Question 1

Which of the following examples comes the closest to describing a monopsony market?

Accepted Answer

A)   The market for beryllium.
B)   The market for Microsoft Windows.
C)   The market for breakfast cereal.
D)   The market for United States military uniforms.

Question 2

Which of the following best explains why there is no meaningful supply curve for a monopolist?

Accepted Answer

A)   The monopolist is the only supplier.
B)   Price is exogenous to the monopolist.
C)   The monopolist is already maximizing profits; thus, it doesn't need a supply curve.
D)   Price is endogenous. That is, the monopolist determines both quantity and price. Hence, there is no longer a unique association between price and quantity supplied.

Question 3

Identify the false statement.

Accepted Answer

A)   A monopolist and a perfectly competitive firm both maximize profits.
B)   A monopolist and a perfectly competitive firm both produce an output level where marginal revenue equals marginal cost.
C)   A monopolist and a perfectly competitive firm both produce where price equals marginal cost.
D)   A monopolist and a perfectly competitive firm both charge a price based on the demand curve facing the firm and the costs borne by the firm.

Question 4

One argument for allowing monopolies to exist is

Accepted Answer

A)   it would be inefficient to break up natural monopolies into smaller units.
B)   monopolies lead to net economic benefits as a rule.
C)   the free market acts as a more effective regulator than the government.
D)   they allow for greater standardization of products and improved quality control.

Question 5

As a monopolist's demand curve becomes more inelastic,

Accepted Answer

A)   the profit-maximizing price goes up.
B)   the profit-maximizing price goes down.
C)   the optimal mark-up of price over marginal cost goes down.
D)   average revenue falls.

Question 6

The Lerner Index for a firm operating in a perfectly competitive industry would be

Accepted Answer

A)   less than zero.
B)   zero.
C)   between zero and one.
D)   one. B

Question 7

Which of the following statements is true?

Accepted Answer

A)   Monopoly profits are generally zero.
B)   Monopoly profits are maximized when total revenue is maximized.
C)   The condition, MC = MR, is the optimizing condition for monopolists and firms in perfectly competitive markets.
D)   Usually the demand and marginal revenue curves for a monopoly are the same.

Question 8

Suppose a monopolist faces a demand curve Q = aP-b and that the monopolist has a constant marginal cost of C. The monopolist's profit-maximizing price is

Accepted Answer

A)    P=C(1−1/b) P = C ( 1 - 1 / b ) P=C(1−1/b)  
B)    P=C(1/b) P = C ( 1 / b ) P=C(1/b)  
C)    P=C(11−1/b) P = C \left( \frac { 1 } { 1 - 1 / b } \right) P=C(1−1/b1​)  
D)   P = C(-1/b)   C

Question 9

The term product differentiation refers to:

Accepted Answer

A)   A situation in which two or more products possess technical differences, which may or may not be perceived by consumers.
B)   A situation in which two or more products possess attributes that, in the minds of consumers, set the products apart from one another and make them less than perfect substitutes.
C)   A situation in which two or more firms produce products for a given market.
D)   A situation in which two or more consumers purchase differing amounts of a product in a market.

Question 10

For a monopolist

Accepted Answer

A)   selling price is greater than average revenue.
B)   selling price is equal to average revenue.
C)   selling price is less than average revenue.
D)   selling price may be above or below average revenue; it depends on the price buyers are willing to pay.

Question 11

A monopolist faces inverse demand  P=300−6QP = 300 - 6 QP=300−6Q  and has marginal cost  MC=120+6QM C = 120 + 6 QMC=120+6Q  . What price should this monopolist charge to maximize profit?

Accepted Answer

A)   10
B)   50
C)   210
D)   240

Question 12

Which of the following describes a correct relation between price elasticity of demand and a monopolist's marginal revenue when inverse demand is linear, P = a-bQ?

Accepted Answer

A)   Demand is elastic when Q > a/2b.
B)   Demand is inelastic when Q > a/b.
C)   Demand is unit elastic when P = a/2b.
D)   Demand is elastic when Q < a/2b.

Question 13

A monopolist owns two plants in which to produce a product which has inverse demand P = (770/3)  - 3Q. The monopolist has marginal cost curves of MC1 = 20+3Q1 and MC2 = 10+6Q2 in the two plants, respectively. Which of the following represents the optimal outputs in the two plants, Q1 and Q2 and the market price?

Accepted Answer

A)   Q1 = 170/9; Q2 = 100/9; P = 500/3.
B)   Q1 = 100/9; Q2 = 170/9; P = 500/3.
C)   Q1 = 500/3; Q2 = 170/9; P = 100/9.
D)   Q1 = 500/3; Q2 = 100/9; P = 170/9.

Question 14

To compute the optimal monopoly price with a linear demand curve, the monopolist

Accepted Answer

A)   should set MC = MR, which would determine the optimal quantity and price would equal MC and MR as well.
B)   should set MC = MR, which would determine the optimal quantity and price would be found by inserting the optimal quantity into the monopolist's demand curve.
C)   should set MC = MR, which would determine the optimal quantity and price would be found by doubling the marginal cost.
D)   should set output where total revenue would be the greatest.

Question 15

In order to calculate the Lerner Index for a particular firm, you need to know _______ and ______ for that firm.

Accepted Answer

A)   marginal cost; marginal revenue
B)   marginal cost; price
C)   price; quantity
D)   price; demand B

Question 16

Use the following diagram to answer the following questions:

-The total economic benefit under perfect competition would be

Accepted Answer

A)   2,700
B)   1,350
C)   675
D)   500

Question 17

A monopolist will produce where

Accepted Answer

A)   demand is elastic.
B)   demand is perfectly elastic.
C)   demand is inelastic.
D)   demand is perfectly inelastic.

Question 18

A monopolist faces a demand curve  Q=50P−4Q = 50 P ^ { - 4 }Q=50P−4  and that the monopolist has a constant marginal cost of 75. The monopolist's profit-maximizing price is

Accepted Answer

A)   25
B)   50
C)   75
D)   100

Question 19

Use the following diagram to answer the following questions:

-The total economic benefit under monopoly would be

Accepted Answer

A)   300
B)   600
C)   900
D)   1,200

Question 20

If a monopolist's marginal cost shifts upward,

Accepted Answer

A)   total revenue will remain unchanged.
B)   total revenue will increase.
C)   total revenue will fall.
D)   total revenue may rise or fall depending on the slope of the demand curve.

Exam 11: Monopoly and Monopsony

Which of the following examples comes the closest to describing a monopsony market?

Correct Answer
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Which of the following best explains why there is no meaningful supply curve for a monopolist?

Correct Answer
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Identify the false statement.

Correct Answer
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One argument for allowing monopolies to exist is

Correct Answer
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As a monopolist's demand curve becomes more inelastic,

Correct Answer
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The Lerner Index for a firm operating in a perfectly competitive industry would be

Correct Answer
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B

Which of the following statements is true?

Correct Answer
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Suppose a monopolist faces a demand curve Q = aP^-b and that the monopolist has a constant marginal cost of C. The monopolist's profit-maximizing price is

Correct Answer
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C

The term product differentiation refers to:

Correct Answer
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For a monopolist

Correct Answer
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A monopolist faces inverse demand $P = 300 - 6 Q$ and has marginal cost $M C = 120 + 6 Q$ . What price should this monopolist charge to maximize profit?

Correct Answer
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Which of the following describes a correct relation between price elasticity of demand and a monopolist's marginal revenue when inverse demand is linear, P = a-bQ?

Correct Answer
verified

Correct Answer
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To compute the optimal monopoly price with a linear demand curve, the monopolist

Correct Answer
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In order to calculate the Lerner Index for a particular firm, you need to know _ and for that firm.

Correct Answer
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B

Use the following diagram to answer the following questions: -The total economic benefit under perfect competition would be

Correct Answer
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A monopolist will produce where

Correct Answer
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A monopolist faces a demand curve $Q = 50 P ^ { - 4 }$ and that the monopolist has a constant marginal cost of 75. The monopolist's profit-maximizing price is

Correct Answer
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Use the following diagram to answer the following questions: -The total economic benefit under monopoly would be

Correct Answer
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If a monopolist's marginal cost shifts upward,

Correct Answer
verified

Exam 11: Monopoly and Monopsony

Which of the following examples comes the closest to describing a monopsony market?

Correct AnswerverifiedShow Answer

Which of the following best explains why there is no meaningful supply curve for a monopolist?

Correct AnswerverifiedShow Answer

Identify the false statement.

Correct AnswerverifiedShow Answer

One argument for allowing monopolies to exist is

Correct AnswerverifiedShow Answer

As a monopolist's demand curve becomes more inelastic,

Correct AnswerverifiedShow Answer

The Lerner Index for a firm operating in a perfectly competitive industry would be

Correct AnswerverifiedB

Which of the following statements is true?

Correct AnswerverifiedShow Answer

Suppose a monopolist faces a demand curve Q = aP-b and that the monopolist has a constant marginal cost of C. The monopolist's profit-maximizing price is

Correct AnswerverifiedC

The term product differentiation refers to:

Correct AnswerverifiedShow Answer

For a monopolist

Correct AnswerverifiedShow Answer

A monopolist faces inverse demand P=300−6QP = 300 - 6 QP=300−6Q and has marginal cost MC=120+6QM C = 120 + 6 QMC=120+6Q . What price should this monopolist charge to maximize profit?

Correct AnswerverifiedShow Answer

Which of the following describes a correct relation between price elasticity of demand and a monopolist's marginal revenue when inverse demand is linear, P = a-bQ?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

To compute the optimal monopoly price with a linear demand curve, the monopolist

Correct AnswerverifiedShow Answer

In order to calculate the Lerner Index for a particular firm, you need to know _______ and ______ for that firm.

Correct AnswerverifiedB

Use the following diagram to answer the following questions: -The total economic benefit under perfect competition would be

Correct AnswerverifiedShow Answer

A monopolist will produce where

Correct AnswerverifiedShow Answer

A monopolist faces a demand curve Q=50P−4Q = 50 P ^ { - 4 }Q=50P−4 and that the monopolist has a constant marginal cost of 75. The monopolist's profit-maximizing price is

Correct AnswerverifiedShow Answer

Use the following diagram to answer the following questions: -The total economic benefit under monopoly would be

Correct AnswerverifiedShow Answer

If a monopolist's marginal cost shifts upward,

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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B

Correct Answer
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Suppose a monopolist faces a demand curve Q = aP^-b and that the monopolist has a constant marginal cost of C. The monopolist's profit-maximizing price is

Correct Answer
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C

Correct Answer
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Correct Answer
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A monopolist faces inverse demand $P = 300 - 6 Q$ and has marginal cost $M C = 120 + 6 Q$ . What price should this monopolist charge to maximize profit?

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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In order to calculate the Lerner Index for a particular firm, you need to know _ and for that firm.

Correct Answer
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B

Correct Answer
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Correct Answer
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A monopolist faces a demand curve $Q = 50 P ^ { - 4 }$ and that the monopolist has a constant marginal cost of 75. The monopolist's profit-maximizing price is

Correct Answer
verified

Correct Answer
verified

Correct Answer
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