Question 1

A price-discriminating monopolist will set a higher price when demand is more elastic and a lower price when demand is less elastic.

Accepted Answer

A) True 
 B)False

Question 2

A monopoly is most likely to emerge and be sustained when:

Accepted Answer

A)   output demand is relatively elastic.
B)   firms have U-shaped average total cost curves.
C)   fixed capital costs are small relative to total costs.
D)   economies of scale are large relative to market demand.E) B) and C)
F) All of the above

Question 3

A nondiscriminating pure monopolist's demand curve:

Accepted Answer

A)   is perfectly inelastic.
B)   coincides with its marginal revenue curve.
C)   lies above its marginal revenue curve.
D)   lies below its marginal revenue curve.E) A) and C)
F) B) and D)

Question 4

Which is true of a price discriminating pure monopolist?

Accepted Answer

A)   P > MR for the last unit sold.
B)   Profit will be lower than in the nondiscriminating case.
C)   The average price will be higher than in the nondiscriminating case.
D)   Allocative inefficiency will be greater than in the nondiscriminating case.E) A) and B)
F) None of the above

Question 5

One feature of pure monopoly is that the monopolist 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) All of the above
F) A) and D)

Question 6

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,then over the course of a full seven-day week this price-discriminating,profit-maximizing golf course should sell a total of:

Accepted Answer

A)   300 rounds.
B)   740 rounds.
C)   900 rounds.
D)   1200 rounds.The monopolist should set MC = MR in both markets.That means the weekday output should be 200 with a price of $7 and the weekend output should be 100 with a price of $10.This means 5 days of 100 rounds each and 200 weekend rounds for a total of 1200.E) All of the above
F) A) and B)

Question 7

What is the term that refers to increases in the value of a product to each user,including existing users,as the total number of users increases?

Accepted Answer

A)   Income transfer
B)   Price discrimination
C)   Simultaneous consumption
D)   Network effectsE) A) and D)
F) B) and D)

Question 8

Using the graph above,what is the difference between purely competitive and pure monopolist output at the industry level?

Accepted Answer

A)   0
B)   35
C)   70
D)   105The purely competitive level of output occurs where the demand curve crossed the MC curve,that is,160 units.The monopoly output occurs where MC = MR,that is,90 units.The difference is 70 units.E) None of the above
F) All of the above

Question 9

Successful price discrimination requires that:

Accepted Answer

A)   buyers with inelastic demand be charged higher prices than buyers with elastic demand.
B)   buyers with inelastic demand be charged lower prices than buyers with elastic demand.
C)   all buyers be charged the same price regardless of their elasticity of demand.
D)   all buyers have the same price elasticity of demand.E) A) and D)
F) All of the above

Question 10

Without regulations,monopolists will produce at an output level where marginal benefit is greater than marginal social cost.

Accepted Answer

A) True 
 B)False

Question 11

A pure monopoly firm will never charge a price in the inelastic range of its demand curve because lowering price to get into this region will:

Accepted Answer

A)   increase total revenue,increase total cost,and decrease profit.
B)   decrease total revenue,increase total cost,and decrease profit.
C)   increase total revenue,decrease total cost,and decrease profit.
D)   decrease total revenue,total cost,and profit.E) A) and D)
F) None of the above

Question 12

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 more price elasticity of demand for a given product than consumers who do not clip and redeem coupons.
C)   exhibit less 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) A) and B)
F) B) and D)

Question 13

A firm will earn economic profits whenever:

Accepted Answer

A)   marginal revenue exceeds marginal costs.
B)   marginal revenue exceeds variable costs.
C)   average revenue exceeds average total costs.
D)   average revenue exceeds average variable costs.E) B) and C)
F) A) and C)

Question 14

A profit-maximizing monopolist facing the situation shown in the graph above should:

Accepted Answer

A)   shut down immediately.
B)   continue producing to minimize losses.
C)   continue producing to make economic profits.
D)   continue producing as long as price is greater than marginal cost.E) A) and B)
F) A) and C)

Question 15

Under pure monopoly,a profit-maximizing firm will produce:

Accepted Answer

A)   in the inelastic range of its demand curve.
B)   in the elastic range of its demand curve.
C)   only where total costs are zero.
D)   only where marginal revenue is zero.E) All of the above
F) A) and B)

Question 16

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 the monopolist's 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 make 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 in other industries.E) C) and D)
F) B) and C)

Question 17

The supply curve for a monopolist is the upsloping portion of the marginal cost curve that lies above the average variable cost curve.

Accepted Answer

A) True 
 B)False

Question 18

Which is a barrier to entry in an industry?

Accepted Answer

A)   Economies of scale
B)   Allocative efficiency
C)   Profit maximization
D)   Economic profitsE) None of the above
F) A) and D)

Question 19

Unfair advertising practices are investigated by the Federal Trade Commission.

Accepted Answer

A) True 
 B)False

Question 20

Rent-seeking behavior refers to activities designed to transfer income or wealth to a particular firm or resource supplier at someone else's or society's expense.

Accepted Answer

A) True 
 B)False

Exam 8: Pure Monopoly

A monopoly is most likely to emerge and be sustained when:

Correct Answer
verified

A pure monopoly firm will never charge a price in the inelastic range of its demand curve because lowering price to get into this region will:

Correct Answer
verified

Using the graph above,what is the difference between purely competitive and pure monopolist output at the industry level?

Correct Answer
verified

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

Correct Answer
verified

What is the term that refers to increases in the value of a product to each user,including existing users,as the total number of users increases?

Correct Answer
verified

Successful price discrimination requires that:

Correct Answer
verified

A nondiscriminating pure monopolist's demand curve:

Correct Answer
verified

Under pure monopoly,a profit-maximizing firm will produce:

Correct Answer
verified

The supply curve for a monopolist is the upsloping portion of the marginal cost curve that lies above the average variable cost curve.

Correct Answer
verified

Correct Answer
verified

A price-discriminating monopolist will set a higher price when demand is more elastic and a lower price when demand is less elastic.

Correct Answer
verified

Unfair advertising practices are investigated by the Federal Trade Commission.

Correct Answer
verified

Without regulations,monopolists will produce at an output level where marginal benefit is greater than marginal social cost.

Correct Answer
verified

Consumers who clip and redeem discount coupons:

Correct Answer
verified

A firm will earn economic profits whenever:

Correct Answer
verified

A profit-maximizing monopolist facing the situation shown in the graph above should:

Correct Answer
verified

Which is a barrier to entry in an industry?

Correct Answer
verified

One feature of pure monopoly is that the monopolist is:

Correct Answer
verified

Which is true of a price discriminating pure monopolist?

Correct Answer
verified

Rent-seeking behavior refers to activities designed to transfer income or wealth to a particular firm or resource supplier at someone else's or society's expense.

Correct Answer
verified

Exam 8: Pure Monopoly

A monopoly is most likely to emerge and be sustained when:

Correct AnswerverifiedShow Answer

A pure monopoly firm will never charge a price in the inelastic range of its demand curve because lowering price to get into this region will:

Correct AnswerverifiedShow Answer

Using the graph above,what is the difference between purely competitive and pure monopolist output at the industry level?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

What is the term that refers to increases in the value of a product to each user,including existing users,as the total number of users increases?

Correct AnswerverifiedShow Answer

Successful price discrimination requires that:

Correct AnswerverifiedShow Answer

A nondiscriminating pure monopolist's demand curve:

Correct AnswerverifiedShow Answer

Under pure monopoly,a profit-maximizing firm will produce:

Correct AnswerverifiedShow Answer

The supply curve for a monopolist is the upsloping portion of the marginal cost curve that lies above the average variable cost curve.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A price-discriminating monopolist will set a higher price when demand is more elastic and a lower price when demand is less elastic.

Correct AnswerverifiedShow Answer

Unfair advertising practices are investigated by the Federal Trade Commission.

Correct AnswerverifiedShow Answer

Without regulations,monopolists will produce at an output level where marginal benefit is greater than marginal social cost.

Correct AnswerverifiedShow Answer

Consumers who clip and redeem discount coupons:

Correct AnswerverifiedShow Answer

A firm will earn economic profits whenever:

Correct AnswerverifiedShow Answer

A profit-maximizing monopolist facing the situation shown in the graph above should:

Correct AnswerverifiedShow Answer

Which is a barrier to entry in an industry?

Correct AnswerverifiedShow Answer

One feature of pure monopoly is that the monopolist is:

Correct AnswerverifiedShow Answer

Which is true of a price discriminating pure monopolist?

Correct AnswerverifiedShow Answer

Rent-seeking behavior refers to activities designed to transfer income or wealth to a particular firm or resource supplier at someone else's or society's expense.

Correct AnswerverifiedShow Answer

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