Question 1

Figure 14-4 
-Refer to Figure 14-4.A profit-maximizing monopoly's profit is equal to

Accepted Answer

A)   P4 x Q3.
B)   (P4-P2) x Q3.
C)   (P4-P1) x Q3.
D)   (P5-P0) x Q1.E) B) and C)
F) C) and D)

Question 2

Patent and copyright laws are major sources of

Accepted Answer

A)   natural monopolies.
B)   government-created monopolies.
C)   resource monopolies.
D)   antitrust regulation.E) None of the above
F) A) and C)

Question 3

If government officials break a natural monopoly up into several smaller firms,then

Accepted Answer

A)   competition will force firms to attain economic profits rather than accounting profits.
B)   competition will force firms to produce surplus output,which drives up price.
C)   the average costs of production will increase.
D)   the average costs of production will decrease.E) A) and B)
F) A) and C)

Question 4

Figure 14-5 
-Refer to Figure 14-5.What price will the monopolist charge?

Accepted Answer

A)   A
B)   B
C)   C
D)   FE) A) and C)
F) A) and B)

Question 5

Patent and copyright laws encourage

Accepted Answer

A)   creative activity.
B)   lower prices due to decreasing average total costs.
C)   competition among firms.
D)   All of the above are correct.E) A) and D)
F) A) and C)

Question 6

A monopolist's supply curve is horizontal.

Accepted Answer

A) True 
 B)False

Question 7

Table 14-13
The following table gives information on the price,quantity,and total cost of production for a monopolist.
 
-Refer to Table 14-13.If the monopolist maximizes profits,he will charge a price of

Accepted Answer

A)   $4.
B)   $3.
C)   $2.
D)   $1.E) A) and B)
F) A) and C)

Question 8

Table 14-1
 
-Refer to Table 14-1.If the monopolist wants to maximize its revenue,how many units of its product should it sell?

Accepted Answer

A)   4
B)   5
C)   6
D)   8E) B) and C)
F) None of the above

Question 9

Deadweight loss measures the loss in society's welfare that occurs because a monopolist does not produce the socially efficient level of output.

Accepted Answer

A) True 
 B)False

Question 10

Table 14-6
A monopolist faces the following demand curve:
 
-Refer to Table 14-6.What is the marginal revenue from the sale of the 2nd unit?

Accepted Answer

A)   $-3
B)   $3
C)   $9
D)   $24E) All of the above
F) C) and D)

Question 11

One problem with government operation of monopolies is that

Accepted Answer

A)   a benevolent government is likely to be interested in generating profits for political gain.
B)   monopolies typically have rising average costs.
C)   the government typically has little incentive to reduce costs.
D)   a government-regulated outcome will increase the profitability of the monopoly.E) A) and B)
F) None of the above

Question 12

Perfect price discrimination describes a situation in which the monopolist

Accepted Answer

A)   knows the exact willingness to pay of each of its customers.
B)   charges exactly two different prices to exactly two different groups of customers.
C)   maximizes consumer surplus.
D)   experiences a zero economic profit.E) C) and D)
F) A) and C)

Question 13

Table 14-7
Sally owns the only shoe store in town.She has the following cost and revenue information.
 
-Refer to Table 14-7.What is the marginal revenue from selling the 8th pair of shoes?

Accepted Answer

A)   $10
B)   $20
C)   $40
D)   $90E) B) and D)
F) B) and C)

Question 14

The fundamental source of monopoly power is

Accepted Answer

A)   barriers to entry.
B)   profit.
C)   decreasing average total cost.
D)   a product without close substitutes.E) All of the above
F) A) and B)

Question 15

The profit-maximization problem for a monopolist differs from that of a competitive firm in which of the following ways?

Accepted Answer

A)   A competitive firm maximizes profit at the point where marginal revenue equals marginal cost; a monopolist maximizes profit at the point where marginal revenue exceeds marginal cost.
B)   A competitive firm maximizes profit at the point where average revenue equals marginal cost; a monopolist maximizes profit at the point where average revenue exceeds marginal cost.
C)   For a competitive firm,marginal revenue at the profit-maximizing level of output is equal to marginal revenue at all other levels of output; for a monopolist,marginal revenue at the profit-maximizing level of output is smaller than it is for larger levels of output.
D)   For a profit-maximizing competitive firm,thinking at the margin is much more important than it is for a profit-maximizing monopolist.E) A) and B)
F) C) and D)

Question 16

If a monopolist is able to perfectly price discriminate,

Accepted Answer

A)   consumer surplus is always increased.
B)   total surplus is always decreased.
C)   consumer surplus and deadweight losses are transformed into monopoly profits.
D)   the price effect dominates the output effect on monopoly revenue.E) All of the above
F) A) and B)

Question 17

Price discrimination can increase both the monopolist's profits and society's welfare.

Accepted Answer

A) True 
 B)False

Question 18

One problem with regulating a monopolist on the basis of cost is that

Accepted Answer

A)   by focusing on costs,the regulators ignore profits.
B)   it does not provide an incentive for the monopolist to reduce its cost.
C)   a monopolist's costs,by definition,are higher than costs of perfectly competitive firms.
D)   a monopolist is still able to generate excessive economic profits.E) All of the above
F) A) and B)

Question 19

Figure 14-15 
-Refer to Figure 14-15.If there are no fixed costs of production,monopoly profit without price discrimination equals

Accepted Answer

A)   $500.
B)   $1,000.
C)   $2,000.
D)   $4,000.E) A) and B)
F) All of the above

Question 20

A firm that is a natural monopoly

Accepted Answer

A)   is not likely to be concerned about new entrants eroding its monopoly power.
B)   is taking advantage of economies of scale.
C)   would experience a higher average total cost if more firms entered the market.
D)   All of the above are correct.E) A) and C)
F) A) and D)

Exam 14: Monopoly

The profit-maximization problem for a monopolist differs from that of a competitive firm in which of the following ways?

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Deadweight loss measures the loss in society's welfare that occurs because a monopolist does not produce the socially efficient level of output.

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One problem with regulating a monopolist on the basis of cost is that

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Table 14-1 -Refer to Table 14-1.If the monopolist wants to maximize its revenue,how many units of its product should it sell?

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Figure 14-15 -Refer to Figure 14-15.If there are no fixed costs of production,monopoly profit without price discrimination equals

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A monopolist's supply curve is horizontal.

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Perfect price discrimination describes a situation in which the monopolist

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Figure 14-5 -Refer to Figure 14-5.What price will the monopolist charge?

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The fundamental source of monopoly power is

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A firm that is a natural monopoly

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Patent and copyright laws encourage

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Table 14-7 Sally owns the only shoe store in town.She has the following cost and revenue information. -Refer to Table 14-7.What is the marginal revenue from selling the 8th pair of shoes?

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Table 14-6 A monopolist faces the following demand curve: -Refer to Table 14-6.What is the marginal revenue from the sale of the 2nd unit?

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If a monopolist is able to perfectly price discriminate,

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One problem with government operation of monopolies is that

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Figure 14-4 -Refer to Figure 14-4.A profit-maximizing monopoly's profit is equal to

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Table 14-13 The following table gives information on the price,quantity,and total cost of production for a monopolist. -Refer to Table 14-13.If the monopolist maximizes profits,he will charge a price of

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Patent and copyright laws are major sources of

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Price discrimination can increase both the monopolist's profits and society's welfare.

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If government officials break a natural monopoly up into several smaller firms,then

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