Question 1

A monopolist will choose to increase output when

Accepted Answer

A)  market price increases.
B)  at all levels of output, marginal cost increases.
C)  at the present level of output, marginal revenue exceeds marginal cost.
D)  the demand curve shifts to the left.

Question 2

Table 15-2
Dreher's Designer Shirt Company, a monopolist, has the following cost and revenue information.
 
-Refer to Table 15-2.What is the marginal revenue from selling the 2nd shirt?

Accepted Answer

A)  $140
B)  $150
C)  $160
D)  $170

Question 3

For a monopoly,the level of output at which marginal revenue equals zero is also the level of output at which

Accepted Answer

A)  average revenue is zero.
B)  profit is maximized.
C)  total revenue is maximized.
D)  marginal cost is zero.

Question 4

Figure 15-6
 
-Refer to Figure 15-6.The monopolist's maximum profit

Accepted Answer

A)  is $800.
B)  is $1,000.
C)  is $1,250.
D)  cannot be determined from the diagram.

Question 5

One problem with government operation of monopolies is that

Accepted Answer

A)  a benevolent government is likely to be interested in generating profits for political gain.
B)  monopolies typically have rising average costs.
C)  the government typically has little incentive to reduce costs.
D)  a government-regulated outcome will increase the profitability of the monopoly.

Question 6

For a typical natural monopoly,average total cost is

Accepted Answer

A)  falling and marginal cost is above average total cost.
B)  falling and marginal cost is below average total cost.
C)  rising and marginal cost is below average total cost.
D)  rising and marginal cost is above average total cost.

Question 7

To maximize total surplus with a monopoly firm,a benevolent social planner would

Accepted Answer

A)  choose the level of output where MR = MC.
B)  choose the level of output where MR intersects the demand curve.
C)  choose the level of output where MC intersects the demand curve.
D)  allow the free market system to determine the level of output.

Question 8

Figure 15-2
The figure below illustrates the cost and revenue structure for a monopoly firm.
 
-Refer to Figure 15-2.If the monopoly firm is currently producing Q₃ units of output,then a decrease in output will necessarily cause profit to

Accepted Answer

A)  remain unchanged.
B)  decrease.
C)  increase as long as the new level of output is at least Q₂.
D)  increase as long as the new level of output is at least Q₁.

Question 9

Table 15-4
Consider the following demand and cost information for a monopoly.
 
-Refer to Table 15-4.To maximize profit,the monopolist sets price at

Accepted Answer

A)  $10
B)  $15
C)  $20
D)  $25

Question 10

Table 15-5
Dreher's Designer Shirt Company, a monopolist, has the following cost and revenue information. Assume that Dreher's is able to engage in perfect price discrimination.
 
-Refer to Table 15-5.What is the total revenue when 3 shirts are sold?

Accepted Answer

A)  $140
B)  $420
C)  $450
D)  $620

Question 11

Table 15-2
Dreher's Designer Shirt Company, a monopolist, has the following cost and revenue information.
 
-Refer to Table 15-2.Which of the following quantities will achieve the maximum profit?

Accepted Answer

A)  3
B)  4
C)  6
D)  7

Question 12

A natural monopoly arises when

Accepted Answer

A)  there are constant returns to scale over the relevant range of output.
B)  there are economies of scale over the relevant range of output.
C)  one firm owns a key natural resource.
D)  the government gives a single firm the exclusive right to produce a particular good or service.

Question 13

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.

Question 14

During the life of a drug patent,the monopoly pharmaceutical firm maximizes profit by producing the quantity at which marginal revenue equals marginal cost.

Accepted Answer

A) True 
 B)False

Question 15

Suppose when a monopolist produces 75 units its average revenue is $10 per unit,its marginal revenue is $5 per unit,its marginal cost is $6 per unit,and its average total cost is $5 per unit.What can we conclude about this monopolist?

Accepted Answer

A)  The monopolist is currently maximizing profits and its total profits are $375.
B)  The monopolist is currently maximizing profits and its total profits are $300.
C)  The monopolist is not currently maximizing profits; it should produce more units and charge a lower price to maximize profits.
D)  The monopolist is not currently maximizing profits; it should produce fewer units and charge a higher price to maximize profits.

Question 16

When an industry is a natural monopoly,

Accepted Answer

A)  it is characterized by constant returns to scale.
B)  it is characterized by diseconomies of scale.
C)  a larger number of firms may lead to a lower average cost.
D)  a larger number of firms will lead to a higher average cost.

Question 17

Figure 15-2
The figure below illustrates the cost and revenue structure for a monopoly firm.
 
-Refer to Figure 15-2.Profit can always be increased by increasing the level of output by one unit if the monopolist is currently operating at (i) 	Q₀.
(ii) 	Q₁.
(iii) 	Q₂.
(iv) 	Q₃.

Accepted Answer

A)  (i)  or (ii) 
B)  (i) , (ii)  or (iii) 
C)  (iii)  or (iv) 
D)  (iv)  only

Question 18

In theory,perfect price discrimination

Accepted Answer

A)  decreases the monopolist's profits.
B)  decreases consumer surplus.
C)  increases deadweight loss.
D)  reduces the number of consumers who purchase the monopoly's product.

Question 19

Because a monopolist is the sole producer in its market,it can necessarily alter the price of its good (i) 	without affecting the quantity sold.
(ii) 	without affecting its average total cost.
(iii) 	by adjusting the quantity it supplies to the market.

Accepted Answer

A)  (ii)  only
B)  (iii)  only
C)  (i)  and (ii) 
D)  (ii)  and (iii)

Question 20

Which of the following statements is correct?

Accepted Answer

A)  The benefits that accrue to a monopoly's owners are equal to the costs that are incurred by consumers of that firm's product.
B)  The deadweight loss that arises in monopoly stems from the fact that the profit-maximizing monopoly firm produces a quantity of output that exceeds the socially-efficient quantity.
C)  The deadweight loss caused by monopoly is similar to the deadweight loss caused by a tax on a product.
D)  The primary social problem caused by monopoly is monopoly profit.

Exam 15: Monopoly

Figure 15-2 The figure below illustrates the cost and revenue structure for a monopoly firm. -Refer to Figure 15-2.If the monopoly firm is currently producing Q₃ units of output,then a decrease in output will necessarily cause profit to

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Table 15-2 Dreher's Designer Shirt Company, a monopolist, has the following cost and revenue information. -Refer to Table 15-2.Which of the following quantities will achieve the maximum profit?

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Table 15-4 Consider the following demand and cost information for a monopoly. -Refer to Table 15-4.To maximize profit,the monopolist sets price at

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Figure 15-2 The figure below illustrates the cost and revenue structure for a monopoly firm. -Refer to Figure 15-2.Profit can always be increased by increasing the level of output by one unit if the monopolist is currently operating at (i) Q₀. (ii) Q₁. (iii) Q₂. (iv) Q₃.

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Which of the following statements is correct?

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For a monopoly,the level of output at which marginal revenue equals zero is also the level of output at which

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Suppose when a monopolist produces 75 units its average revenue is $10 per unit,its marginal revenue is $5 per unit,its marginal cost is $6 per unit,and its average total cost is $5 per unit.What can we conclude about this monopolist?

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Because a monopolist is the sole producer in its market,it can necessarily alter the price of its good (i) without affecting the quantity sold. (ii) without affecting its average total cost. (iii) by adjusting the quantity it supplies to the market.

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In theory,perfect price discrimination

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To maximize total surplus with a monopoly firm,a benevolent social planner would

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Table 15-2 Dreher's Designer Shirt Company, a monopolist, has the following cost and revenue information. -Refer to Table 15-2.What is the marginal revenue from selling the 2nd shirt?

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A natural monopoly arises when

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Figure 15-6 -Refer to Figure 15-6.The monopolist's maximum profit

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For a typical natural monopoly,average total cost is

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During the life of a drug patent,the monopoly pharmaceutical firm maximizes profit by producing the quantity at which marginal revenue equals marginal cost.

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A monopolist will choose to increase output when

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The task of economic regulation is to

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When an industry is a natural monopoly,

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One problem with government operation of monopolies is that

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Table 15-5 Dreher's Designer Shirt Company, a monopolist, has the following cost and revenue information. Assume that Dreher's is able to engage in perfect price discrimination. -Refer to Table 15-5.What is the total revenue when 3 shirts are sold?

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