Question 1

The MR = MC rule

Accepted Answer

A)  applies only to pure competition.
B)  applies only to pure monopoly.
C)  does not apply to pure monopoly, because price exceeds marginal revenue.
D)  applies both to pure monopoly and pure competition.

Question 2

If a regulatory commission wants to provide a natural monopoly with a fair return, it should establish a price that is equal to

Accepted Answer

A)  minimum average fixed cost.
B)  average total cost.
C)  marginal cost.
D)  marginal revenue.

Question 3

Refer to the demand and cost data for a pure monopolist given in the table. An unregulated, nondiscriminating monopolist would earn maximum profits of

Accepted Answer

A)  $420.
B)  $70.
C)  $190.
D)  $360.

Question 4

Successful price discrimination requires that buyers charged the different prices be physically separated.

Accepted Answer

A) True 
 B)False

Question 5

Refer to the two diagrams for individual firms. Line A represents the firm's

Accepted Answer

A)  total revenue in Figure 1 and average revenue in Figure 2.
B)  demand curve in both figures.
C)  marginal revenue in Figure 1 and total revenue in Figure 2.
D)  total revenue curve in both figures.

Question 6

The higher prices charged by monopolists

Accepted Answer

A)  are like a private tax that redistributes income from consumers to monopoly sellers.
B)  are socially optimal because they better reflect how much society values the good relative to the resources used to produce it.
C)  return to consumers through the public goods provided by monopolies.
D)  have no effect on the distribution of income.

Question 7

Refer to the graph, which shows the revenue curves for a monopolist. If it wants to sell quantity Q₁, it must charge at price

Accepted Answer

A)  P₁.
B)  P₂.
C)  0.
D)  The correct price is not labeled on the graph.

Question 8

Assume a pure monopolist is charging price P and selling output Q, as shown on the diagram. On the basis of this information, we can say that

Accepted Answer

A)  if marginal costs were somehow zero, the firm would be maximizing its profits.
B)  if marginal costs were positive, the firm would increase profits by reducing price and selling more output.
C)  the firm is producing where the price elasticity coefficient is less than one.
D)  the firm is a "price taker."

Question 9

Which of the diagrams correctly portrays the demand (D) and marginal revenue (MR) curves of a purely competitive seller?

Accepted Answer

A)  A
B)  B
C)  C
D)  D

Question 10

If the industry depicted in this graph operated as a pure monopoly, the output quantity would be

Accepted Answer

A)  90.
B)  160.
C)  195.
D)  a level that is not labeled in the graph.

Question 11

Which of the following does not necessarily apply to a pure monopoly?

Accepted Answer

A)  The product the firm produces must have no close substitutes.
B)  The firm must be the sole producer of a product.
C)  The firm will charge the highest price possible.
D)  Entry must be blocked.

Question 12

Refer to the cost and demand curves for a pure monopolist. Suppose that this monopoly is subjected to a regulatory commission. If the commission seeks to achieve the most efficient allocation of resources for this industry, it should set the socially optimal price at

Accepted Answer

A)  P₁.
B)  P₂.
C)  P₃.
D)  0.

Question 13

A monopoly is most likely to emerge and be sustained when

Accepted Answer

A)  output demand is relatively elastic.
B)  firms have U-shaped average-total-cost curves.
C)  fixed capital costs are small relative to total costs.
D)  economies of scale are large relative to market demand.

Question 14

A nondiscriminating pure monopolist finds that it can sell its 82nd unit of output for $12. We can surmise that the marginal

Accepted Answer

A)  cost of the 82nd unit is also $12.
B)  revenue of the 82nd unit is also $12.
C)  revenue of the 82nd unit is less than $12.
D)  revenue of the 82nd unit is greater than $12.

Question 15

Refer to the demand and cost data for a pure monopolist given in the table. If the monopolist were forced to produce the socially optimal output through the imposition of a ceiling price, the ceiling price would have to be set at

Accepted Answer

A)  $100.
B)  $150.
C)  $200.
D)  $250.

Question 16

What do economies of scale, the ownership of essential raw materials, and patents have in common?

Accepted Answer

A)  They must all be present before price discrimination can be practiced.
B)  They are all barriers to entry.
C)  They all help explain why a monopolist's demand and marginal revenue curves coincide.
D)  They all help explain why the long-run average cost curve is U-shaped.

Question 17

Assume the figure applies to a pure monopolist and that MC is the same for both graphs. If this firm is able to price discriminate between children and adults, it should charge prices of

Accepted Answer

A)  P₁ to children and P₂ to adults.
B)  P₁ to adults and P₂ to children.
C)  P₁ to both children and adults.
D)  P₂ to both children and adults.

Question 18

Many people believe that monopolies charge any price they want to without affecting sales. In fact, the output and sales level for a profit-maximizing monopoly is codetermined with price where

Accepted Answer

A)  marginal cost = average revenue.
B)  marginal revenue = average cost.
C)  average total cost = average revenue.
D)  marginal cost = marginal revenue.

Question 19

Suppose that a pure monopolist can sell 5 units of output at $4 per unit and 6 units at $3.90 per unit. For the monopolist to profitably produce and sell the sixth unit of output, its marginal cost must be anywhere at or below

Accepted Answer

A)  $4.
B)  $3.90.
C)  $3.50.
D)  $3.40.

Question 20

Refer to the data for a nondiscriminating monopolist. At its profit-maximizing output, this firm's price will exceed its marginal cost by ____ and its average total cost by ____.

Accepted Answer

A)  $20; $27.33
B)  $10; $10.40
C)  $24; $27.33
D)  $30; $20.50

Exam 12: Pure Monopoly

Refer to the data for a nondiscriminating monopolist. At its profit-maximizing output, this firm's price will exceed its marginal cost by ____ and its average total cost by ____.

Correct AnswerverifiedShow Answer

Suppose that a pure monopolist can sell 5 units of output at $4 per unit and 6 units at $3.90 per unit. For the monopolist to profitably produce and sell the sixth unit of output, its marginal cost must be anywhere at or below

Correct AnswerverifiedShow Answer

The higher prices charged by monopolists

Correct AnswerverifiedShow Answer

The MR = MC rule

Correct AnswerverifiedShow Answer

A monopoly is most likely to emerge and be sustained when

Correct AnswerverifiedShow Answer

Which of the diagrams correctly portrays the demand (D) and marginal revenue (MR) curves of a purely competitive seller?

Correct AnswerverifiedShow Answer

If the industry depicted in this graph operated as a pure monopoly, the output quantity would be

Correct AnswerverifiedShow Answer

If a regulatory commission wants to provide a natural monopoly with a fair return, it should establish a price that is equal to

Correct AnswerverifiedShow Answer

Refer to the demand and cost data for a pure monopolist given in the table. An unregulated, nondiscriminating monopolist would earn maximum profits of

Correct AnswerverifiedShow Answer

What do economies of scale, the ownership of essential raw materials, and patents have in common?

Correct AnswerverifiedShow Answer

Assume the figure applies to a pure monopolist and that MC is the same for both graphs. If this firm is able to price discriminate between children and adults, it should charge prices of

Correct AnswerverifiedShow Answer

A nondiscriminating pure monopolist finds that it can sell its 82nd unit of output for $12. We can surmise that the marginal

Correct AnswerverifiedShow Answer

Refer to the graph, which shows the revenue curves for a monopolist. If it wants to sell quantity Q₁, it must charge at price

Correct AnswerverifiedShow Answer

Assume a pure monopolist is charging price P and selling output Q, as shown on the diagram. On the basis of this information, we can say that

Correct AnswerverifiedShow Answer

Which of the following does not necessarily apply to a pure monopoly?

Correct AnswerverifiedShow Answer

Successful price discrimination requires that buyers charged the different prices be physically separated.

Correct AnswerverifiedShow Answer

Many people believe that monopolies charge any price they want to without affecting sales. In fact, the output and sales level for a profit-maximizing monopoly is codetermined with price where

Correct AnswerverifiedShow Answer

Refer to the two diagrams for individual firms. Line A represents the firm's

Correct AnswerverifiedShow Answer

Refer to the demand and cost data for a pure monopolist given in the table. If the monopolist were forced to produce the socially optimal output through the imposition of a ceiling price, the ceiling price would have to be set at

Correct AnswerverifiedShow Answer

Refer to the cost and demand curves for a pure monopolist. Suppose that this monopoly is subjected to a regulatory commission. If the commission seeks to achieve the most efficient allocation of resources for this industry, it should set the socially optimal price at

Correct AnswerverifiedShow Answer

Refer to the data for a nondiscriminating monopolist. At its profit-maximizing output, this firm's price will exceed its marginal cost by and its average total cost by .

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified