Question 1

The fundamental source of monopoly power is

Accepted Answer

A)   many buyers and sellers.
B)   low fixed costs.
C)   rising average total costs.
D)   barriers to entry.E) None of the above
F) C) and D)

Question 2

The distribution of water to residents of a town and an infrequently used bridge are examples of

Accepted Answer

The answer of The distribution of water to residents of...

Question 3

When we compare economic welfare in a monopoly market to a competitive market, the profits earned by the monopolist represent

Accepted Answer

A)   a transfer of benefits from the consumer to the producer.
B)   a loss in total welfare.
C)   the higher marginal costs incurred by the monopolists in comparison to competitive firms.
D)   the higher marginal revenues gained by the monopolists in comparison to competitive firms.E) B) and D)
F) A) and C)

Question 4

Table 15-18
A monopolist faces the following demand curve:  Suppose marginal cost is constant at $8 per unit.
-Refer to Table 15-18 The monopolist's profit­maximizing level of output is

Accepted Answer

A)   3 units.
B)   4 units.
C)   5 units.
D)   6 units.E) None of the above
F) A) and B)

Question 5

Table 15-3
Consider the following demand and cost information for a monopoly. 
-Refer to Table 15-3. The marginal cost of the 4th unit is

Accepted Answer

A)   $7.
B)   $12.
C)   $25.
D)   $60.E) A) and B)
F) A) and C)

Question 6

Drug companies are allowed to be monopolists in the drugs they discover in order to

Accepted Answer

A)   allow drug companies to charge a price that is equal to their marginal cost.
B)   discourage new firms from entering the drug market.
C)   encourage research.
D)   allow the government to earn patent revenue.E) A) and B)
F) All of the above

Question 7

Sizable economic profits can persist over time under monopoly if the monopolist

Accepted Answer

A)   produces that output where average total cost is at a maximum.
B)   is protected by barriers to entry.
C)   operates as a price taker rather than a price maker.
D)   earns revenues that exceed variable costs.E) All of the above
F) A) and D)

Question 8

Which of the following is an example of a barrier to entry?

Accepted Answer

A)   Tom charges a higher price than his competitors for his golf lessons.
B)   Dick charges a lower price than his competitors for his lawn-mowing services.
C)   Harry offers free concerts on Sunday afternoons as a form of advertising.
D)   Larry obtains a copyright for the new computer game that he invented.E) A) and B)
F) All of the above

Question 9

If a monopolist's marginal costs increase by $1 for all levels of output, then the monopoly price will

Accepted Answer

A)   rise by $1.
B)   rise by more than $1.
C)   rise by less than $1.
D)   not change, but profits will decrease.E) A) and D)
F) A) and C)

Question 10

A monopoly

Accepted Answer

A)   can set the price it charges for its output and earn unlimited profits.
B)   takes the market price as given and earns small but positive profits.
C)   can set the price it charges for its output but faces a downward-sloping demand curve so it cannot earn unlimited profits.
D)   can set the price it charges for its output but faces a horizontal demand curve so it can earn unlimited profits.E) B) and D)
F) A) and B)

Question 11

A benefit of a monopoly is

Accepted Answer

A)   lower prices.
B)   a wide variety of similar products.
C)   decreasing long-run average total costs.
D)   greater creativity by authors who can copyright their novels.E) A) and C)
F) All of the above

Question 12

Table 15-13
The following table gives information on the price, quantity, and total cost of production for a monopolist. 
-Refer to Table 15-13. If the monopolist maximizes profits, he will charge a price of

Accepted Answer

A)   $4.
B)   $3.
C)   $2.
D)   $1.E) All of the above
F) A) and D)

Question 13

Deadweight loss

Accepted Answer

A)   measures monopoly inefficiency.
B)   exceeds monopoly profits.
C)   equals monopoly profits.
D)   equals monopoly revenues minus profits.E) None of the above
F) A) and C)

Question 14

Figure 15-10 
-Refer to Figure 15-10. What area measures the deadweight loss?

Accepted Answer

A)   (B-F) *K
B)   0.5[(P-O) *(L-O) ]
C)   0.5[(A-H) *(L-J) ]
D)   0.5[(B-F) *(L-K) ]E) B) and C)
F) A) and B)

Question 15

Figure 15-13 
-Refer to Figure 15-13. A profit-maximizing monopolist would create a deadweight loss to society valued at

Accepted Answer

A)   $12.
B)   $24.
C)   $42.
D)   $84.E) B) and C)
F) All of the above

Question 16

For a monopolist, when the price effect is greater than the output effect, marginal revenue is

Accepted Answer

A)   positive.
B)   negative.
C)   zero.
D)   maximized.E) C) and D)
F) A) and C)

Question 17

Scenario 15-7
Black Box Cable TV is able to purchase an exclusive right to sell a premium movie channel (PMC)  in its market area. Let's assume that Black Box Cable pays $150,000 a year for the exclusive marketing rights to PMC. Since Black Box has already installed cable to all of the homes in its market area, the marginal cost of delivering PMC to subscribers is zero. The manager of Black Box needs to know what price to charge for the PMC service to maximize her profit. Before setting price, she hires an economist to estimate demand for the PMC service. The economist discovers that there are two types of subscribers who value premium movie channels. First are the 4,000 die-hard TV viewers who will pay as much as $150 a year for the new PMC premium channel. Second, the PMC channel will appeal to 20,000 occasional TV viewers who will pay as much as $20 a year for a subscription to PMC.
-Refer to Scenario 15-7. If Black Box Cable TV is unable to price discriminate, what price will it choose to maximize its profit, and what is the amount of the profit?

Accepted Answer

A)   price = $20; profit = $400,000
B)   price = $20; profit = $330,000
C)   price = $150; profit = $450,000
D)   price = $150; profit = $600,000E) None of the above
F) C) and D)

Question 18

In order for antitrust laws to raise social welfare, the government must

Accepted Answer

A)   disallow synergy benefits from accruing to monopolists.
B)   disallow any mergers from taking place.
C)   be able to determine which mergers are desirable and which are not.
D)   always attempt to keep markets in their most competitive form.E) B) and C)
F) A) and B)

Question 19

Figure 15-19 
-Refer to Figure 15-19. If the monopoly firm is not allowed to price discriminate, then the deadweight loss amounts to

Accepted Answer

A)   $0.
B)   $1,562.50.
C)   $3,125.
D)   $6,250.E) None of the above
F) B) and C)

Question 20

Figure 15-4 
-Refer to Figure 15-4. Profit will be maximized by charging a price equal to

Accepted Answer

A)   P5.
B)   P4.
C)   P3.
D)   P1.E) None of the above
F) C) and D)

Exam 15: Monopoly

Sizable economic profits can persist over time under monopoly if the monopolist

Correct Answer
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Figure 15-10 -Refer to Figure 15-10. What area measures the deadweight loss?

Correct Answer
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Table 15-13 The following table gives information on the price, quantity, and total cost of production for a monopolist. -Refer to Table 15-13. If the monopolist maximizes profits, he will charge a price of

Correct Answer
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A benefit of a monopoly is

Correct Answer
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The distribution of water to residents of a town and an infrequently used bridge are examples of

Correct Answer
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In order for antitrust laws to raise social welfare, the government must

Correct Answer
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For a monopolist, when the price effect is greater than the output effect, marginal revenue is

Correct Answer
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Drug companies are allowed to be monopolists in the drugs they discover in order to

Correct Answer
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Figure 15-13 -Refer to Figure 15-13. A profit-maximizing monopolist would create a deadweight loss to society valued at

Correct Answer
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If a monopolist's marginal costs increase by $1 for all levels of output, then the monopoly price will

Correct Answer
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Deadweight loss

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Table 15-18 A monopolist faces the following demand curve: Suppose marginal cost is constant at $8 per unit. -Refer to Table 15-18 The monopolist's profitmaximizing level of output is

Correct Answer
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Which of the following is an example of a barrier to entry?

Correct Answer
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Figure 15-19 -Refer to Figure 15-19. If the monopoly firm is not allowed to price discriminate, then the deadweight loss amounts to

Correct Answer
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Table 15-3 Consider the following demand and cost information for a monopoly. -Refer to Table 15-3. The marginal cost of the 4th unit is

Correct Answer
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Figure 15-4 -Refer to Figure 15-4. Profit will be maximized by charging a price equal to

Correct Answer
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The fundamental source of monopoly power is

Correct Answer
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When we compare economic welfare in a monopoly market to a competitive market, the profits earned by the monopolist represent

Correct Answer
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A monopoly

Correct Answer
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Exam 15: Monopoly

Sizable economic profits can persist over time under monopoly if the monopolist

Correct AnswerverifiedShow Answer

Figure 15-10 -Refer to Figure 15-10. What area measures the deadweight loss?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Table 15-13 The following table gives information on the price, quantity, and total cost of production for a monopolist. -Refer to Table 15-13. If the monopolist maximizes profits, he will charge a price of

Correct AnswerverifiedShow Answer

A benefit of a monopoly is

Correct AnswerverifiedShow Answer

The distribution of water to residents of a town and an infrequently used bridge are examples of

Correct AnswerverifiedShow Answer

In order for antitrust laws to raise social welfare, the government must

Correct AnswerverifiedShow Answer

For a monopolist, when the price effect is greater than the output effect, marginal revenue is

Correct AnswerverifiedShow Answer

Drug companies are allowed to be monopolists in the drugs they discover in order to

Correct AnswerverifiedShow Answer

Figure 15-13 -Refer to Figure 15-13. A profit-maximizing monopolist would create a deadweight loss to society valued at

Correct AnswerverifiedShow Answer

If a monopolist's marginal costs increase by $1 for all levels of output, then the monopoly price will

Correct AnswerverifiedShow Answer

Deadweight loss

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Table 15-18 A monopolist faces the following demand curve: Suppose marginal cost is constant at $8 per unit. -Refer to Table 15-18 The monopolist's profit­maximizing level of output is

Correct AnswerverifiedShow Answer

Which of the following is an example of a barrier to entry?

Correct AnswerverifiedShow Answer

Figure 15-19 -Refer to Figure 15-19. If the monopoly firm is not allowed to price discriminate, then the deadweight loss amounts to

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Table 15-3 Consider the following demand and cost information for a monopoly. -Refer to Table 15-3. The marginal cost of the 4th unit is

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Figure 15-4 -Refer to Figure 15-4. Profit will be maximized by charging a price equal to

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The fundamental source of monopoly power is

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When we compare economic welfare in a monopoly market to a competitive market, the profits earned by the monopolist represent

Correct AnswerverifiedShow Answer

A monopoly

Correct AnswerverifiedShow Answer

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Table 15-18 A monopolist faces the following demand curve: Suppose marginal cost is constant at $8 per unit. -Refer to Table 15-18 The monopolist's profitmaximizing level of output is

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