow Answer

Other things equal,which reduces competition in an industry?

Correct AnswerverifiedShow Answer

Refer to the above graph.Consider a monopolist in short-run equilibrium.This monopolist has total fixed cost equal to area:

Correct AnswerverifiedShow Answer

At the profit-maximizing level of output,a monopolist will always operate where:

Correct AnswerverifiedShow Answer

The supply curve for a pure monopolist:

Correct AnswerverifiedShow Answer

The data below relate to a pure monopolist and the product it produces.What is the profit-maximizing output and price for this monopolist?

Correct AnswerverifiedShow Answer

Price discrimination is:

Correct AnswerverifiedShow Answer

A profit-maximizing firm should shut down in the short run if the average revenue it receives is less than:

Correct AnswerverifiedShow Answer

If a monopolist discovers that it is operating at a level of output where price is less than average variable costs,it will continue to operate in the short run.

Correct AnswerverifiedShow Answer

Based on the graph above,what is the difference between the purely competitive equilibrium level of output and the pure monopolist equilibrium level of output?

Correct AnswerverifiedShow Answer

Suppose that a monopolist calculates that at present output and sales,marginal cost is $1.00 and marginal revenue is $2.00.He could maximize profits by:

Correct AnswerverifiedShow Answer

In general,the amount of X-inefficiency in an industry:

Correct AnswerverifiedShow Answer

Monopolists are said to be allocatively inefficient because:

Correct AnswerverifiedShow Answer

When marginal costs decrease,a monopolist will usually lower its price and increase its level of output.

Correct AnswerverifiedShow Answer

One defining characteristic of pure monopoly is that:

Correct AnswerverifiedShow Answer

To practice long-run price discrimination,a monopolist must:

Correct AnswerverifiedD

The supply curve for the pure monopolist is upsloping.

Correct AnswerverifiedShow Answer

Which would be evidence of price discrimination at a local bar called Heaters?

Correct AnswerverifiedC

Refer to the above graph.Consider a monopolist in short-run equilibrium.This monopolist:

Correct AnswerverifiedB

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
D

Correct Answer
verified

Correct Answer
verified
C

Correct Answer
verified
B

Correct Answer
verified