question
C. perfectly elastic.
answer
Because many good substitutes exist for a competitive firm's product, the demand curve that it faces is:
A. unit-elastic.
B. perfectly inelastic.
C. perfectly elastic.
D. inelastic only over a certain region.
A. unit-elastic.
B. perfectly inelastic.
C. perfectly elastic.
D. inelastic only over a certain region.
question
B. less market power than it would otherwise have.
answer
Suppose most people regard emeralds, rubies, and sapphires as close substitutes for diamonds. Then DeBeers, a large diamond company, has
A. less incentive to advertise than it would otherwise have.
B. less market power than it would otherwise have.
C. more control over the price of diamonds than it would otherwise have.
D. higher profits than it would otherwise have.
A. less incentive to advertise than it would otherwise have.
B. less market power than it would otherwise have.
C. more control over the price of diamonds than it would otherwise have.
D. higher profits than it would otherwise have.
question
Q1
answer
A profit-maximizing monopoly will produce an output level of
question
C. total revenue is maximized.
answer
For a monopoly, the level of output at which marginal revenue equals zero is also the level of output at which:
A. average revenue is zero.
B. profit is maximized.
C. total revenue is maximized.
D. marginal cost is zero.
A. average revenue is zero.
B. profit is maximized.
C. total revenue is maximized.
D. marginal cost is zero.
question
P1
answer
what price will the monopolist charge?
question
C. generally fails to maximize total economic well-being.
answer
A monopoly market
A. always maximizes total economic well-being.
B. always minimizes consumer surplus.
C. generally fails to maximize total economic well-being.
D. generally fails to maximize producer surplus.
A. always maximizes total economic well-being.
B. always minimizes consumer surplus.
C. generally fails to maximize total economic well-being.
D. generally fails to maximize producer surplus.
question
D. All of the above are correct.
answer
Because monopoly firms do not have to compete with other firms, the outcome in a market with a monopoly is often
A. not in the best interest of society.
B. one that fails to maximize total economic well-being.
C. inefficient.
D. All of the above are correct.
A. not in the best interest of society.
B. one that fails to maximize total economic well-being.
C. inefficient.
D. All of the above are correct.
question
A. (i) and (ii) only
answer
Which of the following are necessary characteristics of a monopoly? (i) The firm is the sole seller of its product. (ii)The firm's product does not have close substitutes. (iii) The firm generates a large economic profit. (iv) The firm is located in a small geographic market.
A. (i) and (ii) only
B. (i) and (iii) only C. (i), (ii), and (iii) only
D. (i), (ii), (iii), and (iv)
A. (i) and (ii) only
B. (i) and (iii) only C. (i), (ii), and (iii) only
D. (i), (ii), (iii), and (iv)
question
P1 x Q1
answer
A profit-maximizing monopoly's total revenue is equal to
question
A. average revenue exceeds marginal revenue.
answer
For a monopoly,
A. average revenue exceeds marginal revenue.
B. average revenue equals marginal revenue.
C. average revenue is less than marginal revenue.
D. price equals marginal revenue.
A. average revenue exceeds marginal revenue.
B. average revenue equals marginal revenue.
C. average revenue is less than marginal revenue.
D. price equals marginal revenue.
question
A. marginal cost equals price, while a monopolist produces where price exceeds marginal cost.
answer
One difference between a perfectly competitive firm and a monopoly is that a perfectly competitive firm produces where
A. marginal cost equals price, while a monopolist produces where price exceeds marginal cost.
B. marginal cost equals price, while a monopolist produces where marginal cost exceeds price. C. price exceeds marginal cost, while a monopolist produces where marginal cost equals price.
D. marginal cost exceeds price, while a monopolist produces where marginal cost equals price.
A. marginal cost equals price, while a monopolist produces where price exceeds marginal cost.
B. marginal cost equals price, while a monopolist produces where marginal cost exceeds price. C. price exceeds marginal cost, while a monopolist produces where marginal cost equals price.
D. marginal cost exceeds price, while a monopolist produces where marginal cost equals price.
question
A. measures monopoly inefficiency.
answer
Deadweight loss
A. measures monopoly inefficiency.
B. exceeds monopoly profits.
C. equals monopoly profits.
D. equals monopoly revenues minus profits.
A. measures monopoly inefficiency.
B. exceeds monopoly profits.
C. equals monopoly profits.
D. equals monopoly revenues minus profits.
question
A. never
answer
For a monopolist, when does marginal revenue exceed average revenue?
A. never
B. when output is less than the profit-maximizing level of output
C. when output is greater than the profit-maximizing level of output
D. for all levels of output greater than zero
A. never
B. when output is less than the profit-maximizing level of output
C. when output is greater than the profit-maximizing level of output
D. for all levels of output greater than zero
question
B. decreases.
answer
As a monopolist increases the quantity of output it sells, the price consumers are willing to pay for the good
A. is unaffected.
B. decreases.
C. increases.
D. There is not enough information given in answer the question.
A. is unaffected.
B. decreases.
C. increases.
D. There is not enough information given in answer the question.
question
B. positive externalities.
answer
The provision of public goods gives rise to
A. no externalities.
B. positive externalities.
C. negative externalities.
D. rivalries in consumption.
A. no externalities.
B. positive externalities.
C. negative externalities.
D. rivalries in consumption.
question
B. people can be prevented from using the good.
answer
When a good is excludable,
A. one person's use of the good diminishes another person's ability to use it.
B. people can be prevented from using the good. C. no more than one person can use the good at the same time.
D. everyone will be excluded from using the good.
A. one person's use of the good diminishes another person's ability to use it.
B. people can be prevented from using the good. C. no more than one person can use the good at the same time.
D. everyone will be excluded from using the good.
question
C. government
answer
When goods do not have a price, which of the following primarily ensures that the good is produced?
A. buyers
B. sellers
C. government
D. the market
A. buyers
B. sellers
C. government
D. the market
question
A. private goods.
answer
Property rights are well established for
A. private goods.
B. public goods. C. common resources.
D. both (b) and (c).
A. private goods.
B. public goods. C. common resources.
D. both (b) and (c).
question
B. The absence of property rights sometimes gives rise to market failure.
answer
Which of the following statements is correct?
A. The establishment of property rights sometimes gives rise to market failure.
B. The absence of property rights sometimes gives rise to market failure.
C. In the context of public goods, the Coase theorem implies that total surplus in some markets can be improved by the elimination of property rights. D. Government regulation of private behavior, in response to market failure, can never improve social well-being.
A. The establishment of property rights sometimes gives rise to market failure.
B. The absence of property rights sometimes gives rise to market failure.
C. In the context of public goods, the Coase theorem implies that total surplus in some markets can be improved by the elimination of property rights. D. Government regulation of private behavior, in response to market failure, can never improve social well-being.
question
C. both public goods and common resources.
answer
Governments can improve market outcomes for
A. public goods but not common resources.
B. common resources but not public goods.
C. both public goods and common resources.
D. neither public goods nor common resources.
A. public goods but not common resources.
B. common resources but not public goods.
C. both public goods and common resources.
D. neither public goods nor common resources.
question
D. excludable.
answer
A free-rider problem exists for any good that is not
A. rival in consumption.
B. a private good.
C. free.
D. excludable.
A. rival in consumption.
B. a private good.
C. free.
D. excludable.
question
B. cows are private goods, while elephants tend to roam freely without owners.
answer
The commercial value of ivory is a threat to the elephant, but the commercial value of beef is a guardian of the cow. This is because
A. the cow is raised in developed countries, while the elephant lives primarily in less-developed countries.
B. cows are private goods, while elephants tend to roam freely without owners.
C. cows and elephants are public goods, but ivory is nonrival.
D. ivory is nonrival and nonexclusive, but beef is rival and exclusive.
A. the cow is raised in developed countries, while the elephant lives primarily in less-developed countries.
B. cows are private goods, while elephants tend to roam freely without owners.
C. cows and elephants are public goods, but ivory is nonrival.
D. ivory is nonrival and nonexclusive, but beef is rival and exclusive.
question
A. to prevent overuse
answer
Governments can grant private property rights over resources that were previously viewed as public, such as fish or elephants. Why would governments want to do so?
A. to prevent overuse
B. to decrease taxes
C. to fight poverty
D. to increase consumption
A. to prevent overuse
B. to decrease taxes
C. to fight poverty
D. to increase consumption
question
B. Tragedy of the Commons
answer
Which parable describes the problem of wild animals that are hunted to the point of extinction?
A. Coase theorem
B. Tragedy of the Commons
C. Cost-benefit analysis
D. Clean Air Act
A. Coase theorem
B. Tragedy of the Commons
C. Cost-benefit analysis
D. Clean Air Act
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