Question 1

Refer to the information provided.Jack, the sole owner of all the wells in town, decides to move to a more suitable climate, so he sells the wells to a couple of dozen different town residents.Which of the following is likely to occur?

Accepted Answer

A)  the price of water is likely to fall
B)  the individual water sellers will not have as much pricing power as Jack had
C)  the town residents will likely be better off
D)  all of the above will occurE) A) and D)
F) A) and B)

Question 2

In a monopoly, consumers will purchase if their willingness-to-pay is above:

Accepted Answer

A)  price
B)  firm profit
C)  marginal cost
D)  marginal revenueE) A) and B)
F) B) and D)

Question 3

According to the information provided, suppose only one resident owns all the wells in town.Which of the following statements is most likely going to be true of the market for water?

Accepted Answer

A)  the seller will be able to earn unlimited profit
B)  the price of a gallon of water will be driven to equal its marginal cost
C)  the price of a gallon of water will exceed its marginal cost
D)  since water is a necessity of life, there will be no decline in the quantity of water consumed, regardless of how high the price is raisedE) All of the above
F) C) and D)

Question 4

If a monopolist is able to perfectly price discriminate:

Accepted Answer

A)  consumer surplus is increased and deadweight loss is transformed into monopoly profit
B)  consumer surplus is decreased and deadweight loss is increased
C)  consumer surplus is increased and deadweight loss is increased
D)  consumer surplus and deadweight losses are transformed into monopoly profitsE) C) and D)
F) B) and C)

Question 5

A social planner maximises total welfare by charging a price equal to marginal cost.

Accepted Answer

A) True 
 B)False

Question 6

What is the monopolist's profit under the following conditions? The profit-maximising price charged for goods produced is $40.The intersection of the marginal-revenue and marginal cost-curves occurs where output is 20 units and marginal cost is $25.Average cost for 20 units of output is $15.

Accepted Answer

A)  $300
B)  $500
C)  $200
D)  $40E) C) and D)
F) B) and D)

Question 7

An appropriate way to measure the economic inefficiency of a monopoly is the:

Accepted Answer

A)  number of consumers who are unable to purchase the product because of its high price
B)  deadweight loss
C)  low wages paid to the monopolist's workers
D)  poor quality of service offered by monopoly firmsE) B) and D)
F) B) and C)

Question 8

A natural monopoly can arise when a single firm has equal or greater average total costs than two or more firms.

Accepted Answer

A) True 
 B)False

Question 9

The market demand curve for a monopolist is typically:

Accepted Answer

A)  downward-sloping
B)  horizontal
C)  unit elastic
D)  perfectly elastic at market priceE) A) and C)
F) A) and B)

Question 10

Price discrimination is a rational strategy for a profit-maximising monopolist when:

Accepted Answer

A)  there is no opportunity for arbitrage across market segmentations
B)  there is an opportunity for arbitrage across market segmentations
C)  consumers are unable to be segmented into identifiable markets
D)  they want to increase the deadweight loss that results from profit-maximising behaviourE) B) and C)
F) A) and D)

Question 11

The key difference between a competitive firm and a monopoly firm is the ability to select the level of production.

Accepted Answer

A) True 
 B)False

Question 12

Where does the marginal-revenue curve for a monopoly firm start?
(i)  at the same point on the vertical axis as the average-revenue curve
(ii)  above the demand curve
(iii)  below the demand curve

Accepted Answer

A)  (i)  only
B)  (i)  and (ii) 
C)  (i)  and (iii) 
D)  (iii)  onlyE) None of the above
F) A) and D)

Question 13

Graph 15-4  This graph depicts the demand and marginal-cost curves of a profit-maximising monopolist.Use the graph to answer the following question(s) .
-Refer to Graph 15-4.If the monopoly operates at an output level below q₀, decreasing output would:

Accepted Answer

A)  raise the price and raise total surplus
B)  lower the price and raise total surplus
C)  raise the price and lower total surplus
D)  lower the price and lower total surplusE) A) and B)
F) A) and C)

Question 14

Graph 15-6  This graph depicts the demand, marginal-revenue and marginal-cost curves of a profit-maximising monopolist.Use the graph to answer the following question(s) .
-Refer to Graph 15-6.What is the deadweight loss equal to when the monopolist engages in perfect price discrimination?

Accepted Answer

A)  ABC
B)  ADF
C)  CEF
D)  deadweight loss will equal zeroE) A) and B)
F) A) and C)

Question 15

Suppose there is one firm in a market.If this firm sells the same good at different prices to different customers, then this practice is called:

Accepted Answer

A)  price determination
B)  predatory pricing
C)  variable pricing
D)  price discriminationE) C) and D)
F) A) and D)

Question 16

In theory, perfect price discrimination:

Accepted Answer

A)  increases the monopolist's profits
B)  decreases consumer surplus
C)  decreases deadweight loss
D)  does all of the aboveE) A) and C)
F) A) and B)

Question 17

Suppose that at the current output level the price received by a monopolist for its good is $10, marginal revenue is equal to $6, and marginal cost is $8.To maximise profit the monopolist should:

Accepted Answer

A)  decrease output
B)  increase output
C)  keep output constant
D)  we cannot say without more informationE) A) and B)
F) B) and D)

Question 18

Given that monopoly firms do not have to compete with other firms, the outcome in a monopoly market is best described as:

Accepted Answer

A)  not in the best interest of society
B)  where excessive pollution occurs
C)  efficient, but not equitable
D)  all of the aboveE) A) and B)
F) B) and D)

Question 19

Graphically depict the deadweight loss caused by a monopoly.How is this similar to the deadweight loss from taxation?

Accepted Answer

A profit-maximising monopolist will choo...

Question 20

For a monopolist, when does marginal revenue equal demand?

Accepted Answer

A)  when output is less than profit-maximising output
B)  when output is greater than profit-maximising output
C)  when there is a zero output
D)  marginal revenue is never equal to demandE) A) and D)
F) All of the above

Exam 15: Monopoly

Suppose that at the current output level the price received by a monopolist for its good is $10, marginal revenue is equal to $6, and marginal cost is $8.To maximise profit the monopolist should:

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Suppose there is one firm in a market.If this firm sells the same good at different prices to different customers, then this practice is called:

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A social planner maximises total welfare by charging a price equal to marginal cost.

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Graphically depict the deadweight loss caused by a monopoly.How is this similar to the deadweight loss from taxation?

Correct AnswerverifiedA profit-maximising monopolist will choo...View AnswerShow Answer

Given that monopoly firms do not have to compete with other firms, the outcome in a monopoly market is best described as:

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The key difference between a competitive firm and a monopoly firm is the ability to select the level of production.

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Price discrimination is a rational strategy for a profit-maximising monopolist when:

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What is the monopolist's profit under the following conditions? The profit-maximising price charged for goods produced is $40.The intersection of the marginal-revenue and marginal cost-curves occurs where output is 20 units and marginal cost is $25.Average cost for 20 units of output is $15.

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For a monopolist, when does marginal revenue equal demand?

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If a monopolist is able to perfectly price discriminate:

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In a monopoly, consumers will purchase if their willingness-to-pay is above:

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Graph 15-6 This graph depicts the demand, marginal-revenue and marginal-cost curves of a profit-maximising monopolist.Use the graph to answer the following question(s) . -Refer to Graph 15-6.What is the deadweight loss equal to when the monopolist engages in perfect price discrimination?

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A natural monopoly can arise when a single firm has equal or greater average total costs than two or more firms.

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The market demand curve for a monopolist is typically:

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According to the information provided, suppose only one resident owns all the wells in town.Which of the following statements is most likely going to be true of the market for water?

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Where does the marginal-revenue curve for a monopoly firm start? (i) at the same point on the vertical axis as the average-revenue curve (ii) above the demand curve (iii) below the demand curve

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An appropriate way to measure the economic inefficiency of a monopoly is the:

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Refer to the information provided.Jack, the sole owner of all the wells in town, decides to move to a more suitable climate, so he sells the wells to a couple of dozen different town residents.Which of the following is likely to occur?

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Graph 15-4 This graph depicts the demand and marginal-cost curves of a profit-maximising monopolist.Use the graph to answer the following question(s) . -Refer to Graph 15-4.If the monopoly operates at an output level below q₀, decreasing output would:

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In theory, perfect price discrimination:

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