Question 1

In the short run, a monopolist will shut down when

Accepted Answer

A)  average total cost is greater than price at all output levels
B)  average variable cost is greater than average fixed cost at all output levels
C)  price is greater than average variable cost at all output levels
D)  average fixed cost is greater than price at all output levels
E)  average variable cost is greater than price at all output levelsF) D) and E)
G) A) and C)

Question 2

Exhibit 9-14  At the profit-maximizing (or loss-minimizing) level of production, the monopoly in Exhibit 9-14 will have total cost of

Accepted Answer

A)  $264
B)  $306
C)  $216
D)  $187
E)  $176F) A) and D)
G) D) and E)

Question 3

For a monopolist, P < MR at all quantities.

Accepted Answer

A) True 
 B)False

Question 4

In the long run, which of the following is not a problem for a monopolist earning economic profit?

Accepted Answer

A)  other firms have an incentive to create substitutes for the monopolist's product
B)  technological change tends to break down barriers to entry
C)  patents expire, licenses must be renewed, and new sources of essential resources may be discovered
D)  government often decides to regulate monopolies
E)  all profit will gradually be converted to consumer surplusF) All of the above
G) C) and E)

Question 5

Exhibit 9-14  At the profit-maximizing (or loss-minimizing) level of production, the monopoly in Exhibit 9-14 will have a

Accepted Answer

A)  profit per unit of output of $2
B)  loss per unit of output of $2
C)  loss per unit of output of $5
D)  profit per unit of output of $5
E)  loss per unit of output of $4F) None of the above
G) A) and B)

Question 6

Assuming a constant cost industry, consumer surplus would be greater under monopoly than if the industry were perfectly competitive.

Accepted Answer

A) True 
 B)False

Question 7

If marginal cost is positive, which of the following is true?

Accepted Answer

A)  A monopolist always produces on the inelastic portion of the firm's demand curve.
B)  A monopolist always produces on the inelastic portion of the market demand curve.
C)  A monopolist always produces on the elastic portion of the market demand curve.
D)  A monopolist always produces on the unit elastic portion of the market demand curve.
E)  The presence of a monopolist increases the elasticity of demand.F) A) and C)
G) B) and C)

Question 8

Patents stimulate investment

Accepted Answer

A)  by giving inventors an incentive to incur up-front costs of developing new products
B)  by giving tax breaks to inventors
C)  by guaranteeing a profit from new products
D)  by lowering interest rates
E)  through government payments that cover costs of research and developmentF) C) and D)
G) B) and E)

Question 9

Exhibit 9-5  The firm in Exhibit 9-5

Accepted Answer

A)  is operating in the short run
B)  is operating in the long run
C)  will exit the industry in the long run
D)  shut down in the short run
E)  could be operating in either the short run or the long runF) A) and C)
G) A) and E)

Question 10

A monopolist maximizes profit at the quantity where its total revenue curve equals total cost.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is true of marginal revenue for a monopolist that charges a single price?

Accepted Answer

A)  P = MR because there are no close substitutes for the monopolist's product.
B)  P > MR because the monopolist must decrease price on all units sold in order to sell an additional unit.
C)  P 
D)  AR = MR because there are no close substitutes for the monopolist's product.
E)  P = MR only at the profit-maximizing quantity.F) All of the above
G) None of the above

Question 12

The welfare loss of monopoly is also called

Accepted Answer

A)  converted consumer surplus
B)  deadweight loss
C)  economic profit under monopoly
D)  producer surplus
E)  contestable profitF) All of the above
G) None of the above

Question 13

Exhibit 9-17  Which area in Exhibit 9-17 represents deadweight loss under monopoly with perfect price discrimination?

Accepted Answer

A)  area a
B)  area b
C)  area c
D)  there is no deadweight loss
E)  area eF) A) and C)
G) A) and B)

Question 14

Exhibit 9-8  Consider Exhibit 9-8.What is the profit-maximizing quantity?

Accepted Answer

A)  1 unit
B)  2 units
C)  3 units
D)  4 units
E)  5 unitsF) D) and E)
G) B) and C)

Question 15

Exhibit 9-16  Exhibit 9-16 depicts the cost and demand conditions facing a profit-maximizing monopolist that does not price discriminate.Which of the following statements is true?

Accepted Answer

A)  An output of 50 is allocatively efficient, but the monopolist will produce 100 units.
B)  An output of 50 is allocatively efficient, but the monopolist will produce 75 units.
C)  An output of 75 is allocatively efficient, but the monopolist will produce 100 units.
D)  An output of 100 is allocatively efficient, but the monopolist will produce 50 units.
E)  An output of 100 is allocatively efficient, but the monopolist will produce 75 units.F) D) and E)
G) A) and B)

Question 16

Firms can earn economic profits even in the long run if

Accepted Answer

A)  they charge the highest price possible
B)  there is a cost-reducing technological change
C)  there are significant barriers to entry
D)  marginal revenue equals marginal cost
E)  price is less than average variable cost at all rates of outputF) A) and E)
G) A) and B)

Question 17

Suppose that a monopolist must choose between two points on its demand curve; it can sell 100 units for $3 each, or it can sell 160 units for $2 each.Which of the following is true?

Accepted Answer

A)  The monopolist is facing an elastic demand.
B)  The monopolist is facing unit elastic demand.
C)  The monopolist is facing inelastic demand.
D)  The monopolist is facing perfectly elastic demand.
E)  The elasticity of demand cannot be determined with the information given.F) A) and C)
G) A) and D)

Question 18

Exhibit 9-11  If the monopolist in Exhibit 9-11 does not price discriminate, the total amount consumers will spend on its profit-maximizing quantity of output is

Accepted Answer

A)  $95, 200
B)  $84, 000
C)  $79, 000
D)  $53, 200
E)  $42, 000F) C) and D)
G) B) and C)

Question 19

If a firm's demand curve slopes downward, the firm's

Accepted Answer

A)  marginal revenue will rise as price is reduced
B)  marginal revenue will generally be less than price
C)  total revenue will decline continuously as price is reduced
D)  marginal revenue will always be greater than its demand
E)  average revenue will increase continuously as output increasesF) B) and E)
G) All of the above

Question 20

Which of the following is not true of a pure monopoly?

Accepted Answer

A)  Demand is negatively sloped
B)  Marginal revenue is less than price therefore the firm should consider raising its price until marginal revenue equals demand
C)  Marginal revenue is less than average revenue therefore the firm should consider adjusting its quantity until marginal revenue equals average revenue
D)  It is a price taker
E)  Its position is protected by significant barriers to entryF) C) and D)
G) A) and E)

Exam 9: A--Monopoly

Exhibit 9-16 Exhibit 9-16 depicts the cost and demand conditions facing a profit-maximizing monopolist that does not price discriminate.Which of the following statements is true?

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Exhibit 9-14 At the profit-maximizing (or loss-minimizing) level of production, the monopoly in Exhibit 9-14 will have total cost of

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If marginal cost is positive, which of the following is true?

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Firms can earn economic profits even in the long run if

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Which of the following is not true of a pure monopoly?

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Exhibit 9-17 Which area in Exhibit 9-17 represents deadweight loss under monopoly with perfect price discrimination?

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A monopolist maximizes profit at the quantity where its total revenue curve equals total cost.

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Exhibit 9-14 At the profit-maximizing (or loss-minimizing) level of production, the monopoly in Exhibit 9-14 will have a

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Exhibit 9-5 The firm in Exhibit 9-5

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Exhibit 9-11 If the monopolist in Exhibit 9-11 does not price discriminate, the total amount consumers will spend on its profit-maximizing quantity of output is

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Which of the following is true of marginal revenue for a monopolist that charges a single price?

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If a firm's demand curve slopes downward, the firm's

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Exhibit 9-8 Consider Exhibit 9-8.What is the profit-maximizing quantity?

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Suppose that a monopolist must choose between two points on its demand curve; it can sell 100 units for $3 each, or it can sell 160 units for $2 each.Which of the following is true?

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The welfare loss of monopoly is also called

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Patents stimulate investment

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In the short run, a monopolist will shut down when

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In the long run, which of the following is not a problem for a monopolist earning economic profit?

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Assuming a constant cost industry, consumer surplus would be greater under monopoly than if the industry were perfectly competitive.

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For a monopolist, P < MR at all quantities.

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