Question 1

Because the monopolist's demand curve is downsloping,

Accepted Answer

A)   MR will equal price.
B)   price must be lowered to sell more output.
C)   the elasticity coefficient will increase as price is lowered.
D)   its supply curve will also be downsloping.E) A) and D)
F) A) and C)

Question 2

Pure monopolists may obtain economic profits in the long run because

Accepted Answer

A)   of advertising.
B)   marginal revenue is constant as sales increase.
C)   of barriers to entry.
D)   of rising average fixed costs.E) B) and C)
F) A) and B)

Question 3

The higher prices charged by monopolists

Accepted Answer

A)   are like a private tax that redistributes income from consumers to monopoly sellers.
B)   are socially optimal because they better reflect how much society values the good relative to the resources used to produce it.
C)   return to consumers through the public goods provided by monopolies.
D)   have no effect on the distribution of income.E) B) and D)
F) None of the above

Question 4

One major barrier to entry under pure monopoly arises from

Accepted Answer

A)   the availability of close substitutes for a product.
B)   ownership of essential resources.
C)   the price taking ability of the firm.
D)   diseconomies of scale.E) C) and D)
F) A) and B)

Question 5

To practice long-run price discrimination, a monopolist must

Accepted Answer

A)   be a natural monopoly.
B)   charge one price to all buyers.
C)   permit the resale of the product by the original buyers.
D)   be able to separate buyers into different markets with different price elasticities.E) All of the above
F) C) and D)

Question 6

In the short run a pure monopolist will maximize profits by producing at that level of output where the difference between price and average total cost is at a maximum.

Accepted Answer

A) True 
 B)False

Question 7

Because of their large-scale level of production, pure monopolists overallocate resources to their industry by producing beyond the P = MC output.

Accepted Answer

A) True 
 B)False

Question 8

With nonrivalrous consumption, such as in the case of online music and movies, as more consumers buy the product,

Accepted Answer

A)   the average cost of the output declines because the marginal cost is very small.
B)   marginal cost is low, but the average cost of the output will be rising.
C)   the average cost of the output will be rising because marginal cost is quite high.
D)   marginal cost is quite high, but the average cost of the output will be declining.E) C) and D)
F) B) and D)

Question 9

Price discrimination is

Accepted Answer

A)   always legal.
B)   always illegal.
C)   only illegal if it hurts consumers more than nondiscrimination.
D)   only illegal if used to lessen or eliminate competition.E) B) and D)
F) B) and C)

Question 10

"Price makers" refers to firms that

Accepted Answer

A)   face a downward-sloping demand curve.
B)   are pure monopolies, rather than monopolistic competitors.
C)   have no ability to influence the market price.
D)   are pure monopolies or monopolistic competitors, but not oligopolies.E) B) and C)
F) All of the above

Question 11

Which of the following statements is correct?

Accepted Answer

A)   The pure monopolist will maximize profit by producing at that point on the demand curve where elasticity is zero.
B)   In seeking the profit-maximizing output, the pure monopolist underallocates resources to its production.
C)   The pure monopolist maximizes profits by producing that output at which the differential between price and average cost is the greatest.
D)   Purely monopolistic sellers earn only normal profits in the long run.E) C) and D)
F) B) and C)

Question 12

What do economies of scale, the ownership of essential raw materials, and patents have in common?

Accepted Answer

A)   They must all be present before price discrimination can be practiced.
B)   They are all barriers to entry.
C)   They all help explain why a monopolist's demand and marginal revenue curves coincide.
D)   They all help explain why the long-run average cost curve is U-shaped.E) A) and C)
F) A) and B)

Question 13

Which of the following conditions is not required for price discrimination?

Accepted Answer

A)   Buyers with different elasticities must be physically separate from each other.
B)   The good or service cannot be profitably resold by original buyers.
C)   The seller must be able to segment the market, that is, to distinguish buyers with different elasticities of demand.
D)   The seller must possess some degree of monopoly power.E) A) and C)
F) A) and B)

Question 14

A pure monopolist should never produce in the

Accepted Answer

A)   elastic segment of its demand curve, because it can increase total revenue and reduce total cost by lowering price.
B)   inelastic segment of its demand curve, because it can increase total revenue and reduce total cost by increasing price.
C)   inelastic segment of its demand curve, because it can always increase total revenue by more than it increases total cost by reducing price.
D)   segment of its demand curve, where the price elasticity coefficient is greater than one.E) A) and C)
F) A) and D)

Question 15

In which one of the following market models is X-inefficiency most likely to be the greatest?

Accepted Answer

A)   pure competition
B)   oligopoly
C)   monopolistic competition
D)   pure monopolyE) A) and B)
F) A) and D)

Question 16

In the short run, a monopolist's economic profits

Accepted Answer

A)   are always positive because the monopolist is a price-maker.
B)   are usually negative because of government price regulation.
C)   are always zero because consumers prefer to buy from competitive sellers.
D)   may be positive or negative depending on market demand and cost conditions.E) B) and D)
F) None of the above

Question 17

A purely monopolistic firm

Accepted Answer

A)   has no entry barriers.
B)   faces a downsloping demand curve.
C)   produces a product or service for which there are many close substitutes.
D)   earns only a normal profit in the long run.E) A) and D)
F) None of the above

Question 18

Under which of the following conditions would a profit-maximizing monopolist necessarily raise price?

Accepted Answer

A)   if product demand was price-elastic
B)   if marginal revenue is positive
C)   if marginal revenue was greater than marginal cost
D)   if marginal cost was greater than marginal revenueE) A) and C)
F) B) and C)

Question 19

The profit-maximizing output of a pure monopoly is not socially optimal, because in equilibrium

Accepted Answer

A)   price equals minimum average total cost.
B)   marginal revenue equals marginal cost.
C)   marginal cost exceeds price.
D)   price exceeds marginal cost.E) B) and D)
F) A) and D)

Question 20

Other things equal, a price-discriminating monopolist will

Accepted Answer

A)   realize a smaller economic profit than a nondiscriminating monopolist.
B)   produce a larger output than a nondiscriminating monopolist.
C)   produce the same output as a nondiscriminating monopolist.
D)   produce a smaller output than a nondiscriminating monopolist.E) A) and D)
F) A) and C)

Exam 12: Pure Monopoly

Under which of the following conditions would a profit-maximizing monopolist necessarily raise price?

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In the short run a pure monopolist will maximize profits by producing at that level of output where the difference between price and average total cost is at a maximum.

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Which of the following conditions is not required for price discrimination?

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To practice long-run price discrimination, a monopolist must

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Which of the following statements is correct?

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In the short run, a monopolist's economic profits

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The higher prices charged by monopolists

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Other things equal, a price-discriminating monopolist will

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The profit-maximizing output of a pure monopoly is not socially optimal, because in equilibrium

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Price discrimination is

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With nonrivalrous consumption, such as in the case of online music and movies, as more consumers buy the product,

Correct AnswerverifiedShow Answer

A purely monopolistic firm

Correct AnswerverifiedShow Answer

In which one of the following market models is X-inefficiency most likely to be the greatest?

Correct AnswerverifiedShow Answer

Pure monopolists may obtain economic profits in the long run because

Correct AnswerverifiedShow Answer

A pure monopolist should never produce in the

Correct AnswerverifiedShow Answer

One major barrier to entry under pure monopoly arises from

Correct AnswerverifiedShow Answer

Because of their large-scale level of production, pure monopolists overallocate resources to their industry by producing beyond the P = MC output.

Correct AnswerverifiedShow Answer

Because the monopolist's demand curve is downsloping,

Correct AnswerverifiedShow Answer

What do economies of scale, the ownership of essential raw materials, and patents have in common?

Correct AnswerverifiedShow Answer

"Price makers" refers to firms that

Correct AnswerverifiedShow Answer

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