Question 1

NARRBEGIN: Exhibit 9-5-1
Exhibit 9-5
 
-The nondiscriminating monopolist in Exhibit 9-5 will produce where

Accepted Answer

A)   MR = 0
B)   MR = MC
C)   MC 
D)   MC = ATC
E)   D = MC

Question 2

NARRBEGIN: Exhibit 9-12
Exhibit 9-12
 
-The profit-maximizing level of output and price for the nondiscriminating monopolist in Exhibit 9-12 are

Accepted Answer

A)   f and $a
B)   g and $c
C)   f and $b
D)   f and $d
E)   f and $e

Question 3

The supply curve for a monopolist

Accepted Answer

A)   is its marginal cost curve
B)   is vertical because there are no close substitutes for its product
C)   is horizontal because there are no close substitutes for its product
D)   slopes upward
E)   does not exist

Question 4

NARRBEGIN: Exhibit 9-5-1
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 run

Question 5

The actual deadweight loss from monopoly in the U.S. may be greater than calculated estimates because some

Accepted Answer

A)   monopolies experience strong economies of scale
B)   monopolists spend resources to secure and maintain their monopoly
C)   monopolists may purposely keep price lower than its profit-maximizing level, in order to increase barriers to entry
D)   monopolists' markets are contestable
E)   monopolists' prices and profits are regulated by the government

Question 6

For a nondiscriminating monopolist, describe the relationship between market price (P) , average revenue (AR) , and marginal revenue (MR) .

Accepted Answer

A)   P = AR = MR
B)   P > AR = MR
C)   P = AR > MR
D)   P > AR > MR
E)   P = AR < MR

Question 7

Average revenue equals the change in total revenue divided by the change in the quantity of output produced.

Accepted Answer

A) True 
 B)False

Question 8

Willie Stand obtains a patent on his new invention, the bipod. After twenty years,

Accepted Answer

A)   he can renew his patent
B)   new entrants will begin bipod production if price exceeds average variable cost
C)   new entrants will drive up the price of the bipod
D)   Willie will eventually earn no more than a normal profit
E)   Willie will continue to earn a positive economic profit, because entry will not affect the price of bipods

Question 9

A profit-maximizing monopolist

Accepted Answer

A)   never produces on the inelastic portion of the demand curve because it can increase profit by increasing output
B)   never produces on the inelastic portion of the demand curve because marginal revenue exceeds marginal cost
C)   always produces on the inelastic portion of the demand curve
D)   never produces on the elastic portion of the demand curve because there are no substitutes for the good it produces
E)   never produces on the inelastic portion of the demand curve because marginal revenue is negative there

Question 10

Which of the following would probably not be considered a natural monopoly?

Accepted Answer

A)   a municipal water company
B)   the local telephone industry
C)   the cable television industry
D)   natural gas and electric companies
E)   the automobile industry

Question 11

For a nondiscriminating monopolist, which of the following is false?

Accepted Answer

A)   The monopolist produces where MR = MC.
B)   The monopolist's marginal revenue curve is the same as its demand curve.
C)   The monopolist will never produce in the inelastic range of its demand curve.
D)   A monopolist is more allocatively inefficient than a perfectly competitive firm.
E)   The monopolist produces where P > MC.

Question 12

NARRBEGIN: Exhibit 9-16
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.

Question 13

Which of the following is not true of monopolists?

Accepted Answer

A)   The entry of new firms is not a major concern.
B)   Monopolists seek to maximize profits.
C)   Monopolists can charge any price they want and make a profit.
D)   Monopolists can choose any point on the market demand curve.
E)   Monopolists can raise price more than 10 percent.

Question 14

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

Accepted Answer

A) True 
 B)False

Question 15

Suppose Arf n' Barf restaurant has a monopoly on restaurant food in a certain small town. Their rent, which is one of several fixed costs they pay whether they sell food or not, has gone up. In the short run, the Arf n' Barf should

Accepted Answer

A)   pay the higher rent and increase menu prices
B)   pay the higher rent and leave menu prices unchanged
C)   pay the higher rent and lower prices
D)   go out of business
E)   shut down

Question 16

The demand curve facing a monopolist

Accepted Answer

A)   is kinked at the market price
B)   is perfectly elastic
C)   lies above its marginal revenue curve
D)   lies below its marginal revenue curve
E)   is the same as its marginal revenue curve

Question 17

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 surplus

Question 18

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.

Question 19

In the short run, a monopolist will always shut down when

Accepted Answer

A)   total cost is greater than total revenue at all output levels
B)   total variable cost is greater than fixed cost
C)   total revenue is greater than total variable cost at all output levels
D)   fixed cost is greater than total revenue at all output levels
E)   total variable cost is greater than total revenue at all output levels

Question 20

For a monopolist that does not price discriminate, economic profit is maximized in the short run at a price of $140. Marginal revenue at that output level is

Accepted Answer

A)   equal to $140
B)   greater than $140
C)   less than $140
D)   less than marginal cost
E)   greater than average revenue

Exam 9: A: Monopoly

Which of the following is not true of monopolists?

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Which of the following would probably not be considered a natural monopoly?

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In the short run, a monopolist will always shut down when

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Willie Stand obtains a patent on his new invention, the bipod. After twenty years,

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The demand curve facing a monopolist

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NARRBEGIN: Exhibit 9-16 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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Which of the following is true of marginal revenue for a monopolist that charges a single price?

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NARRBEGIN: Exhibit 9-12 Exhibit 9-12 -The profit-maximizing level of output and price for the nondiscriminating monopolist in Exhibit 9-12 are

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A profit-maximizing monopolist

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For a nondiscriminating monopolist, which of the following is false?

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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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For a monopolist that does not price discriminate, economic profit is maximized in the short run at a price of $140. Marginal revenue at that output level is

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Suppose Arf n' Barf restaurant has a monopoly on restaurant food in a certain small town. Their rent, which is one of several fixed costs they pay whether they sell food or not, has gone up. In the short run, the Arf n' Barf should

Correct AnswerverifiedShow Answer

NARRBEGIN: Exhibit 9-5-1 Exhibit 9-5 -The nondiscriminating monopolist in Exhibit 9-5 will produce where

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For a nondiscriminating monopolist, describe the relationship between market price (P) , average revenue (AR) , and marginal revenue (MR) .

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Average revenue equals the change in total revenue divided by the change in the quantity of output produced.

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The actual deadweight loss from monopoly in the U.S. may be greater than calculated estimates because some

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NARRBEGIN: Exhibit 9-5-1 Exhibit 9-5 -The firm in Exhibit 9-5

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The supply curve for a monopolist

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

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