Question 1

A natural monopoly arises when

Accepted Answer

A)   there are constant returns to scale over the relevant range of output.
B)   there are economies of scale over the relevant range of output.
C)   one firm owns a key natural resource.
D)   the government gives a single firm the exclusive right to produce a particular good or service.E) A) and B)
F) None of the above

Question 2

Figure 15-8 
-Refer to Figure 15-8.To maximize total surplus,a benevolent social planner would choose which of the following outcomes?

Accepted Answer

A)   100 units of output and a price of $10 per unit
B)   150 units of output and a price of $10 per unit
C)   150 units of output and a price of $15 per unit
D)   200 units of output and a price of $10 per unitE) A) and C)
F) B) and D)

Question 3

Suppose a firm has a monopoly on the sale of widgets and faces a downward-sloping demand curve.When selling the 100th widget,the firm will always receive

Accepted Answer

A)   less marginal revenue on the 100th widget than it received on the 99th widget.
B)   more average revenue on the 100th widget than it received on the 99th widget.
C)   more total revenue on the 100 widgets than it received on the first 99 widgets.
D)   a lower average cost per unit at 100 units output than at 99 units of output.E) A) and B)
F) A) and C)

Question 4

Most firms have

Accepted Answer

A)   no monopoly pricing power.
B)   some monopoly pricing power.
C)   absolute monopoly pricing power.
D)   the ability to earn monopoly profits.E) B) and C)
F) A) and D)

Question 5

A common solution to monopoly in European countries is public ownership.

Accepted Answer

A) True 
 B)False

Question 6

Which of the following statements is correct?

Accepted Answer

A)   Two examples of early antitrust laws are the Clinton and Stigler Antitrust Acts.
B)   Antitrust laws automatically prevent mergers between companies that produce similar products.
C)   Antitrust laws reduce the government's power to regulate private companies.
D)   Antitrust laws can reduce social welfare if they prevent mergers that would lower costs through more efficient joint production.E) A) and C)
F) B) and D)

Question 7

The assessment by George Stigler concerning the tradeoffs between "market failure" and "political failure" in the American economy provides support for which of the following solutions to the problems of monopolies?

Accepted Answer

A)   public ownership of monopolies
B)   government regulation of monopolies
C)   government incentives to promote competition in monopolized industries
D)   doing nothing at allE) None of the above
F) B) and D)

Question 8

Marginal revenue for a monopolist is computed as

Accepted Answer

A)   average revenue divided by quantity sold.
B)   average revenue times quantity divided by price.
C)   total revenue divided by quantity sold.
D)   change in total revenue per one unit increase in quantity sold.E) A) and B)
F) A) and C)

Question 9

Scenario 15-4
Black Box Cable TV is able to purchase an exclusive right to sell a premium movie channel (PMC) in its market area.Let's assume that Black Box Cable pays $150,000 a year for the exclusive marketing rights to PMC.Since Black Box has already installed cable to all of the homes in its market area,the marginal cost of delivering PMC to subscribers is zero.The manager of Black Box needs to know what price to charge for the PMC service to maximize her profit.Before setting price,she hires an economist to estimate demand for the PMC service.The economist discovers that there are two types of subscribers who value premium movie channels.First are the 4,000 die-hard TV viewers who will pay as much as $150 a year for the new PMC premium channel.Second,the PMC channel will appeal to about 20,000 occasional TV viewers who will pay as much as $20 a year for a subscription to PMC.
-Refer to Scenario 15-4.If Black Box Cable TV is able to price discriminate,what would be the maximum amount of profit it could generate?

Accepted Answer

A)   $500,000
B)   $600,000
C)   $850,000
D)   $925,000E) B) and D)
F) C) and D)

Question 10

A monopoly market

Accepted Answer

A)   always maximizes total economic well-being.
B)   always minimizes consumer surplus.
C)   generally fails to maximize total economic well-being.
D)   generally fails to maximize producer surplus.E) A) and C)
F) A) and D)

Question 11

Which of the following statements is correct?

Accepted Answer

A)   If the monopolist's marginal revenue is greater than its marginal cost,the monopolist can increase profit by selling more units at a lower price per unit.
B)   If the monopolist's marginal revenue is greater than its marginal cost,the monopolist can increase profit by selling fewer units at a higher price per unit.
C)   When a monopolist produces where price equals the minimum of average total cost,it earns a positive economic profit.
D)   If the monopolist is earning a positive economic profit,it must be producing where MR = MC.E) A) and D)
F) B) and C)

Question 12

Scenario 15-2
A monopoly firm maximizes its profit by producing Q = 500 units of output.At that level of output,its marginal revenue is $30,its average revenue is $60,and its average total cost is $34.
-Refer to Scenario 15-2.At Q = 500,the firm's marginal cost is

Accepted Answer

A)   less than $30.
B)   $30.
C)   $34.
D)   greater than $34.E) A) and B)
F) B) and C)

Question 13

Which of the following statements is correct?

Accepted Answer

A)   Public ownership is preferred to regulation in order to minimize the deadweight losses associated with natural monopolies.
B)   Antitrust laws are always the best way to limit monopoly power.
C)   It is possible that the best approach to monopolies is for the government to do nothing.
D)   Marginal-cost pricing requires a natural monopoly to earn zero economic profits.E) A) and B)
F) A) and C)

Question 14

Suppose a profit-maximizing monopolist faces a constant marginal cost of $10,produces an output level of 100 units,and charges a price of $50.The socially efficient level of output is 200 units.Assume that the demand curve and marginal revenue curve are the typical downward-sloping straight lines.The monopoly deadweight loss equals $2,000.

Accepted Answer

A) True 
 B)False

Question 15

Antitrust laws allow the government to

Accepted Answer

A)   collect revenues through the antitrust tax.
B)   break up companies.
C)   purchase privately-held companies through eminent domain.
D)   All of the above are correct.E) B) and C)
F) A) and D)

Question 16

For a monopoly firm,which of the following equalities is always true?

Accepted Answer

A)   price = marginal revenue
B)   price = average revenue
C)   price = total revenue
D)   marginal revenue = marginal costE) A) and C)
F) A) and B)

Question 17

A fundamental source of monopoly market power arises from

Accepted Answer

A)   perfectly elastic demand.
B)   perfectly inelastic demand.
C)   barriers to entry.
D)   availability of "free" natural resources,such as water or air.E) C) and D)
F) None of the above

Question 18

A monopoly's marginal cost will

Accepted Answer

A)   be less than its average fixed cost.
B)   be less than the price per unit of its product.
C)   exceed its marginal revenue.
D)   equal its average total cost.E) B) and C)
F) B) and D)

Question 19

What is the shape of the monopolist's marginal revenue curve?

Accepted Answer

A)   a downward-sloping line that is identical to the demand curve
B)   a downward-sloping line that lies below the demand curve
C)   a horizontal line that is identical to the demand curve
D)   a horizontal line that lies below the demand curveE) None of the above
F) C) and D)

Question 20

Table 15-2
Dreher's Designer Shirt Company,a monopolist,has the following cost and revenue information.
 
-Refer to Table 15-2.What is the total revenue from selling 8 shirts?

Accepted Answer

A)   $90
B)   $695
C)   $720
D)   $800E) C) and D)
F) B) and C)

Exam 15: Monopoly

Scenario 15-2 A monopoly firm maximizes its profit by producing Q = 500 units of output.At that level of output,its marginal revenue is $30,its average revenue is $60,and its average total cost is $34. -Refer to Scenario 15-2.At Q = 500,the firm's marginal cost is

Correct Answer
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A fundamental source of monopoly market power arises from

Correct Answer
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A common solution to monopoly in European countries is public ownership.

Correct Answer
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A monopoly's marginal cost will

Correct Answer
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Correct Answer
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Figure 15-8 -Refer to Figure 15-8.To maximize total surplus,a benevolent social planner would choose which of the following outcomes?

Correct Answer
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Correct Answer
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Marginal revenue for a monopolist is computed as

Correct Answer
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Table 15-2 Dreher's Designer Shirt Company,a monopolist,has the following cost and revenue information. -Refer to Table 15-2.What is the total revenue from selling 8 shirts?

Correct Answer
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Suppose a firm has a monopoly on the sale of widgets and faces a downward-sloping demand curve.When selling the 100^th widget,the firm will always receive

Correct Answer
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Antitrust laws allow the government to

Correct Answer
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Most firms have

Correct Answer
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For a monopoly firm,which of the following equalities is always true?

Correct Answer
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Which of the following statements is correct?

Correct Answer
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Which of the following statements is correct?

Correct Answer
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Which of the following statements is correct?

Correct Answer
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What is the shape of the monopolist's marginal revenue curve?

Correct Answer
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A natural monopoly arises when

Correct Answer
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A monopoly market

Correct Answer
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The assessment by George Stigler concerning the tradeoffs between "market failure" and "political failure" in the American economy provides support for which of the following solutions to the problems of monopolies?

Correct Answer
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Exam 15: Monopoly

Scenario 15-2 A monopoly firm maximizes its profit by producing Q = 500 units of output.At that level of output,its marginal revenue is $30,its average revenue is $60,and its average total cost is $34. -Refer to Scenario 15-2.At Q = 500,the firm's marginal cost is

Correct AnswerverifiedShow Answer

A fundamental source of monopoly market power arises from

Correct AnswerverifiedShow Answer

A common solution to monopoly in European countries is public ownership.

Correct AnswerverifiedShow Answer

A monopoly's marginal cost will

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Figure 15-8 -Refer to Figure 15-8.To maximize total surplus,a benevolent social planner would choose which of the following outcomes?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Marginal revenue for a monopolist is computed as

Correct AnswerverifiedShow Answer

Table 15-2 Dreher's Designer Shirt Company,a monopolist,has the following cost and revenue information. -Refer to Table 15-2.What is the total revenue from selling 8 shirts?

Correct AnswerverifiedShow Answer

Suppose a firm has a monopoly on the sale of widgets and faces a downward-sloping demand curve.When selling the 100th widget,the firm will always receive

Correct AnswerverifiedShow Answer

Antitrust laws allow the government to

Correct AnswerverifiedShow Answer

Most firms have

Correct AnswerverifiedShow Answer

For a monopoly firm,which of the following equalities is always true?

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

What is the shape of the monopolist's marginal revenue curve?

Correct AnswerverifiedShow Answer

A natural monopoly arises when

Correct AnswerverifiedShow Answer

A monopoly market

Correct AnswerverifiedShow Answer

The assessment by George Stigler concerning the tradeoffs between "market failure" and "political failure" in the American economy provides support for which of the following solutions to the problems of monopolies?

Correct AnswerverifiedShow Answer

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Suppose a firm has a monopoly on the sale of widgets and faces a downward-sloping demand curve.When selling the 100^th widget,the firm will always receive

Correct Answer
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