Question 1

The graph shown represents the cost and revenue curves faced by a monopoly.  What profit is the monopolist earning?

Accepted Answer

A)  (P3 − P0) × Q1
B)  (P3− P1) × Q1
C)  (P1− P0) × Q1
D)  (P3− P0) / Q1E) B) and D)
F) A) and C)

Question 2

For a monopolist, marginal revenue for all units greater than one is:

Accepted Answer

A)  always equal to price.
B)  never less than price.
C)  always less than price.
D)  minimized at the profit-maximizing price.E) A) and D)
F) A) and B)

Question 3

Total revenue increases as output increases along sections of the demand curve that are:

Accepted Answer

A)  downward sloping.
B)  price elastic.
C)  price inelastic.
D)  upward sloping.E) A) and B)
F) A) and C)

Question 4

When the monopolist chooses its quantity supplied, it will:

Accepted Answer

A)  set the price equal to marginal cost.
B)  set the price higher than what consumers are willing to pay for that quantity.
C)  set the price equal to the amount consumers are willing to pay for that quantity.
D)  set the price lower than the demand curve to create a perceived shortage.E) A) and B)
F) None of the above

Question 5

This graph shows the cost and revenue curves faced by a monopoly.  The profit-maximizing price is:

Accepted Answer

A)  $3
B)  $7
C)  $11
D)  $12E) C) and D)
F) B) and D)

Question 6

One barrier to entry into a monopoly market is:

Accepted Answer

A)  a natural monopoly.
B)  commonplace inputs.
C)  bulk buying.
D)  price gouging.E) A) and D)
F) None of the above

Question 7

The graph shown represents the cost and revenue curves faced by a monopoly.  If Q2 units are being produced, the monopolist:

Accepted Answer

A)  is earning negative economic profits.
B)  is earning positive economic profits.
C)  is earning zero economic profits.
D)  may be earning zero accounting profits.E) A) and B)
F) B) and C)

Question 8

For a monopolist, at the profit-maximizing level of output:

Accepted Answer

A)  price is greater than marginal revenue.
B)  marginal revenue is greater than average revenue.
C)  average revenue is greater than price.
D)  price is equal to marginal revenue.E) A) and B)
F) None of the above

Question 9

Natural monopolies are the natural result of:

Accepted Answer

A)  competition in markets where economies of scale exist over the relevant range of output.
B)  geographical happenstance.
C)  fierce competition from firms in a market.
D)  government regulations intended to encourage competition.E) A) and B)
F) A) and C)

Question 10

Monopoly power in a market causes:

Accepted Answer

A)  monopolists to earn economic profits of zero.
B)  consumers to gain.
C)  market surplus to be lost.
D)  producers to worry about competition.E) C) and D)
F) A) and C)

Question 11

Most U.S. firms face:

Accepted Answer

A)  perfect competition.
B)  some degree of competition.
C)  market power resting in a few large firms in every industry.
D)  no competition at all.E) B) and C)
F) All of the above

Question 12

If the monopolist charges a high price:it will always earn more profits than if it had set a lower price.the quantity sold will be less than if it had set a lower price.it can keep other firms from entering the market.

Accepted Answer

A)  III only
B)  I and II only
C)  II only
D)  I and III onlyE) A) and B)
F) C) and D)

Question 13

The loss of the profit motive by a publicly-owned natural monopoly could:

Accepted Answer

A)  increase the motivation to improve efficiency.
B)  reduce the motivation to improve efficiency.
C)  increase the incentive to provide better service.
D)  increase the incentive to lower costs.E) A) and B)
F) None of the above

Question 14

The graph shown represents the cost and revenue curves faced by a monopoly.  What is the monopolist's profit-maximizing decision?

Accepted Answer

A)  Q1, P1
B)  Q1, P3
C)  Q2, P2
D)  Q1, P2E) A) and C)
F) B) and C)

Question 15

For a monopoly producing at any output level greater than one, the marginal revenue curve:

Accepted Answer

A)  is minimized when total revenue is maximized.
B)  lies above the average revenue curve.
C)  lies below the demand curve.
D)  is the same as the demand curve.E) A) and D)
F) A) and B)

Question 16

For a monopolist, the price effect:

Accepted Answer

A)  is the increase in revenue from selling a greater quantity at a lower price.
B)  is always outweighed by the quantity effect.
C)  is the decrease in revenue from selling a greater quantity at a lower price.
D)  always outweighs the quantity effect.E) A) and D)
F) B) and C)

Question 17

The graph shown represents the cost and revenue curves faced by a monopoly.  What profit is earned by the monopolist in the short run?

Accepted Answer

A)  $420
B)  $250
C)  $500
D)  $1,000E) All of the above
F) B) and D)

Question 18

The table shown represents the revenues faced by a monopolist.

The firm's marginal revenue for the fourth unit is ______ the marginal revenue of the third unit.

Accepted Answer

A)  higher than
B)  lower than
C)  the same as
D)  This answer cannot be determined from the information given.E) C) and D)
F) A) and B)

Question 19

What is the most important reason why diamonds are expensive?

Accepted Answer

A)  Very few diamonds are discovered each year.
B)  The seller of most diamonds in the world restricts output.
C)  They are a symbol of luxury.
D)  They are a form of conspicuous consumption.E) A) and B)
F) A) and C)

Question 20

A natural monopolist that sets prices equal to marginal cost will:

Accepted Answer

A)  incur losses.
B)  earn zero profit.
C)  make a positive economic profit.
D)  be efficient.E) A) and B)
F) A) and C)

Exam 14: Monopoly

For a monopoly producing at any output level greater than one, the marginal revenue curve:

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For a monopolist, marginal revenue for all units greater than one is:

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The graph shown represents the cost and revenue curves faced by a monopoly. If Q2 units are being produced, the monopolist:

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For a monopolist, the price effect:

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This graph shows the cost and revenue curves faced by a monopoly. The profit-maximizing price is:

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One barrier to entry into a monopoly market is:

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The graph shown represents the cost and revenue curves faced by a monopoly. What is the monopolist's profit-maximizing decision?

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The graph shown represents the cost and revenue curves faced by a monopoly. What profit is earned by the monopolist in the short run?

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When the monopolist chooses its quantity supplied, it will:

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Natural monopolies are the natural result of:

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For a monopolist, at the profit-maximizing level of output:

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If the monopolist charges a high price:it will always earn more profits than if it had set a lower price.the quantity sold will be less than if it had set a lower price.it can keep other firms from entering the market.

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Total revenue increases as output increases along sections of the demand curve that are:

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Most U.S. firms face:

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The loss of the profit motive by a publicly-owned natural monopoly could:

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A natural monopolist that sets prices equal to marginal cost will:

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The table shown represents the revenues faced by a monopolist. The firm's marginal revenue for the fourth unit is ______ the marginal revenue of the third unit.

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Monopoly power in a market causes:

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The graph shown represents the cost and revenue curves faced by a monopoly. What profit is the monopolist earning?

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What is the most important reason why diamonds are expensive?

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