Question 1

Market power is illegal.

Accepted Answer

A)   True, no one is allowed to charge a price greater than marginal cost.
B)   False.
C)   True, no one is allowed to charge a price greater than average cost.
D)   False, because market power guarantees price equal to average cost.E) A) and B)
F) B) and C)

Question 2

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.E) B) and C)
F) A) and D)

Question 3

The average cost for a typical electric-power-production firm is AC = 100 - 10Q + Q2 where Q is measured in billion kilowatt hours per day.At the current regulated price,consumers demand 4 billion kilowatt hours per day.Is this market a natural monopoly? If demand increases to 10 billion kilowatt hours,is this market a natural monopoly? Explain.

Accepted Answer

The firm enjoys economies of scale up to...

Question 4

For a monopoly,marginal revenue is less than price because

Accepted Answer

A)   the firm is a price taker.
B)   the firm must lower price if it wishes to sell more output.
C)   the firm can sell all of its output at any price.
D)   the demand for the firm's output is perfectly elastic.E) All of the above
F) A) and C)

Question 5

A monopoly faces an inverse demand curve of P = 100 - 2Q.The marginal cost curve is MC = .5Q.What government price ceiling would represent optimal price regulation?

Accepted Answer

Setting P = 100 - 2Q...

Question 6

A monopoly does not have a supply curve.

Accepted Answer

A) True 
 B)False

Question 7

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.E) B) and C)
F) All of the above

Question 8

The existence of a deadweight loss associated with a monopoly can be seen because

Accepted Answer

A)   consumers are willing to pay more for the last unit of output than it costs to produce.
B)   the cost of the last unit produced is more than consumers are willing to pay for it.
C)   the producer surplus is larger than in a competitive market.
D)   None of the above.E) A) and B)
F) None of the above

Question 9

Which of the following DOES NOT contribute to the market power of a firm?

Accepted Answer

A)   number of available substitutes
B)   the color of the product
C)   legal protections
D)   the number of firms in the marketE) A) and B)
F) None of the above

Question 10

The producer surplus to a monopolist must be

Accepted Answer

A)   less than zero or the firm is in violation of anti-trust statutes.
B)   at least as great as the producer surplus in a competitive market.
C)   positive, otherwise why would the monopoly produce?
D)   the same as for a competitive market.E) C) and D)
F) A) and D)

Question 11

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.E) B) and D)
F) All of the above

Question 12

The optimal patent length is equal to 20 years.

Accepted Answer

A) True 
 B)False

Question 13

-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.E) A) and B)
F) A) and C)

Question 14

A monopolist changes price from $1 to $2 and sells 10 fewer units.The marginal revenue is

Accepted Answer

A)   $10
B)   -$10
C)   $0
D)   impossible to determine with the information provided.E) B) and C)
F) None of the above

Question 15

Since there are no close substitutes for the monopoly's product,the monopoly can charge any price it wishes.

Accepted Answer

A) True 
 B)False

Question 16

If the government regulates the price a monopoly can charge,and the price ceiling is set below what the competitive market price would be,then

Accepted Answer

A)   a shortage will exist.
B)   a surplus will exist.
C)   producer surplus is maximized.
D)   consumer surplus is maximized.E) None of the above
F) All of the above

Question 17

What is one problem with trying to regulate a monopoly's price?

Accepted Answer

A)   The government needs information on the monopoly's marginal cost.
B)   The government needs information on the price people are willing to pay.
C)   The government needs to identify which firm is a monopolist.
D)   Anything that the government does is problematic.E) A) and B)
F) A) and C)

Question 18

When attempting price regulation,a government faces what problem(s) ?

Accepted Answer

A)   limited information
B)   bribes
C)   uncooperative firms
D)   All of the above.E) All of the above
F) A) and B)

Question 19

Why is the monopoly total welfare lower than the competitive total welfare?

Accepted Answer

A monopoly restricts output relative to ...

Question 20

When generic drugs enter the market after the patent for a brand name drug expires,the price of the brand name drug often increases.This is usually due to

Accepted Answer

A)   the demand curve for the brand name drug shifting in but becoming more inelastic.
B)   the demand curve for the brand name drug not shifting, but the marginal cost of producing the good increases.
C)   the demand curve for the brand name drug shifting in but becoming more elastic.
D)   the demand curve for the brand name drug not shifting, but loyal customers are willing to pay a higher price for the brand name drug.E) A) and D)
F) None of the above

Exam 11: Monopoly

Which of the following DOES NOT contribute to the market power of a firm?

Correct Answer
verified

Correct Answer
verified
The firm enjoys economies of scale up to...
View Answer

When attempting price regulation,a government faces what problem(s) ?

Correct Answer
verified

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

Correct Answer
verified

A monopolist changes price from $1 to $2 and sells 10 fewer units.The marginal revenue is

Correct Answer
verified

The producer surplus to a monopolist must be

Correct Answer
verified

Market power is illegal.

Correct Answer
verified

A monopoly does not have a supply curve.

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

When generic drugs enter the market after the patent for a brand name drug expires,the price of the brand name drug often increases.This is usually due to

Correct Answer
verified

Since there are no close substitutes for the monopoly's product,the monopoly can charge any price it wishes.

Correct Answer
verified

The existence of a deadweight loss associated with a monopoly can be seen because

Correct Answer
verified

For a monopoly,marginal revenue is less than price because

Correct Answer
verified

Why is the monopoly total welfare lower than the competitive total welfare?

Correct Answer
verified
A monopoly restricts output relative to ...
View 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 Answer
verified

A monopoly faces an inverse demand curve of P = 100 - 2Q.The marginal cost curve is MC = .5Q.What government price ceiling would represent optimal price regulation?

Correct Answer
verified
Setting P = 100 - 2Q...
View Answer

If the government regulates the price a monopoly can charge,and the price ceiling is set below what the competitive market price would be,then

Correct Answer
verified

What is one problem with trying to regulate a monopoly's price?

Correct Answer
verified

The optimal patent length is equal to 20 years.

Correct Answer
verified

Exam 11: Monopoly

Which of the following DOES NOT contribute to the market power of a firm?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedThe firm enjoys economies of scale up to...View AnswerShow Answer

When attempting price regulation,a government faces what problem(s) ?

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

A monopolist changes price from $1 to $2 and sells 10 fewer units.The marginal revenue is

Correct AnswerverifiedShow Answer

The producer surplus to a monopolist must be

Correct AnswerverifiedShow Answer

Market power is illegal.

Correct AnswerverifiedShow Answer

A monopoly does not have a supply curve.

Correct AnswerverifiedShow Answer

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

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

When generic drugs enter the market after the patent for a brand name drug expires,the price of the brand name drug often increases.This is usually due to

Correct AnswerverifiedShow Answer

Since there are no close substitutes for the monopoly's product,the monopoly can charge any price it wishes.

Correct AnswerverifiedShow Answer

The existence of a deadweight loss associated with a monopoly can be seen because

Correct AnswerverifiedShow Answer

For a monopoly,marginal revenue is less than price because

Correct AnswerverifiedShow Answer

Why is the monopoly total welfare lower than the competitive total welfare?

Correct AnswerverifiedA monopoly restricts output relative to ...View AnswerShow 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

A monopoly faces an inverse demand curve of P = 100 - 2Q.The marginal cost curve is MC = .5Q.What government price ceiling would represent optimal price regulation?

Correct AnswerverifiedSetting P = 100 - 2Q...View AnswerShow Answer

If the government regulates the price a monopoly can charge,and the price ceiling is set below what the competitive market price would be,then

Correct AnswerverifiedShow Answer

What is one problem with trying to regulate a monopoly's price?

Correct AnswerverifiedShow Answer

The optimal patent length is equal to 20 years.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified
The firm enjoys economies of scale up to...
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

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
A monopoly restricts output relative to ...
View Answer

Correct Answer
verified

Correct Answer
verified
Setting P = 100 - 2Q...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified