Question 1

If the industry depicted in this graph were purely competitive, the output quantity would be

Accepted Answer

A)  90.
B)  160.
C)  195.
D)  a level that is not labeled in the graph.

Question 2

Marginal costs of a producer may be very small due to its product's ability to satisfy a large number of consumers at the same time. This characteristic of a product is called

Accepted Answer

A)  economies of scale.
B)  rent-seeking.
C)  simultaneous consumption.
D)  consumer sovereignty.

Question 3

If a regulatory commission wants to establish a socially optimal price for a natural monopoly, it should select a price

Accepted Answer

A)  at which the marginal cost curve intersects the demand curve.
B)  at which marginal revenue is zero.
C)  at which the average total cost curve intersects the demand curve.
D)  that corresponds with the equality of marginal cost and marginal revenue.

Question 4

If a monopolist finds itself operating in the inelastic portion of its demand curve, then it should never lower its price because doing so would reduce its profits.

Accepted Answer

A) True 
 B)False

Question 5

Refer to the diagram for a nondiscriminating monopolist. The profit-seeking monopolist will

Accepted Answer

A)  always produce at output q₂.
B)  always produce more than q₂.
C)  never produce an output larger than q₂.
D)  never produce an output larger than q₁.

Question 6

The supply curve for a monopoly is

Accepted Answer

A)  the portion of the marginal cost curve that lies above the average variable cost curve.
B)  the portion of the marginal cost curve that lies above the average total cost curve.
C)  the portion of the marginal cost curve that lies above the average fixed cost curve.
D)  not clearly defined.

Question 7

Refer to the graph for a profit-maximizing monopolist. The firm will produce a quantity equal to the distance:

Accepted Answer

A)  0 V.
B)  0 Y.
C)  0 T.
D)  0 X.

Question 8

Refer to the long-run cost diagram for a firm. If the firm produces output Q₂ at an average cost of ATC₃, then the firm is

Accepted Answer

A)  producing the profit-maximizing output but is failing to minimize production costs.
B)  incurring X-inefficiency but is realizing all existing economies of scale.
C)  incurring X-inefficiency and is failing to realize all existing economies of scale.
D)  producing that output with the most efficient combination of inputs and is realizing all existing economies of scale.

Question 9

If a pure monopolist can price discriminate by separating buyers into two or more groups,

Accepted Answer

A)  the marginal revenue curve and the total revenue curve will now coincide.
B)  the marginal revenue curve will now shift to a position above the demand curve.
C)  the firm will face multiple marginal revenue curves.
D)  marginal revenue will become less at each level of output than it would be without price discrimination.

Question 10

Which is true of a price-discriminating pure monopolist?

Accepted Answer

A)  P > MR for the last unit sold.
B)  Profit will be higher than in the nondiscriminating case.
C)  The average price will be higher than in the nondiscriminating case.
D)  Allocative inefficiency will be greater than in the nondiscriminating case.

Question 11

The ability of personalized pricing by online retailers to price discriminate

Accepted Answer

A)  is enhanced by Big Data's ability to accurately determine a buyer's reservation price.
B)  is only effective at the group level.
C)  means that buyers with more elastic demand face systematically higher prices.
D)  is limited by buyers' willingness and ability to easily search out lower prices at other online sites.

Question 12

Which of the graphs shows the correct relationship between demand and marginal revenue?

Accepted Answer

A)  A
B)  B
C)  C
D)  D

Question 13

Which of the diagrams correctly portrays the demand (D) and marginal revenue (MR) curves of a pure monopolist that is able to price discriminate by charging each customer his or her maximum willingness to pay?

Accepted Answer

A)  A
B)  B
C)  C
D)  D

Question 14

Which of the following is a characteristic of pure monopoly?

Accepted Answer

A)  close substitute products
B)  barriers to entry
C)  the absence of market power
D)  "price taking"

Question 15

Which of the following is not a possible source of natural monopoly?

Accepted Answer

A)  large-scale network effects
B)  simultaneous consumption
C)  greater use of specialized inputs
D)  rent-seeking behavior

Question 16

Refer to the data for a nondiscriminating monopolist. At its profit-maximizing output, this firm's total profit will be

Accepted Answer

A)  $82.
B)  zero.
C)  $54.
D)  $27.

Question 17

Refer to the diagram for a nondiscriminating monopolist. At output R economic profits will be zero.

Accepted Answer

A) True 
 B)False

Question 18

A monopolist will avoid setting a price in the elastic segment of the demand curve and prefer to set the price in the inelastic segment.

Accepted Answer

A) True 
 B)False

Question 19

A monopolist can sell 10 toys per day for $10.00 each. To sell 11 toys per day, the price must be cut to $9.50. The marginal revenue of the 11th toy is

Accepted Answer

A)  $9.50.
B)  $-0.50.
C)  $4.50 .
D)  $11.

Question 20

Refer to the diagram for a nondiscriminating monopolist. The profit-maximizing output for this firm is M.

Accepted Answer

A) True 
 B)False

Exam 12: Pure Monopoly

If a pure monopolist can price discriminate by separating buyers into two or more groups,

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Refer to the long-run cost diagram for a firm. If the firm produces output Q₂ at an average cost of ATC₃, then the firm is

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A monopolist will avoid setting a price in the elastic segment of the demand curve and prefer to set the price in the inelastic segment.

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Which is true of a price-discriminating pure monopolist?

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If a regulatory commission wants to establish a socially optimal price for a natural monopoly, it should select a price

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Marginal costs of a producer may be very small due to its product's ability to satisfy a large number of consumers at the same time. This characteristic of a product is called

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Which of the diagrams correctly portrays the demand (D) and marginal revenue (MR) curves of a pure monopolist that is able to price discriminate by charging each customer his or her maximum willingness to pay?

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Refer to the diagram for a nondiscriminating monopolist. The profit-seeking monopolist will

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If the industry depicted in this graph were purely competitive, the output quantity would be

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The supply curve for a monopoly is

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If a monopolist finds itself operating in the inelastic portion of its demand curve, then it should never lower its price because doing so would reduce its profits.

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The ability of personalized pricing by online retailers to price discriminate

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Which of the graphs shows the correct relationship between demand and marginal revenue?

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A monopolist can sell 10 toys per day for $10.00 each. To sell 11 toys per day, the price must be cut to $9.50. The marginal revenue of the 11th toy is

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Refer to the diagram for a nondiscriminating monopolist. At output R economic profits will be zero.

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Refer to the data for a nondiscriminating monopolist. At its profit-maximizing output, this firm's total profit will be

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Refer to the graph for a profit-maximizing monopolist. The firm will produce a quantity equal to the distance:

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Refer to the diagram for a nondiscriminating monopolist. The profit-maximizing output for this firm is M.

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Which of the following is not a possible source of natural monopoly?

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Which of the following is a characteristic of pure monopoly?

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