Question 1

A monopoly is able to continue to generate economic profits in the long run because

Accepted Answer

A)   It can control both price and output in the market.
B)   potential competitors sometimes don't notice the profits.
C)   the monopolist is financially powerful.
D)   Antitrust or competition laws eliminate competitors for a specified number of years.
E)   there is some barrier to entry to that market.F) C) and D)
G) A) and C)

Question 2

Sizable economic profits can persist over time under monopoly if the monopolist

Accepted Answer

A)   produces that output where average total cost is at a maximum.
B)   is protected by barriers to entry.
C)   operates as a price taker rather than a price maker.
D)   earns revenues that exceed variable costs.E) B) and D)
F) A) and D)

Question 3

Which of the following statements is correct?

Accepted Answer

A)   Both a competitive firm and a monopolist are price takers.
B)   Both a competitive firm and a monopolist are price makers.
C)   A competitive firm is a price taker, whereas a monopolist is a price maker.
D)   A competitive firm is a price maker, whereas a monopolist is a price taker.E) None of the above
F) A) and D)

Question 4

The task of economic regulation is to

Accepted Answer

A)   protect monopoly profits.
B)   approximate the results of the competitive market.
C)   replace competition with government ownership.
D)   increase competition within the market.E) None of the above
F) A) and C)

Question 5

Price discrimination can raise economic welfare because output increases beyond that which would result under monopoly pricing.

Accepted Answer

A) True 
 B)False

Question 6

Monopolies use their market power to

Accepted Answer

A)   charge prices that equal minimum average total cost.
B)   attain normal profits in the long run.
C)   restrict output and increase price.
D)   dump excess supplies of their product on the market.E) C) and D)
F) B) and D)

Question 7

Describe how government is involved in creating a monopoly. Why might the government create one? Give an example.

Accepted Answer

The government can create a monopoly by ...

Question 8

Perfect price discrimination is efficient but all of the surplus is received by the consumer.

Accepted Answer

A) True 
 B)False

Question 9

A monopolist produces an efficient quantity of output but it is still inefficient because it charges a price that exceeds marginal cost and the resulting profit is a social cost.

Accepted Answer

A) True 
 B)False

Question 10

For the monopolist, marginal revenue is always less than the price of the good.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following is an example of price discrimination?

Accepted Answer

A)   Nestlé provides money-off coupons for its products.
B)   Virgin trains offers a lower price for weekend travel compared to weekday rates on the same routes.
C)   Hotel rates for members of the Automobile Association are lower than for non-members.
D)   All of the above are correct.E) All of the above
F) A) and B)

Question 12

Universities are engaging in price discrimination when they charge different levels of tuition to poor and wealthy students.

Accepted Answer

A) True 
 B)False

Question 13

The monopolist's supply curve

Accepted Answer

A)   is the upward-sloping portion of the average variable cost.
B)   is the marginal cost curve above average variable cost.
C)   is the marginal cost curve above average total cost.
D)   is the upward-sloping portion of the average total cost curve.
E)   does not exist.F) D) and E)
G) A) and B)

Question 14

Explain how a profit-maximizing monopolist chooses its level of output and the price of its goods.

Accepted Answer

A profit-maximizing monopolist produces ...

Question 15

Monopolists are price takers.

Accepted Answer

A) True 
 B)False

Question 16

In many countries, the government chooses to "internalize" the monopoly by owning monopoly providers of goods and services. (In some cases these firms are "nationalized," and the government actually buys or confiscates firms that operate in monopoly markets). What would be the advantages and disadvantages of such an approach to ensure that the "best interest of society" is promoted in these markets? Explain your answer.

Accepted Answer

As long as the government "owner" pursue...

Question 17

Which of the following strategies is not an effective strategy to reduce monopoly inefficiency?

Accepted Answer

A)   antitrust or competition laws
B)   price discrimination
C)   doing nothing
D)   breaking up a natural monopoly into more than one firmE) C) and D)
F) A) and C)

Question 18

The purpose of anti-trust laws (also known as competition laws)  is to

Accepted Answer

A)   Ensure prices are the same for all consumers
B)   regulate the prices charged by a monopoly.
C)   increase merger activity to help generate synergies that reduce costs and raise efficiency.
D)   create public ownership of natural monopolies.
E)   increase competition in an industry by preventing mergers and breaking up large firms.F) A) and E)
G) C) and E)

Question 19

Assume that a monopolist decides to maximize revenue rather than profit. How does this operating objective change the size of the deadweight loss? If you are a "benevolent" manager of a monopoly firm and are interested in reducing the deadweight loss of monopoly, should you maximize profits or maximize revenue? Explain your answer.

Accepted Answer

A revenue maximizer operates where MR = ...

Question 20

Which of the following statements about price and marginal cost in competitive and monopolized markets is true?

Accepted Answer

A)   In competitive markets, price equals marginal cost; in monopolized markets, price exceeds marginal cost.
B)   In competitive markets, price equals marginal cost; in monopolized markets, price equals marginal cost.
C)   In competitive markets, price exceeds marginal cost; in monopolized markets, price exceeds marginal cost.
D)   In competitive markets, price exceeds marginal cost; in monopolized markets, price equals marginal cost.E) B) and D)
F) A) and D)

Exam 14: Market Structures I: Monopoly

Explain how a profit-maximizing monopolist chooses its level of output and the price of its goods.

Correct Answer
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A profit-maximizing monopolist produces ...
View Answer

Describe how government is involved in creating a monopoly. Why might the government create one? Give an example.

Correct Answer
verified
The government can create a monopoly by ...
View Answer

Which of the following is an example of price discrimination?

Correct Answer
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The monopolist's supply curve

Correct Answer
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Correct Answer
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As long as the government "owner" pursue...
View Answer

Monopolies use their market power to

Correct Answer
verified

A monopoly is able to continue to generate economic profits in the long run because

Correct Answer
verified

Which of the following strategies is not an effective strategy to reduce monopoly inefficiency?

Correct Answer
verified

Which of the following statements about price and marginal cost in competitive and monopolized markets is true?

Correct Answer
verified

Which of the following statements is correct?

Correct Answer
verified

The task of economic regulation is to

Correct Answer
verified

Price discrimination can raise economic welfare because output increases beyond that which would result under monopoly pricing.

Correct Answer
verified

A monopolist produces an efficient quantity of output but it is still inefficient because it charges a price that exceeds marginal cost and the resulting profit is a social cost.

Correct Answer
verified

Perfect price discrimination is efficient but all of the surplus is received by the consumer.

Correct Answer
verified

The purpose of anti-trust laws (also known as competition laws) is to

Correct Answer
verified

Sizable economic profits can persist over time under monopoly if the monopolist

Correct Answer
verified

Monopolists are price takers.

Correct Answer
verified

Correct Answer
verified
A revenue maximizer operates where MR = ...
View Answer

Universities are engaging in price discrimination when they charge different levels of tuition to poor and wealthy students.

Correct Answer
verified

For the monopolist, marginal revenue is always less than the price of the good.

Correct Answer
verified

Exam 14: Market Structures I: Monopoly

Explain how a profit-maximizing monopolist chooses its level of output and the price of its goods.

Correct AnswerverifiedA profit-maximizing monopolist produces ...View AnswerShow Answer

Describe how government is involved in creating a monopoly. Why might the government create one? Give an example.

Correct AnswerverifiedThe government can create a monopoly by ...View AnswerShow Answer

Which of the following is an example of price discrimination?

Correct AnswerverifiedShow Answer

The monopolist's supply curve

Correct AnswerverifiedShow Answer

Correct AnswerverifiedAs long as the government "owner" pursue...View AnswerShow Answer

Monopolies use their market power to

Correct AnswerverifiedShow Answer

A monopoly is able to continue to generate economic profits in the long run because

Correct AnswerverifiedShow Answer

Which of the following strategies is not an effective strategy to reduce monopoly inefficiency?

Correct AnswerverifiedShow Answer

Which of the following statements about price and marginal cost in competitive and monopolized markets is true?

Correct AnswerverifiedShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

The task of economic regulation is to

Correct AnswerverifiedShow Answer

Price discrimination can raise economic welfare because output increases beyond that which would result under monopoly pricing.

Correct AnswerverifiedShow Answer

A monopolist produces an efficient quantity of output but it is still inefficient because it charges a price that exceeds marginal cost and the resulting profit is a social cost.

Correct AnswerverifiedShow Answer

Perfect price discrimination is efficient but all of the surplus is received by the consumer.

Correct AnswerverifiedShow Answer

The purpose of anti-trust laws (also known as competition laws) is to

Correct AnswerverifiedShow Answer

Sizable economic profits can persist over time under monopoly if the monopolist

Correct AnswerverifiedShow Answer

Monopolists are price takers.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedA revenue maximizer operates where MR = ...View AnswerShow Answer

Universities are engaging in price discrimination when they charge different levels of tuition to poor and wealthy students.

Correct AnswerverifiedShow Answer

For the monopolist, marginal revenue is always less than the price of the good.

Correct AnswerverifiedShow Answer

Correct Answer
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A profit-maximizing monopolist produces ...
View Answer

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The government can create a monopoly by ...
View Answer

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Correct Answer
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As long as the government "owner" pursue...
View Answer

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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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A revenue maximizer operates where MR = ...
View Answer

Correct Answer
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Correct Answer
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