question
Refer to the graph above for an industry. If the industry were purely competitive, the market price would be:
a) lower than 8
b) 8
c) 16
d) 14
a) lower than 8
b) 8
c) 16
d) 14
answer
14
question
With a natural monopoly, the fair return price:
a) And the socially optimal price are both allocatively efficient
b) Is allocatively inefficient; the socially optimal price is allocatively efficient
c) Is allocatively efficient; the socially optimal price is allocatively inefficient
d) And the socially optimal price are both allocatively inefficient
a) And the socially optimal price are both allocatively efficient
b) Is allocatively inefficient; the socially optimal price is allocatively efficient
c) Is allocatively efficient; the socially optimal price is allocatively inefficient
d) And the socially optimal price are both allocatively inefficient
answer
Is allocatively inefficient; the socially optimal price is allocatively efficient
question
Answer the question on the basis of the following information for a pure monopolist:
How many units would the above profit-maximizing nondiscriminating monopolist produce?
a) 4
b) 1
c) 2
d) 3
How many units would the above profit-maximizing nondiscriminating monopolist produce?
a) 4
b) 1
c) 2
d) 3
answer
3
question
If a regulatory commission wants to provide a natural monopoly with a fair return, it should establish a price that is equal to:
a) average total cost.
b) marginal cost.
c) minimum average fixed cost.
d) marginal revenue.
a) average total cost.
b) marginal cost.
c) minimum average fixed cost.
d) marginal revenue.
answer
average total cost
question
Price discrimination refers to:
a) the difference between the prices a purely competitive seller and a purely monopolistic seller would charge.
b) selling a given product for different prices at two different points in time.
c) any price above that which is equal to a minimum average total cost.
d) the selling of a given product at different prices that do not reflect cost differences.
a) the difference between the prices a purely competitive seller and a purely monopolistic seller would charge.
b) selling a given product for different prices at two different points in time.
c) any price above that which is equal to a minimum average total cost.
d) the selling of a given product at different prices that do not reflect cost differences.
answer
the selling of a given product at different prices that do not reflect cost differences
question
Refer to the graph above for an industry. If the industry were purely competitive, the output quantity would be:
a) 90
b) 160
c) 195
d) A level that is not labeled in the graph
a) 90
b) 160
c) 195
d) A level that is not labeled in the graph
answer
160
question
Which of the following statements is correct?
a) The pure monopolist maximizes profits by producing that output at which the differential between price and average cost is the greatest.
b) The pure monopolist will maximize profit by producing at that point on the demand curve where elasticity is zero.
c) Purely monopolistic sellers earn only normal profits in the long run.
d) In seeking the profit-maximizing output the pure monopolist underallocates resources to its production.
a) The pure monopolist maximizes profits by producing that output at which the differential between price and average cost is the greatest.
b) The pure monopolist will maximize profit by producing at that point on the demand curve where elasticity is zero.
c) Purely monopolistic sellers earn only normal profits in the long run.
d) In seeking the profit-maximizing output the pure monopolist underallocates resources to its production.
answer
In seeking the profit-maximizing output the pure monopolist underallocates resources to its production
question
Confronted with the same unit cost data, a monopolistic producer will charge:
a) a higher price and produce a smaller output than a competitive firm.
b) a lower price and produce a smaller output than a competitive firm.
c) a higher price and produce a larger output than a competitive firm.
d) the same price and produce the same output as a competitive firm.
a) a higher price and produce a smaller output than a competitive firm.
b) a lower price and produce a smaller output than a competitive firm.
c) a higher price and produce a larger output than a competitive firm.
d) the same price and produce the same output as a competitive firm.
answer
a higher price and produce a smaller output than a competitive firm
question
Answer the question on the basis of the following information for a pure monopolist:
If the above profit-maximizing monopolist is able to price discriminate, charging each customer the price associated with each given level of output, how much profit will the firm earn?
a) $300
b) $250
c) $120
d) $420
If the above profit-maximizing monopolist is able to price discriminate, charging each customer the price associated with each given level of output, how much profit will the firm earn?
a) $300
b) $250
c) $120
d) $420
answer
$250
question
Other things equal, in which of the following cases would economic profit be the greatest?
a) a regulated monopolist charging a price equal to average total cost
b) an unregulated, nondiscriminating monopolist
c) an unregulated monopolist which is able to engage in price discrimination
d) a regulated monopolist charging a price equal to marginal cost
a) a regulated monopolist charging a price equal to average total cost
b) an unregulated, nondiscriminating monopolist
c) an unregulated monopolist which is able to engage in price discrimination
d) a regulated monopolist charging a price equal to marginal cost
answer
a regulated monopolist charging a price equal to average total cost
question
Other things equal, a price discriminating monopolist will:
a) produce a larger output than a nondiscriminating monopolist.
b) produce a smaller output than a nondiscriminating monopolist.
c) realize a smaller economic profit than a nondiscriminating monopolist.
d) produce the same output as a nondiscriminating monopolist.
a) produce a larger output than a nondiscriminating monopolist.
b) produce a smaller output than a nondiscriminating monopolist.
c) realize a smaller economic profit than a nondiscriminating monopolist.
d) produce the same output as a nondiscriminating monopolist.
answer
produce a larger output than a nondiscriminating monopolist
question
When compared with the purely competitive industry with identical costs of production, a monopolist will produce:
a) Less output and charge a higher price
b) More output and charge a higher price
c) Less output and charge the same price
d) More output and charge the same price
a) Less output and charge a higher price
b) More output and charge a higher price
c) Less output and charge the same price
d) More output and charge the same price
answer
Less output and charge a higher price
question
Assume the above figure applies to a pure monopolist, and that MC is the same for both graphs. If this firm is able to price discriminate between children and adults, its profit-maximizing level of output will be:
a) Q1A + Q1C.
b) Q1C + Q2.
c) Q1A + Q1C + Q2.
d) Q1A + Q2.
a) Q1A + Q1C.
b) Q1C + Q2.
c) Q1A + Q1C + Q2.
d) Q1A + Q2.
answer
Q1C + Q2
question
The gains to monopolists from exercising market power:
a) are less than the losses to consumer in monopoly markets, resulting in a net loss to society.
b) equal the losses to consumers in monopoly markets, resulting in no net change for society.
c) exceed the losses to consumers in monopoly markets, resulting in a net gain to society.
d) create smaller deadweight losses than occur in purely competitive industries.
a) are less than the losses to consumer in monopoly markets, resulting in a net loss to society.
b) equal the losses to consumers in monopoly markets, resulting in no net change for society.
c) exceed the losses to consumers in monopoly markets, resulting in a net gain to society.
d) create smaller deadweight losses than occur in purely competitive industries.
answer
are less than the losses to consumer in monopoly markets, resulting in a net loss to society
question
Refer to the graph above for an industry. If the industry had a pure monopoly, the output quantity would be:
a) A level that is not labeled in the graph
b) 195
c) 90
d) 160
a) A level that is not labeled in the graph
b) 195
c) 90
d) 160
answer
90
question
Answer the question on the basis of the following information for a pure monopolist:
At its profit-maximizing output, the above nondiscriminating monopolist:
a) earns a normal profit of $250.
b) earns an economic profit of $250.
c) incurs a loss.
d) earns an economic profit of $150.
At its profit-maximizing output, the above nondiscriminating monopolist:
a) earns a normal profit of $250.
b) earns an economic profit of $250.
c) incurs a loss.
d) earns an economic profit of $150.
answer
earns an economic profit of $250
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