Question 1

-Refer to the table above.The deadweight loss due to monopoly in the market stems from the fact that

Accepted Answer

A)   this monopolist will earn a large profit.
B)   the value of unit four and unit five exceed or equal the cost of producing them.
C)   the cost of producing units four and five exceed their value.
D)   the monopolist's price is "too low."
E)   the monopolist's output is "too large."F) A) and B)
G) C) and D)

Question 2

In this diagram,D* represents the demand curve facing a monopolist and d** represents the demand curve facing a perfectly competitive firm.
-Refer to the diagram above.Assume that the current price is P1 and current production is Q1.Total revenue to the perfect competitor is equal to the area of __________ and the area of __________ for the monopolist.

Accepted Answer

A)   (A + 
B)  ; (A + 
B)  
B)   A;B
C)   (A + 
B)  ; (B + 
E)  
D)   (A + B + 
C)  ; (A + B + C + 
E)  
E)   (A - 
B)  ; (C + D - 
E)  F) B) and C)
G) None of the above

Question 3

-Refer to the table above.The marginal revenue of selling the sixth unit is

Accepted Answer

A)   $30.
B)   $6.
C)   $5.
D)   $2.
E)   $0.F) A) and B)
G) B) and E)

Question 4

-Refer to the graph above.A profit-maximizing monopolist would charge a price of

Accepted Answer

A)   $3 per unit.
B)   $4 per unit.
C)   $5 per unit.
D)   $6 per unit.
E)   $7 per unit.F) A) and E)
G) C) and D)

Question 5

An industry that features a few firms that produce close substitutes is called

Accepted Answer

A)   pure monopoly.
B)   imperfect monopoly.
C)   monopolistic competition.
D)   oligopoly.
E)   competitive monopoly.F) None of the above
G) B) and E)

Question 6

Which of the following statements about perfect price discrimination is FALSE?

Accepted Answer

A)   Consumer surplus is zero.
B)   Total economic surplus is maximized.
C)   Some consumers are paying less than their reservation price.
D)   The monopolist will capture all consumer surplus.
E)   The monopolist will always be better off.F) B) and C)
G) A) and D)

Question 7

-Refer to the graph above.A profit-maximizing monopolist would earn a profit of ___________ per unit.

Accepted Answer

A)   $1
B)   $2
C)   $3
D)   $4
E)   $5F) A) and E)
G) A) and D)

Question 8

When a firm with constant returns to scale uses 30% more of all inputs and input prices remain unchanged,then

Accepted Answer

A)   total cost rises by less than 30%.
B)   average cost falls by 30%.
C)   total cost rises by more than 30%.
D)   average cost remains unchanged.
E)   average cost rises by 30%.F) A) and B)
G) A) and C)

Question 9

The elasticity of demand for an imperfectly competitive firm is

Accepted Answer

A)   infinity.
B)   greater than zero and less than infinity.
C)   zero.
D)   greater than zero and less than one.
E)   greater than one.F) B) and E)
G) A) and E)

Question 10

When marginal revenue is equal to zero,

Accepted Answer

A)   profit is maximized.
B)   total cost is minimized.
C)   elasticity of demand is zero.
D)   total revenue is maximized.
E)   total revenue is minimized.F) A) and B)
G) C) and D)

Question 11

A monopolist facing a downward-sloping demand curve finds that his marginal cost is constant at $10 and his marginal revenue is zero.This monopolist should

Accepted Answer

A)   reduce production.
B)   increase production.
C)   leave production unchanged.
D)   reduce the production cost further.
E)   decrease price.F) D) and E)
G) B) and D)

Question 12

Suppose that a monopolist is considering two different pricing schemes: offering the good at $100 per unit with a $10 rebate coupon,or just charging a flat $90 per unit.His economic consultant would advise him to

Accepted Answer

A)   charge the $90 price.
B)   charge the $100 price and "misplace" most of the rebate coupons.
C)   charge the $100 price because less than 100% of the buyers will mail in the rebate.
D)   do either;the impact will be the same.
E)   charge the $90 price because most consumers ignore rebate offers.F) A) and D)
G) D) and E)

Question 13

To sell an extra unit of output,a perfect competitor __________,while an imperfect competitor __________.

Accepted Answer

A)   does not alter price;must lower price
B)   must hope the market price falls;must lower price
C)   does not alter price;does not alter price either
D)   must lower price;must lower price
E)   must lower price;must offer discountsF) C) and E)
G) C) and D)

Question 14

Production and distribution of electricity would be a __________ candidate for exclusive contracting because __________.

Accepted Answer

A)   poor;it is a complex task with large fixed investments
B)   good;it is a simple task
C)   poor;production costs are very uncertain
D)   good;transferring the fixed investments from one firm to another is easily accomplished
E)   poor;demand for electricity is difficult to estimateF) A) and C)
G) C) and E)

Question 15

What happens to producer and consumer surplus when a monopolist increases output above the profit-maximizing output level?

Accepted Answer

A)   Both producer and consumer surplus increase.
B)   Producer surplus falls but consumer surplus rises.
C)   Both producer and consumer surplus decrease.
D)   Producer surplus rises but consumer surplus falls.
E)   Both producer and consumer surplus remain unchanged.F) C) and D)
G) D) and E)

Question 16

Which of the following is TRUE if a monopolist faces a constant marginal cost? The monopolist faces a

Accepted Answer

A)   constant total cost.
B)   constant average variable cost.
C)   perfectly elastic demand curve.
D)   vertical demand curve.
E)   vertical supply curve.F) B) and D)
G) B) and C)

Question 17

Exclusive contracting involves provincial or municipal governments

Accepted Answer

A)   directly providing a good or service.
B)   regulating the price a natural monopolist can charge.
C)   acquiring bids from private firms and awarding the contract to the lowest bidder.
D)   requiring that agencies purchase goods from minority-owned businesses.
E)   getting bids from one firm exclusively.F) All of the above
G) D) and E)

Question 18

-Refer to the table above.If these data refer to a profit-maximizing monopolist,the firm will produce where __________,which in this example means that output will be __________ units,and it will be sold at a price of ________ per unit.

Accepted Answer

A)   P = MC;3;$8
B)   MR = MC;5;$6
C)   P = MR;4;$7
D)   MR = MC;3;$8
E)   P = MC;5;$6F) A) and B)
G) C) and D)

Question 19

Predatory pricing refers to selling

Accepted Answer

A)   above cost in order to make a profit.
B)   below cost in order to take a loss.
C)   below cost in order to drive competitors out of business.
D)   above cost in order to ensure product quality.
E)   above cost in order to drive competitors out of businessF) All of the above
G) D) and E)

Question 20

A city government that produces electricity for the local residents and businesses is an example of

Accepted Answer

A)   government regulation of a natural monopoly.
B)   government using exclusive contracting agreements.
C)   the results of the enforcement of competition laws.
D)   the ever growing presence of government in the economy.
E)   government ownership of a natural monopoly.F) B) and D)
G) C) and E)

Exam 8: Monopoly and Other Forms of Imperfect Competition

Suppose that a monopolist is considering two different pricing schemes: offering the good at $100 per unit with a $10 rebate coupon,or just charging a flat $90 per unit.His economic consultant would advise him to

Correct Answer
verified

The elasticity of demand for an imperfectly competitive firm is

Correct Answer
verified

An industry that features a few firms that produce close substitutes is called

Correct Answer
verified

-Refer to the graph above.A profit-maximizing monopolist would charge a price of

Correct Answer
verified

Exclusive contracting involves provincial or municipal governments

Correct Answer
verified

Predatory pricing refers to selling

Correct Answer
verified

-Refer to the graph above.A profit-maximizing monopolist would earn a profit of ___________ per unit.

Correct Answer
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When marginal revenue is equal to zero,

Correct Answer
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To sell an extra unit of output,a perfect competitor ,while an imperfect competitor .

Correct Answer
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-Refer to the table above.If these data refer to a profit-maximizing monopolist,the firm will produce where ,which in this example means that output will be units,and it will be sold at a price of per unit.

Correct Answer
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-Refer to the table above.The deadweight loss due to monopoly in the market stems from the fact that

Correct Answer
verified

Which of the following is TRUE if a monopolist faces a constant marginal cost? The monopolist faces a

Correct Answer
verified

Production and distribution of electricity would be a candidate for exclusive contracting because .

Correct Answer
verified

What happens to producer and consumer surplus when a monopolist increases output above the profit-maximizing output level?

Correct Answer
verified

Which of the following statements about perfect price discrimination is FALSE?

Correct Answer
verified

When a firm with constant returns to scale uses 30% more of all inputs and input prices remain unchanged,then

Correct Answer
verified

-Refer to the table above.The marginal revenue of selling the sixth unit is

Correct Answer
verified

Correct Answer
verified

A city government that produces electricity for the local residents and businesses is an example of

Correct Answer
verified

A monopolist facing a downward-sloping demand curve finds that his marginal cost is constant at $10 and his marginal revenue is zero.This monopolist should

Correct Answer
verified

Exam 8: Monopoly and Other Forms of Imperfect Competition

Suppose that a monopolist is considering two different pricing schemes: offering the good at $100 per unit with a $10 rebate coupon,or just charging a flat $90 per unit.His economic consultant would advise him to

Correct AnswerverifiedShow Answer

The elasticity of demand for an imperfectly competitive firm is

Correct AnswerverifiedShow Answer

An industry that features a few firms that produce close substitutes is called

Correct AnswerverifiedShow Answer

-Refer to the graph above.A profit-maximizing monopolist would charge a price of

Correct AnswerverifiedShow Answer

Exclusive contracting involves provincial or municipal governments

Correct AnswerverifiedShow Answer

Predatory pricing refers to selling

Correct AnswerverifiedShow Answer

-Refer to the graph above.A profit-maximizing monopolist would earn a profit of ___________ per unit.

Correct AnswerverifiedShow Answer

When marginal revenue is equal to zero,

Correct AnswerverifiedShow Answer

To sell an extra unit of output,a perfect competitor __________,while an imperfect competitor __________.

Correct AnswerverifiedShow Answer

-Refer to the table above.If these data refer to a profit-maximizing monopolist,the firm will produce where __________,which in this example means that output will be __________ units,and it will be sold at a price of ________ per unit.

Correct AnswerverifiedShow Answer

-Refer to the table above.The deadweight loss due to monopoly in the market stems from the fact that

Correct AnswerverifiedShow Answer

Which of the following is TRUE if a monopolist faces a constant marginal cost? The monopolist faces a

Correct AnswerverifiedShow Answer

Production and distribution of electricity would be a __________ candidate for exclusive contracting because __________.

Correct AnswerverifiedShow Answer

What happens to producer and consumer surplus when a monopolist increases output above the profit-maximizing output level?

Correct AnswerverifiedShow Answer

Which of the following statements about perfect price discrimination is FALSE?

Correct AnswerverifiedShow Answer

When a firm with constant returns to scale uses 30% more of all inputs and input prices remain unchanged,then

Correct AnswerverifiedShow Answer

-Refer to the table above.The marginal revenue of selling the sixth unit is

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

A city government that produces electricity for the local residents and businesses is an example of

Correct AnswerverifiedShow Answer

A monopolist facing a downward-sloping demand curve finds that his marginal cost is constant at $10 and his marginal revenue is zero.This monopolist should

Correct AnswerverifiedShow Answer

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To sell an extra unit of output,a perfect competitor ,while an imperfect competitor .

Correct Answer
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-Refer to the table above.If these data refer to a profit-maximizing monopolist,the firm will produce where ,which in this example means that output will be units,and it will be sold at a price of per unit.

Correct Answer
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Correct Answer
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Production and distribution of electricity would be a candidate for exclusive contracting because .

Correct Answer
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