Question 1

Price discrimination is not possible if a firm:

Accepted Answer

A)   is regulated by the government
B)   operates in a competitive market
C)   has perfect information about consumer demand
D)   faces a downward-sloping demand curveE) B) and D)
F) C) and D)

Question 2

Khan is a wholesale imported fish distributor. He sells his imported fish to all the restaurants in town and he is the only distributor of a specialty imported fish. Assuming that Khan is maximising his profit, which of the following statements is true?

Accepted Answer

A)   imported fish prices will equal marginal cost
B)   imported fish prices will exceed marginal cost
C)   imported fish prices will be less than marginal cost
D)   imported fish prices will equal average costE) B) and C)
F) All of the above B

Question 3

Adult and concession prices for movie tickets are examples of perfect price discrimination.

Accepted Answer

A) True 
 B)False

Question 4

For a monopolist, marginal revenue will turn negative when:

Accepted Answer

A)   the price effect on revenue is greater than the output effect
B)   the output effect on revenue is greater than the price effect
C)   demand for the good has turned negative
D)   An increase in the price results in a fall in demandE) A) and C)
F) None of the above

Question 5

A monopoly firm has an upward-sloping supply curve.

Accepted Answer

A) True 
 B)False

Question 6

Table 15-1
 
-Refer to Table 15-1. If the monopolist wants to maximise its revenue, how many units of its product should it sell?

Accepted Answer

A)   one
B)   six
C)   eight
D)   tenE) A) and B)
F) A) and C)

Question 7

Graph 15-2
 0 B)  P1 C)  P2 D)  P3" class="answers-bank-image d-inline" rel="preload" > This graph reflects the cost and revenue structure for a monopoly firm. Use the graph to answer the following question(s) .
-Refer to Graph 15-2. Profit will be maximised by charging a price equal to:

Accepted Answer

A)   P0
B)   P1
C)   P2
D)   P3E) A) and C)
F) B) and C)

Question 8

Competitive firms maximise profit by setting MR = MC. This is not always true for monopoly firms.

Accepted Answer

A) True 
 B)False  False

Question 9

A monopolist is a price:

Accepted Answer

A)   setter, and therefore has no indifference curve
B)   setter, and therefore has no variable-cost curve
C)   setter, and therefore has no supply curve
D)   setter, and therefore has no demand curveE) B) and D)
F) A) and C) C

Question 10

The socially efficient level of production occurs where the marginal-cost curve of a monopoly intersects which of the following curves?

Accepted Answer

A)   demand
B)   marginal revenue
C)   supply
D)   average costE) B) and C)
F) All of the above

Question 11

When a firm operates under conditions of a monopoly, its price is unconstrained.

Accepted Answer

A) True 
 B)False

Question 12

A monopoly will be maximising total welfare if:

Accepted Answer

A)   price equals marginal revenue
B)   price equals marginal profit
C)   price equals marginal cost
D)   the marginal cost curve intersects the marginal revenue curveE) A) and B)
F) A) and C)

Question 13

Graph 15-5
  This graph depicts the demand, marginal-revenue and marginal-cost curves of a profit-maximising monopolist. Use the graph to answer the following question(s) .
-Refer to Graph 15-5. Which of the following areas represents the deadweight loss due to monopoly pricing?

Accepted Answer

A)   rectangle ACDB
B)   rectangle CFGD
C)   triangle BDE
D)   triangle BGEE) None of the above
F) A) and D)

Question 14

Graph 15-1
 
-Refer to Graph 15-1. The shape of the average-total-cost curve in the figure suggests an opportunity for a profit-maximising monopolist to exploit:

Accepted Answer

A)   price discrimination
B)   average cost pricing
C)   economies of scale
D)   diminishing marginal productE) C) and D)
F) A) and B)

Question 15

When the government creates a monopoly, the social loss may include:

Accepted Answer

A)   high monopoly profits
B)   falling marginal cost
C)   the cost of lawyers and lobbyists to convince lawmakers to continue its monopoly
D)   all of the aboveE) A) and B)
F) None of the above

Question 16

Graph 15-2
  This graph reflects the cost and revenue structure for a monopoly firm. Use the graph to answer the following question(s) .
-Refer to Graph 15-2. The marginal-revenue curve for a monopoly firm is depicted by curve:

Accepted Answer

A)   A
B)   B
C)   C
D)   DE) A) and D)
F) C) and D)

Question 17

The most important feature of a natural monopoly is:

Accepted Answer

A)   constant returns to scale over the relevant range of output
B)   it exploits a natural resource
C)   diseconomies of scale over the relevant range of output
D)   economies of scale over the relevant range of outputE) A) and C)
F) None of the above

Question 18

Graph 15-6
  This graph depicts the demand, marginal-revenue and marginal-cost curves of a profit-maximising monopolist. Use the graph to answer the following question(s) .
-Refer to Graph 15-6. What is the deadweight loss equal to when the monopolist does NOT price discriminate?

Accepted Answer

A)   ABC
B)   ADF
C)   CEF
D)   deadweight loss will equal zeroE) A) and B)
F) None of the above

Question 19

A government created monopoly arises when:

Accepted Answer

A)   government spending in a certain industry gives rise to monopoly power
B)   the government gives a firm the exclusive right to sell some good or service
C)   the government exercises its market control by encouraging competition among sellers
D)   all of the above could qualify as government created monopoliesE) B) and D)
F) C) and D)

Question 20

Marginal revenue for a monopolist is computed as:

Accepted Answer

A)   total revenue / quantity sold
B)   total costs / quantity sold
C)   (average revenue * quantity)  / price
D)   the change to total revenue per unit change in quantity soldE) All of the above
F) C) and D)

Exam 15: Monopoly

Price discrimination is not possible if a firm:

Correct AnswerverifiedShow Answer

Khan is a wholesale imported fish distributor. He sells his imported fish to all the restaurants in town and he is the only distributor of a specialty imported fish. Assuming that Khan is maximising his profit, which of the following statements is true?

Correct AnswerverifiedB

Adult and concession prices for movie tickets are examples of perfect price discrimination.

Correct AnswerverifiedShow Answer

For a monopolist, marginal revenue will turn negative when:

Correct AnswerverifiedShow Answer

A monopoly firm has an upward-sloping supply curve.

Correct AnswerverifiedShow Answer

Table 15-1 -Refer to Table 15-1. If the monopolist wants to maximise its revenue, how many units of its product should it sell?

Correct AnswerverifiedShow Answer

Graph 15-2 This graph reflects the cost and revenue structure for a monopoly firm. Use the graph to answer the following question(s) . -Refer to Graph 15-2. Profit will be maximised by charging a price equal to:

Correct AnswerverifiedShow Answer

Competitive firms maximise profit by setting MR = MC. This is not always true for monopoly firms.

Correct AnswerverifiedFalse

A monopolist is a price:

Correct AnswerverifiedC

The socially efficient level of production occurs where the marginal-cost curve of a monopoly intersects which of the following curves?

Correct AnswerverifiedShow Answer

When a firm operates under conditions of a monopoly, its price is unconstrained.

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A monopoly will be maximising total welfare if:

Correct AnswerverifiedShow Answer

Graph 15-5 This graph depicts the demand, marginal-revenue and marginal-cost curves of a profit-maximising monopolist. Use the graph to answer the following question(s) . -Refer to Graph 15-5. Which of the following areas represents the deadweight loss due to monopoly pricing?

Correct AnswerverifiedShow Answer

Graph 15-1 -Refer to Graph 15-1. The shape of the average-total-cost curve in the figure suggests an opportunity for a profit-maximising monopolist to exploit:

Correct AnswerverifiedShow Answer

When the government creates a monopoly, the social loss may include:

Correct AnswerverifiedShow Answer

Graph 15-2 This graph reflects the cost and revenue structure for a monopoly firm. Use the graph to answer the following question(s) . -Refer to Graph 15-2. The marginal-revenue curve for a monopoly firm is depicted by curve:

Correct AnswerverifiedShow Answer

The most important feature of a natural monopoly is:

Correct AnswerverifiedShow Answer

Graph 15-6 This graph depicts the demand, marginal-revenue and marginal-cost curves of a profit-maximising monopolist. Use the graph to answer the following question(s) . -Refer to Graph 15-6. What is the deadweight loss equal to when the monopolist does NOT price discriminate?

Correct AnswerverifiedShow Answer

A government created monopoly arises when:

Correct AnswerverifiedShow Answer

Marginal revenue for a monopolist is computed as:

Correct AnswerverifiedShow Answer

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False

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C

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