Question 1

The fact that a monopoly has to take the shapes of marginal cost AND marginal revenue into account when making decisions is reflected in the fact that

Accepted Answer

A)  monopolies don't have a supply curve.
B)  monopolies have shifting demand curves.
C)  monopolies have the same supply curve as perfectly competitive firms.
D)  monopolies are subject to market failure.

Question 2

A monopolist that chooses price

Accepted Answer

A)  necessarily produces less than a monopolist that chooses quantity, hence the laws against price fixing.
B)  produces the same amount as a monopolist that chooses quantity.
C)  produces more than a monopolist that chooses quantity, thus the irony of laws against price fixing.
D)  can set price higher than the demand curve and earn additional profits, whereas a firm that chooses quantity cannot.

Question 3

A patent

Accepted Answer

A)  always gives rise to a monopoly.
B)  may not provide a barrier to entry.
C)  allows the patent owner to capture all of the consumer surplus.
D)  increases total welfare.

Question 4

Privatization of a state-owned monopoly can

Accepted Answer

A)  allow governments to capture future producer surplus.
B)  allow governments to be more efficient.
C)  reduce bribery of government officials.
D)  increases chances of reelection for politicians.

Question 5

If the inverse demand curve a monopoly faces is p = 100 - 2Q, and MC is constant at 16, then profit maximization is achieved when the monopoly sets price equal to

Accepted Answer

A)  16.
B)  21.
C)  25.
D)  58.

Question 6

As other firms enter a monopoly's market, the monopoly's market power

Accepted Answer

A)  is unaffected.
B)  declines.
C)  increases.
D)  increases according to the Lerner Index but decreases according to the price/marginal cost ratio.

Question 7

The monopoly maximizes profit by setting

Accepted Answer

A)  price equal to marginal cost.
B)  price equal to marginal revenue.
C)  marginal revenue equal to marginal cost.
D)  marginal revenue equal to zero.

Question 8

One difference between a monopoly and a competitive firm is that

Accepted Answer

A)  a monopoly is a price taker.
B)  a monopoly maximizes profit by setting marginal revenue equal to marginal cost.
C)  a monopoly faces a downward sloping demand curve.
D)  None of the above.

Question 9

A profit maximizing monopolist

Accepted Answer

A)  is guaranteed to lose money because of a lack of competition.
B)  is not guaranteed to make a positive profit.
C)  is guaranteed to make a positive profit, hence the desire to be a monopolist.
D)  is guaranteed to make a non-negative profit, otherwise government would step in to assist.

Question 10

A monopoly sets a price of $50 per unit for an item that has a marginal cost of $10. Assuming profit maximization, the implicit demand elasticity is

Accepted Answer

A)  -0.2.
B)  -0.8.
C)  -1.25.
D)  -5.0.

Question 11

When would a profit-maximizing monopolist that operates with no government intervention choose to produce the competitive level of output?

Accepted Answer

A monopolist that faces a perf...

Question 12

If the demand for a monopoly's output shifts rightward, the change in quantity produced is NOT predictable because

Accepted Answer

A)  the monopoly is a profit maximizer.
B)  the monopoly is a price taker.
C)  the monopoly has no supply curve.
D)  the monopoly's marginal cost curve might not be upward sloping.

Question 13

A firm that has market power

Accepted Answer

A)  can charge whatever it wants for its product.
B)  can charge a price above marginal cost.
C)  has positive economic profits.
D)  does not lose sales when increasing price.

Question 14

Which of the following products benefits from network externalities?

Accepted Answer

A)  microwave ovens
B)  diamond rings
C)  Twitter
D)  concert tickets

Question 15

If a monopoly can produce a good at zero marginal cost, then its Lerner Index is

Accepted Answer

A)  zero.
B)  one.
C)  infinity.
D)  undetermined.

Question 16

-The above figure shows the demand and cost curves facing a monopoly. A $100 per unit tax would raise price by

Accepted Answer

A)  $100.
B)  $50.
C)  $25.
D)  $0.

Question 17

The loss associated with the fact that at the profit-maximizing quantity consumers value the goods more than it cost to produce them is called

Accepted Answer

A)  deadweight loss.
B)  comparative loss.
C)  Lerner Loss.
D)  Consumer Value Loss.

Question 18

If a monopoly can advertise and as a result the demand curve will become more inelastic, the monopoly

Accepted Answer

A)  should always engage in the advertising.
B)  should engage in the advertising until the demand curve becomes more elastic.
C)  will earn higher gross profit if it advertises.
D)  None of the above.

Question 19

For a monopoly, marginal revenue is less than price because

Accepted Answer

A)  the demand for the firm's output is downward sloping.
B)  the firm has no supply curve.
C)  the firm can sell all of its output at any price.
D)  the demand for the firm's output is perfectly elastic.

Question 20

If the demand for a monopoly's output shifts rightward, the change in quantity produced is

Accepted Answer

A)  positive.
B)  negative.
C)  zero.
D)  not predictable.

Exam 9: Monopoly

Which of the following products benefits from network externalities?

Correct AnswerverifiedShow Answer

Privatization of a state-owned monopoly can

Correct AnswerverifiedShow Answer

A profit maximizing monopolist

Correct AnswerverifiedShow Answer

The loss associated with the fact that at the profit-maximizing quantity consumers value the goods more than it cost to produce them is called

Correct AnswerverifiedShow Answer

The fact that a monopoly has to take the shapes of marginal cost AND marginal revenue into account when making decisions is reflected in the fact that

Correct AnswerverifiedShow Answer

One difference between a monopoly and a competitive firm is that

Correct AnswerverifiedShow Answer

If the demand for a monopoly's output shifts rightward, the change in quantity produced is NOT predictable because

Correct AnswerverifiedShow Answer

If the inverse demand curve a monopoly faces is p = 100 - 2Q, and MC is constant at 16, then profit maximization is achieved when the monopoly sets price equal to

Correct AnswerverifiedShow Answer

As other firms enter a monopoly's market, the monopoly's market power

Correct AnswerverifiedShow Answer

If a monopoly can advertise and as a result the demand curve will become more inelastic, the monopoly

Correct AnswerverifiedShow Answer

A monopoly sets a price of $50 per unit for an item that has a marginal cost of $10. Assuming profit maximization, the implicit demand elasticity is

Correct AnswerverifiedShow Answer

When would a profit-maximizing monopolist that operates with no government intervention choose to produce the competitive level of output?

Correct AnswerverifiedA monopolist that faces a perf...View AnswerShow Answer

A firm that has market power

Correct AnswerverifiedShow Answer

A monopolist that chooses price

Correct AnswerverifiedShow Answer

For a monopoly, marginal revenue is less than price because

Correct AnswerverifiedShow Answer

-The above figure shows the demand and cost curves facing a monopoly. A $100 per unit tax would raise price by

Correct AnswerverifiedShow Answer

If the demand for a monopoly's output shifts rightward, the change in quantity produced is

Correct AnswerverifiedShow Answer

The monopoly maximizes profit by setting

Correct AnswerverifiedShow Answer

If a monopoly can produce a good at zero marginal cost, then its Lerner Index is

Correct AnswerverifiedShow Answer

A patent

Correct AnswerverifiedShow Answer

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
A monopolist that faces a perf...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified