Question 1

Which of the following statements is true?

Accepted Answer

A)   One reason a monopoly can earn economic profits is because it can raise price and restrict output.
B)   A perfectly competitive firm can earn economic profits because it can raise price and restrict output.
C)   Income is transferred from producers to consumers in a monopoly compared to perfect competition.
D)   Monopolists who price-discriminate rarely earn positive economic profits in the long run.

Question 2

Marginal revenue can be:

Accepted Answer

A)   never negative.
B)   always positive.
C)   only zero.
D)   zero, positive or negative.

Question 3

The monopolist can choose:

Accepted Answer

A)   any price for its product.
B)   the demand curve.
C)   price and quantity to produce.
D)   price or quantity to produce.

Question 4

Narrbegin Exhibit 8.6 Monopolist  
-According to the information provided in Exhibit 8.6, if the Rudd Ice Company is a monopoly and is currently charging a price of $10, what would you advise Rudd to do?

Accepted Answer

A)   Stay where he is currently operating because he is charging the profit-maximising price.
B)   Increase price and increase output.
C)   Decrease price and increase output.
D)   Increase output and hold price constant.

Question 5

Bus services often offer lower prices for students and pensioners because:

Accepted Answer

A)   they have a more inelastic demand for bus services.
B)   its the right thing to do morally.
C)   they have a higher elasticity for bus services than the adult working population.
D)   they have a higher willingness to pay.

Question 6

A casino is often protected by license because:

Accepted Answer

A)   it is helping gamblers to access the services.
B)   it allows the casino to enjoy the competitive pricing.
C)   it creates a stream of revenue to the government.
D)   it invites more casinos to open.

Question 7

The only hairdresser in a small town is an example of:

Accepted Answer

A)   monopsy.
B)   luxury.
C)   monopoly.
D)   oligopoly.

Question 8

Suppose a monopolist charges a price corresponding to the intersection of the marginal cost and marginal revenue curves. If the price is between its average variable cost and average total cost curves, the firm will:

Accepted Answer

A)   earn an economic profit.
B)   stay in operation in the short run, but shut down in the long run if demand remains the same.
C)   shut down.
D)   charge a higher price.

Question 9

Which barrier to entry results in the creation of a natural monopoly?

Accepted Answer

A)   Legal barriers like government franchises.
B)   Economies of scale.
C)   Ownership of a vital resource.
D)   Patents and copyrights.

Question 10

A single priced monopoly:

Accepted Answer

A)   can increase price and increase output at the same time.
B)   can charge any price it wants and still sell all of its output.
C)   can sell any output it produces provided it accepts the market price.
D)   must lower price in order to increase output.

Question 11

At a price of $5, 24 units of a good would be sold. At a price of $10, 25 units of output would be sold. The marginal revenue of the 25th unit of output is:

Accepted Answer

A)   $14.
B)   $55.
C)   $100.
D)   $130.

Question 12

Narrbegin Exhibit 8.6 Monopolist  
-According to the information provided in Exhibit 8.6, if the Rudd Ice Company is a monopoly and is currently charging a price of $8, what would you advise Rudd to do?

Accepted Answer

A)   Stay where he is currently operating because he is charging the profit-maximising price.
B)   Increase price and increase output.
C)   Decrease price and increase output.
D)   Increase output and hold price constant.

Question 13

Narrbegin Exhibit 8.3 Demand and cost curves for GeneTech, a monopolist with a patented vaccine  
-In Exhibit 8.3, what is the maximum hourly profit that GeneTech can earn from its vaccine?

Accepted Answer

A)   $1500.
B)   $3000.
C)   $4500.
D)   $10 500.

Question 14

For a monopolist to practise price discrimination, one necessary condition is that the product offered for sale must be:

Accepted Answer

A)   high quality.
B)   expensive.
C)   cheap.
D)   impossible or difficult to resell.

Question 15

The most effective barrier/s to protect a monopoly from competition is/are:

Accepted Answer

A)   legal barriers or government ownership.
B)   excessive advertising by the monopoly.
C)   higher wages paid to the monopoly's workers.
D)   the high quality product offered by a monopoly.

Question 16

What should a profit-maximising monopolist do if she is currently producing where MC < MR?

Accepted Answer

A)   Increase output until MC = MR.
B)   Decrease output until MC = MR.
C)   Shut down in the long run.
D)   Keep producing at this level.

Question 17

In contrast to a perfectly competitive firm, a monopolist operates in the long run at a quantity of output at which:

Accepted Answer

A)   P = MC.
B)   MR = MC.
C)   P = ATC.
D)   P > MR.

Question 18

Narrbegin Exhibit 8.7 0. B)  P1. C)  P2. D)  indeterminate as there is not enough information provided." class="answers-bank-image d-inline" rel="preload" > 
-According to Exhibit 8.7, the price a monopolist would charge is:

Accepted Answer

A)   P0.
B)   P1.
C)   P2.
D)   indeterminate as there is not enough information provided.

Question 19

Competition means:

Accepted Answer

A)   that a society's wealth is maximised.
B)   that a society experiences a deadweight loss.
C)   high prices and less goods.
D)   that a society misallocates its resources.

Question 20

A recent study has concluded that working adults have a price elasticity of demand of 1.72 for train services, while pensioners have a price elasticity of demand of 3.74. If price discrimination is possible, then the company providing the train service will:

Accepted Answer

A)   charge a lower price to working adults than to pensioners.
B)   charge a lower price to pensioners than to working adults.
C)   earn higher profits by charging everyone the same price.
D)   lower prices for all customers because demand is elastic for both groups.

Exam 9: Monopoly

Which barrier to entry results in the creation of a natural monopoly?

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What should a profit-maximising monopolist do if she is currently producing where MC < MR?

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A casino is often protected by license because:

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Marginal revenue can be:

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Narrbegin Exhibit 8.6 Monopolist -According to the information provided in Exhibit 8.6, if the Rudd Ice Company is a monopoly and is currently charging a price of $8, what would you advise Rudd to do?

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Bus services often offer lower prices for students and pensioners because:

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The most effective barrier/s to protect a monopoly from competition is/are:

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Narrbegin Exhibit 8.6 Monopolist -According to the information provided in Exhibit 8.6, if the Rudd Ice Company is a monopoly and is currently charging a price of $10, what would you advise Rudd to do?

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Competition means:

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At a price of $5, 24 units of a good would be sold. At a price of $10, 25 units of output would be sold. The marginal revenue of the 25th unit of output is:

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For a monopolist to practise price discrimination, one necessary condition is that the product offered for sale must be:

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The monopolist can choose:

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The only hairdresser in a small town is an example of:

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Narrbegin Exhibit 8.3 Demand and cost curves for GeneTech, a monopolist with a patented vaccine -In Exhibit 8.3, what is the maximum hourly profit that GeneTech can earn from its vaccine?

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A single priced monopoly:

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Narrbegin Exhibit 8.7 -According to Exhibit 8.7, the price a monopolist would charge is:

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In contrast to a perfectly competitive firm, a monopolist operates in the long run at a quantity of output at which:

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Suppose a monopolist charges a price corresponding to the intersection of the marginal cost and marginal revenue curves. If the price is between its average variable cost and average total cost curves, the firm will:

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Which of the following statements is true?

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A recent study has concluded that working adults have a price elasticity of demand of 1.72 for train services, while pensioners have a price elasticity of demand of 3.74. If price discrimination is possible, then the company providing the train service will:

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