Question 1

A natural monopoly arises when the government creates a legal barrier that prevents firms from entering a market.

Accepted Answer

A) True 
 B)False

Question 2

Which of the following is a characteristic of a monopoly?

Accepted Answer

A)  Free entry
B)  Single buyer
C)  Price-maker
D)  Price-taker
E)  Product differentiationF) B) and E)
G) B) and C)

Question 3

Which of the following statements about natural monopolies is not true?

Accepted Answer

A)  Natural monopolies can be eliminated through technological change.
B)  Natural monopolies occur because of the nature of the market system.
C)  Cost-curve characteristics are one reason natural monopolies occur.
D)  Natural monopolies occur when minimum efficient scale is reached after demand is satisfied.
E)  The average total costs of natural monopolies continue to decline over production.F) C) and D)
G) A) and B)

Question 4

A firm with market power can always sell more by raising the price of its product.

Accepted Answer

A) True 
 B)False

Question 5

For a monopoly,average revenue is always less than price.

Accepted Answer

A) True 
 B)False

Question 6

Exhibit 10-5 
-Refer to Exhibit 10-5 for a profit-maximizing monopoly.If the average total cost for the monopoly producing 50 units equals $13,then it will

Accepted Answer

A)  make a total economic profit of $5.
B)  make a total economic profit of $100.
C)  incur a loss of $5.
D)  incur a loss of $100.
E)  break even.F) B) and E)
G) C) and E)

Question 7

Suppose a firm decides to cut its production in half.One could claim that this firm has market power if there is a significant change in the

Accepted Answer

A)  firm's total cost.
B)  market price of the product.
C)  firm's total revenue.
D)  firm's marginal revenue.
E)  firm's average revenue.F) A) and E)
G) C) and E)

Question 8

Marginal revenue and demand are unrelated.

Accepted Answer

A) True 
 B)False

Question 9

The deadweight loss from monopoly is the result of

Accepted Answer

A)  marginal cost being upward-sloping.
B)  irrational action on the part of consumers.
C)  the higher price charged and higher quantity produced compared to competition.
D)  the fact that price and marginal revenue are not the same.
E)  profit maximization as a motivating factor.F) D) and E)
G) C) and E)

Question 10

An example of price discrimination with a quantity discount is

Accepted Answer

A)  Wal-Mart selling for less by moving a large volume of merchandise.
B)  charging commercial telephone users higher fees.
C)  sightseeing tours.
D)  lower long-distance charges the more you use the service.
E)  one person buying 100 units of a good and being charged less total shipping than 100 people buying one unit each.F) C) and E)
G) A) and D)

Question 11

A monopoly's demand curve is less elastic than a perfect competitor's demand curve.

Accepted Answer

A) True 
 B)False

Question 12

Government licensing policies can eliminate monopolies.

Accepted Answer

A) True 
 B)False

Question 13

The reason a monopoly produces less than a competitive industry with identical costs is that

Accepted Answer

A)  in a competitive industry there are more firms,which leaves more money available for production.
B)  There is not enough information to answer this question.
C)  competitive firms' marginal revenue equals marginal cost,so the industry produces at the point at which demand and marginal cost cross instead of the point at which marginal revenue and marginal cost cross.
D)  monopolies are usually regulated industries,and the government limits production.
E)  production costs are always higher for monopolies than for competitive firms.F) All of the above
G) None of the above

Question 14

Which of the following is not an example of price discrimination?

Accepted Answer

A)  Charging more to send a large package than a small package
B)  Airlines charging different amounts based on how early reservations are made
C)  Letting children eat free when accompanied by an adult in a nice restaurant
D)  Taverns charging cover charges only to men
E)  Magazine publishers charging less for student subscriptions than general subscriptionsF) B) and E)
G) A) and B)

Question 15

The market demand curve that a monopoly faces implies that

Accepted Answer

A)  the law of demand is still at work.
B)  cost does not matter.
C)  the monopoly can increase price indiscriminately and consumers have no choice but to pay it.
D)  the monopoly does not have to be concerned about making profits.
E)  an increase in output will not affect price.F) A) and E)
G) B) and E)

Question 16

For a natural monopoly,the minimum efficient scale is

Accepted Answer

A)  sometimes smaller and sometimes larger than the size of the market.
B)  larger than the size of the market.
C)  smaller than the size of the market.
D)  equal to the size of the market.
E)  zero.F) A) and D)
G) B) and E)

Question 17

The demand curve facing a monopoly firm

Accepted Answer

A)  may well bend backward.
B)  suggests that the monopoly can sell additional units without lowering the price.
C)  is the market demand curve.
D)  is equal to its total revenue curve.
E)  is perfectly inelastic.F) C) and D)
G) A) and D)

Question 18

A profit-maximizing monopoly produces at the point at which marginal cost equals marginal revenue,while a profit-maximizing competitive firm produces at the point at which marginal cost equals price.

Accepted Answer

A) True 
 B)False

Question 19

For a monopoly to maximize profits,price must exceed marginal cost.

Accepted Answer

A) True 
 B)False

Question 20

The profit-maximizing output level is determined on a monopoly diagram by finding the point at which the demand and marginal cost curves cross.

Accepted Answer

A) True 
 B)False

Exam 10: Monopoly

A profit-maximizing monopoly produces at the point at which marginal cost equals marginal revenue,while a profit-maximizing competitive firm produces at the point at which marginal cost equals price.

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For a monopoly,average revenue is always less than price.

Correct AnswerverifiedShow Answer

The demand curve facing a monopoly firm

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For a natural monopoly,the minimum efficient scale is

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Suppose a firm decides to cut its production in half.One could claim that this firm has market power if there is a significant change in the

Correct AnswerverifiedShow Answer

Marginal revenue and demand are unrelated.

Correct AnswerverifiedShow Answer

The profit-maximizing output level is determined on a monopoly diagram by finding the point at which the demand and marginal cost curves cross.

Correct AnswerverifiedShow Answer

Which of the following statements about natural monopolies is not true?

Correct AnswerverifiedShow Answer

Government licensing policies can eliminate monopolies.

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For a monopoly to maximize profits,price must exceed marginal cost.

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Exhibit 10-5 -Refer to Exhibit 10-5 for a profit-maximizing monopoly.If the average total cost for the monopoly producing 50 units equals $13,then it will

Correct AnswerverifiedShow Answer

A firm with market power can always sell more by raising the price of its product.

Correct AnswerverifiedShow Answer

Which of the following is not an example of price discrimination?

Correct AnswerverifiedShow Answer

Which of the following is a characteristic of a monopoly?

Correct AnswerverifiedShow Answer

A natural monopoly arises when the government creates a legal barrier that prevents firms from entering a market.

Correct AnswerverifiedShow Answer

An example of price discrimination with a quantity discount is

Correct AnswerverifiedShow Answer

A monopoly's demand curve is less elastic than a perfect competitor's demand curve.

Correct AnswerverifiedShow Answer

The deadweight loss from monopoly is the result of

Correct AnswerverifiedShow Answer

The reason a monopoly produces less than a competitive industry with identical costs is that

Correct AnswerverifiedShow Answer

The market demand curve that a monopoly faces implies that

Correct AnswerverifiedShow Answer

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