Question 1

Relative to a perfectly competitive market,a monopoly produces

Accepted Answer

A)   more output, charges higher prices, and earns economic profits.
B)   more output, charges higher prices, and incurs economic losses.
C)   less output, charges higher prices, and earns only a normal profit.
D)   less output, charges higher prices, and earns economic profits.

Question 2

A Colombian emerald mine has a monopoly over the production of emeralds in Colombia.The mine will find it profitable to increase the mining production of emeralds as long as marginal cost

Accepted Answer

A)   is less than marginal revenue.
B)   equals marginal revenue.
C)   is greater than marginal revenue.
D)   is positive.

Question 3

Because the marginal revenue curve for a monopolist lies below its demand curve,the profit-maximizing price of the monopolist will be above marginal cost.

Accepted Answer

A) True 
 B)False

Question 4

Explain why a firm may choose to price discriminate.

Accepted Answer

By charging different prices to differen...

Question 5

What three conditions must be met in order for a firm to be able to price discriminate?

Accepted Answer

(1)The firm must have market p...

Question 6

A firm has an opportunity of price discrimination if

Accepted Answer

A)   it has some control over the price of its product.
B)   it can split consumers in to different groups.
C)   its products are not easily resold.
D)   All of the above are correct.

Question 7

Suppose Coca Cola Company uses heat sensors and microchips to automatically change prices of its products.Which of the following economic concepts describes Coca Cola's goal to charge higher prices for a can of Coke on a hot day?

Accepted Answer

A)   price discrimination
B)   rent-seeking
C)   deadweight loss
D)   internalizing an externality

Question 8

One barrier to entry is a patent granted by consumer associations.

Accepted Answer

A) True 
 B)False

Question 9

-Figure 10.7 shows the demand and cost conditions for a monopolist.What is the firm's maximum profit?

Accepted Answer

The monopolist will produce 10...

Question 10

A profit-maximizing monopolist will produce an output level at which

Accepted Answer

A)   marginal revenue is zero.
B)   marginal cost is minimized.
C)   price equals marginal cost.
D)   marginal revenue equals marginal cost.

Question 11

A local cable company has a monopoly on cable service.If it sells 20 of its packages its total revenue is $10,000,and if it sells 21 packages its total revenue is $10,600.When the local cable company sells 21 packages,the price per package is closest to

Accepted Answer

A)   $600.
B)   $505.
C)   $500.
D)   $50.

Question 12

Assume that Lorex is the only pharmaceutical company that has a patent in producing the cholesterol drug Lipitor.Lorex can make a profit by selling Lipitor

Accepted Answer

A)   in the short run but not in the long run because new firms will enter the industry in the long run.
B)   only in the long run because government regulations prevent monopolists from earning profits in the short run.
C)   in the long run but not the short run because the monopolist will face competition in the short run.
D)   in the long run because entry into the industry by new firms is blocked until the patent expires.

Question 13

Which of the following is an example of price discrimination?

Accepted Answer

A)   Firm A sells its output for less than Firm B.
B)   Firm C doubles the price of its output given a large increase in market demand.
C)   Firm D is the only seller of a product.
D)   Firm E gives senior citizens a 10% discount.

Question 14

-Refer to Figure 10.4.The Exclusive Gift Company has a monopoly over the sale of gold hula hoops.This company is currently selling 50 gold hula hoops at a price of $5,000.You are hired as an economic consultant to this company.You should advise this monopolist to

Accepted Answer

A)   shut down in the short run and exit the industry in the long run.
B)   produce in the short run and expand capacity in the long run.
C)   produce in the short run but exit the industry in the long run if conditions do not change.
D)   shut down in the short run but expand capacity in the long run if conditions do not change.

Question 15

Another source of inefficiency from a monopoly is the use of resources to acquire monopoly power.

Accepted Answer

A) True 
 B)False

Question 16

Explain what economists mean when they refer to rent-seeking behavior.

Accepted Answer

Firms with monopoly power will earn a la...

Question 17

Given that a firm can divide its customers into two groups with different price elasticities of demand,a firm will charge a lower price to the group with the inelastic demand.

Accepted Answer

A) True 
 B)False

Question 18

In a monopoly,the market demand curve is

Accepted Answer

A)   the same as the demand curve facing the firm.
B)   the summation of all the individual firms' demand curves.
C)   nonexistent.
D)   the marginal cost curve above minimum average variable cost.

Question 19

In order for a monopoly to maximize its profit,the monopoly will produce the quantity at which marginal revenue is less than marginal cost.

Accepted Answer

A) True 
 B)False

Question 20

A firm can effectively practice price discrimination and increase profit if

Accepted Answer

A)   the marginal cost of production in each market is different.
B)   the average cost of production in each market is different.
C)   the price elasticity of demand in each market is different.
D)   the product can be produced in two different factories.

Exam 10: Monopoly and Price Discrimination

Given that a firm can divide its customers into two groups with different price elasticities of demand,a firm will charge a lower price to the group with the inelastic demand.

Correct AnswerverifiedShow Answer

Explain why a firm may choose to price discriminate.

Correct AnswerverifiedBy charging different prices to differen...View AnswerShow Answer

Explain what economists mean when they refer to rent-seeking behavior.

Correct AnswerverifiedFirms with monopoly power will earn a la...View AnswerShow Answer

Assume that Lorex is the only pharmaceutical company that has a patent in producing the cholesterol drug Lipitor.Lorex can make a profit by selling Lipitor

Correct AnswerverifiedShow Answer

A firm can effectively practice price discrimination and increase profit if

Correct AnswerverifiedShow Answer

Another source of inefficiency from a monopoly is the use of resources to acquire monopoly power.

Correct AnswerverifiedShow Answer

A profit-maximizing monopolist will produce an output level at which

Correct AnswerverifiedShow Answer

One barrier to entry is a patent granted by consumer associations.

Correct AnswerverifiedShow Answer

What three conditions must be met in order for a firm to be able to price discriminate?

Correct Answerverified(1)The firm must have market p...View AnswerShow Answer

A Colombian emerald mine has a monopoly over the production of emeralds in Colombia.The mine will find it profitable to increase the mining production of emeralds as long as marginal cost

Correct AnswerverifiedShow Answer

Which of the following is an example of price discrimination?

Correct AnswerverifiedShow Answer

-Figure 10.7 shows the demand and cost conditions for a monopolist.What is the firm's maximum profit?

Correct AnswerverifiedThe monopolist will produce 10...View AnswerShow Answer

A firm has an opportunity of price discrimination if

Correct AnswerverifiedShow Answer

Suppose Coca Cola Company uses heat sensors and microchips to automatically change prices of its products.Which of the following economic concepts describes Coca Cola's goal to charge higher prices for a can of Coke on a hot day?

Correct AnswerverifiedShow Answer

-Refer to Figure 10.4.The Exclusive Gift Company has a monopoly over the sale of gold hula hoops.This company is currently selling 50 gold hula hoops at a price of $5,000.You are hired as an economic consultant to this company.You should advise this monopolist to

Correct AnswerverifiedShow Answer

In order for a monopoly to maximize its profit,the monopoly will produce the quantity at which marginal revenue is less than marginal cost.

Correct AnswerverifiedShow Answer

Relative to a perfectly competitive market,a monopoly produces

Correct AnswerverifiedShow Answer

A local cable company has a monopoly on cable service.If it sells 20 of its packages its total revenue is $10,000,and if it sells 21 packages its total revenue is $10,600.When the local cable company sells 21 packages,the price per package is closest to

Correct AnswerverifiedShow Answer

In a monopoly,the market demand curve is

Correct AnswerverifiedShow Answer

Because the marginal revenue curve for a monopolist lies below its demand curve,the profit-maximizing price of the monopolist will be above marginal cost.

Correct AnswerverifiedShow Answer

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By charging different prices to differen...
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Firms with monopoly power will earn a la...
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(1)The firm must have market p...
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The monopolist will produce 10...
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