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160 Cards in this Set

  • Front
  • Back
1. Pure monopoly means:
A) any market in which the demand curve to the firm is downsloping.
B) a standardized product being produced by many firms.
C) a single firm producing a product for which there are no close substitutes.
D) a large number of firms producing a differentiated product
C
2. Which of the following is correct?
A) Both purely competitive and monopolistic firms are "price takers."
B) Both purely competitive and monopolistic firms are "price makers."
C) A purely competitive firm is a "price taker," while a monopolist is a "price maker." D) A purely competitive firm is a "price maker," while a monopolist is a "price taker."
A
3. A purely monopolistic industry:
A) has no entry barriers.
B) has a downward sloping demand curve.
C) produces a product or service for which there are many close substitutes.
D) earns only a normal profit in the long run. Answer
D
Type: D Topic: 1 E: 438 MI: 194
4. A pure monopolist is:
A) any firm realizing all existing economies of scale.
B) any firm whose demand curve is downsloping.
C) any firm which can engage in price discrimination.
D) a one-firm industry.
D
5. Pure monopolists may obtain economic profits in the long run because:
A) of advertising. C) of barriers to entry.
B) marginal revenue is constant as sales increase. D) of rising average fixed costs
D
6. Which of the following approximates a pure monopoly?
A) the foreign exchange market
C) the diamond market
B) the Kansas City wheat market
D) the soft drink market
D
7. Which of the following is a characteristic of pure monopoly?
A) close substitute products B) barriers to entry C) the absence of market power D) "price taking"
B
10. Patents:
A) give firms the exclusive right to produce or control a product for 100 years.
B) discourage research and innovation.
C) are a source of monopoly. D) are also called trademarks
D
11. A natural monopoly occurs when:
A) long-run average costs decline continuously through the range of demand.
B) a firm owns or controls some resource essential to production.
C) long-run average costs rise continuously as output is increased.
D) economies of scale are obtained at relatively low levels of output
A
12. Large minimum efficient scale of plant combined with limited market demand may lead to:
A) natural monopoly. B) patent monopoly C) government franchise monopoly. D) shared monopoly.
A
13. What do economies of scale, the ownership of essential raw materials, and patents have in common? A) They must all be present before price discrimination can be practiced.
B) They are all barriers to entry.
C) They all help explain why a monopolist's demand and marginal revenue curves coincide.
D) They all help explain why the long-run average cost curve is U-shaped
B
14. The nondiscriminating pure monopolist's demand curve: A) is the industry demand curve.
B) shows a direct or positive relationship between price and quantity demanded.
C) tends to be inelastic at high prices and elastic at low prices.
D) is identical to its marginal revenue curve
D
15. The nondiscriminating monopolist's demand curve:
A) is less elastic than a purely competitive firm's demand curve.
B) is perfectly elastic.
C) coincides with its marginal revenue curve.
D) is perfectly inelastic
A
16. If a nondiscriminating imperfectly competitive firm is selling its 100th unit of output for $35, its marginal revenue:
A) may be either greater or less than $35. C) will be less than $35.
B) will also be $35. D) will be greater than $35.
C
15. The nondiscriminating monopolist's demand curve:
A) is less elastic than a purely competitive firm's demand curve.
B) is perfectly elastic.
C) coincides with its marginal revenue curve.
D) is perfectly inelastic
A
16. If a nondiscriminating imperfectly competitive firm is selling its 100th unit of output for $35, its marginal revenue:
A) may be either greater or less than $35. C) will be less than $35.
B) will also be $35. D) will be greater than $35.
C
17. A nondiscriminating pure monopolist's demand curve:
A) is perfectly inelastic. C) lies above its marginal revenue curve.
B) coincides with its marginal revenue curve. D) lies below its marginal
C
18. For an imperfectly competitive firm:

A) total revenue is a straight, upsloping line because a firm's sales are independent of product price.
B) the marginal revenue curve lies above the demand curve because any reduction in price applies to all units sold.
C) the marginal revenue curve lies below the demand curve because any reduction in price applies to all units sold.
D) the marginal revenue curve lies below the demand curve because any reduction in price applies only to the extra unit sold.
C
19. For a nondiscriminating imperfectly competitive firm:
A) the marginal revenue curve lies above the demand curve.
B) the demand and marginal revenue curves coincide.
C) the demand curve intersects the horizontal axis where total revenue is at a maximum.
D) marginal revenue will become zero at that output where total revenue is at a maximum.
D
20. When a firm is on the inelastic segment of its demand curve, it can: A) increase total revenue by reducing price.
B) decrease total costs by decreasing price.
C) increase profits by increasing price



D) increase total revenue by more than the increase in total cost by increasing price
C
21. Refer to the above diagram. If price is reduced from P1 to P2, total revenue will:
A) increase by A minus C. C) decrease by A minus C.
B) increase by C minus A.
D) decrease by C minus A
B
22. Refer to the above diagram. The quantity difference between areas A and C for the indicated price reduction measures:
A) marginal cost. B) marginal revenue.
C) monopoly price. D) a welfare or efficiency loss
D
23. The above diagram implies that whenever a firm's demand curve is downsloping: A) price discrimination is not possible.
B) monopolists will be more efficient than competitors.
C) the demand and marginal revenue curves will coincide.
D) marginal revenue is less than price.
D
Answer the next question(s) on the basis of the demand schedule shown below:

Price Quantity demanded
$7 1
6 2
5 3
4 4
3 5

Type: T Topic: 3 E: 442 MI: 198
24. Refer to the above data. The marginal revenue obtained from selling the third unit of output is: A) $6. B) $1. C) $3. D) $5.
C
25. Refer to the above data. At the point where 3 units are being sold, the coefficient of price elasticity of demand:
A) cannot be estimated. C) is less than unity (one).
B) suggests that the market is purely competitive. D) is greater than unity (
D
26. A monopolistic firm has a sales schedule such that it can sell 10 prefabricated garages per week at $10,000 each, but if it restricts its output to 9 per week it can sell these at $11,000 each. The marginal revenue of the tenth unit of sales per week is:
A) -$1,000. B) $9,000. C) $10,000. D) $1,000.
D
A) an imperfectly competitive firm. C) an oligopolist.
B) a purely competitive firm. D) a pure monopolist.
B
28. Refer to the above two diagrams for individual firms. SEE PAGE 1508 In Figure 1 line B represents the firm's: A) demand and marginal revenue curves. C) marginal revenue curve B) demand curve only. D) average revenue curve only.
A
29. Refer to the above two diagrams for individual firms. In Figure 1, line A represents the firm's: A) demand and marginal revenue curves. C) marginal revenue curve only.
B) demand curve only. D) total revenue curve only
D
30. Refer to the above two diagrams for individual firms. Figure 2 pertains to: A) a market characterized by government regulation of price and output.
B) either an imperfectly competitive or a purely competitive seller.
C) a purely competitive seller.
D) an imperfectly competitive seller
D
31. Refer to the above two diagrams for individual firms. In Figure 2 the firm's demand and marginal revenue curves are represented by:
A) lines B and C respectively. C) lines A and B respectively.
B) lines A and C respectively. Answer: A D) line B.
A
32. With respect to the pure monopolist's demand curve it can be said that:
A) the stronger the barriers to entry, the more elastic is the monopolist's demand curve.
B) price exceeds marginal revenue at all outputs greater than 1.
C) demand is perfectly inelastic.
D) marginal revenue equals price at all outputs
B
33. The pure monopolist's demand curve is:
A) identical with the industry demand curve. C) perfectly inelastic.
B) of unit elasticity throughout. D) perfectly elastic
A
34. Refer to the above diagram. This firm is selling in:
A) a market in which there are an extremely large number of other firms producing the same product.
B) an imperfectly competitive market.
C) a market in which demand is elastic at all prices.
D) a purely competitive market.
B
35. Refer to the above diagram. Demand is relatively elastic:
A) in the P2P1 price range. C) in the P2P4 price range.
B) in the 0P1 price range. D) only at price P2
C
36. Refer to the above diagram. Demand is relatively inelastic:
A) at price P3. B) at any price below P2. C) in the P2P4 price range. D) in the P2P3 price range.
B
37. Refer to the above diagram. If this somehow was a costless product (that is, the total cost of any level of output was zero), the firm would maximize profits by:
A) selling the product at the highest possible price at which a positive quantity will be demanded.
B) producing Q1 units and charging a price of P1. C) producing Q3 units and charging a price of P3.
D) producing Q2 units and charging a price of P2.
D
38. Price exceeds marginal revenue for the pure monopolist because the: A) law of diminishing returns is inapplicable.
B) demand curve is downsloping.
C) monopolist produces a smaller output than would a purely competitive firm.
D) demand curve lies below the marginal revenue curve.
B
39. The demand curve faced by a pure monopolist:
A) may be either more or less elastic than that faced by a single purely competitive firm.
B) is less elastic than that faced by a single purely competitive firm.
C) has the same elasticity as that faced by a single purely competitive firm.
D) is more elastic than that faced by a single purely competitive firm
B
40. The marginal revenue curve for a monopolist: A) is a straight, upward sloping curve.
B) rises at first, reaches a maximum, and then declines.
C) becomes negative when output increases beyond some particular level.
D) is a straight line, parallel to the horizontal axis
C
41.


If the firm in the above diagram lowers price from P1 to P2, it will:
A) lose P1P 2ba in revenue from the price cut but increase revenue by Q1bcQ2 from the increase in sales.
B) lose P1P 2ca in revenue from the price cut but increase revenue by Q1acQ2 from the increase in sales.
C) incur a decline in total revenue because it is operating on the elastic segment of the demand curve.
D) incur an increase in total revenue because it is operating on the inelastic segment of the demand curve
A
42. The quantitative difference between areas Q1bcQ 2 and P1P2ba in the above diagram measures: A) marginal cost. B) total revenue. C) marginal revenue. D) average revenue.
C
43. Which of the following is characteristic of a pure monopolist's demand curve? A) Average revenue is less than price.
B) Its elasticity coefficient is 1 at all levels of output.
C) Price and marginal revenue are equal at all levels of output.
D) It is the same as the market demand curve
D
44. Because the monopolist's demand curve is downsloping: A) MR will equal price.
B) price must be lowered to sell more output.
C) the elasticity coefficient will increase as price is lowered.
D) its supply curve will also be downsloping
B
45. The pure monopolist's demand curve is relatively elastic: A) in the price range where total revenue is declining.
B) at all points where the demand curve lies above the horizontal axis.
C) in the price range where marginal revenue is negative.
D) in the price range where marginal revenue is positive
D
46. When the pure monopolist's demand curve is elastic, marginal revenue:
A) may be either positive or negative. B) is zero. C) is negative. D) is positive.
D
47. When total revenue is increasing:
A) marginal revenue may be either positive or negative.
B) the demand curve is relatively inelastic.
C) marginal revenue is positive.
D) marginal revenue is negative
C
48. A nondiscriminating monopolist:
A) will never produce in the output range where marginal revenue is positive.
B) will never produce in the output range where demand is inelastic.
C) will never produce in the output range where demand is elastic.
D) may produce where demand is either elastic or inelastic, depending on the level of production costs.
B
49. For a pure monopolist the relationship between total revenue and marginal revenue is such that: A) marginal revenue is positive when total revenue is at a maximum.
B) total revenue is positive when marginal revenue is increasing, but total revenue becomes negative when marginal revenue is decreasing.
C) marginal revenue is positive when total revenue is increasing, but marginal revenue becomes negative when total revenue is decreasing.
D) marginal revenue is positive so long as total revenue is positive.
C
50. A pure monopolist's demand curve is:
A) downsloping. B) upsloping. C) parallel to the vertical axis. D) parallel to the horizontal axis
A
51. For a pure monopolist marginal revenue is less than price because: A) the monopolist's demand curve is perfectly elastic.
B) the monopolist's demand curve is perfectly inelastic.
C) when a monopolist lowers price to sell more output, the lower price applies to all units sold.
D) the monopolist's total revenue curve is linear and slopes upward to the right.
C
52. Refer to the above diagram for a nondiscriminating monopolist. Demand is elastic:
A) in the q1q 3 output range. C) for all levels of output less than q2.
B) only for outputs greater than q4. D) for all levels of output greater than q2.
C
53. Refer to the above diagram for a nondiscriminating monopolist. Marginal revenue will be zero at output: A) q4. B) q3. C) q2. D) q1
C
54. Refer to the above diagram for a nondiscriminating monopolist. The profit-seeking monopolist will:
A) always produce at output q2. C) never produce an output larger than q2.
B) always produce more than q2. D) never produce an output larger than q1.
C
55. Assume a pure monopolist is currently operating at a price-quantity combination on the inelastic segment of its demand curve. If the monopolist is seeking maximum profits, it should:
A) retain its current price-quantity combination. C) charge a higher price.
B) increase both price and quantity sold. D) charge a lower price
C
56. A pure monopolist should never produce in the:
A) elastic segment of its demand curve because it can increase total revenue and reduce total cost by lowering price.
B) inelastic segment of its demand curve because it can increase total revenue and reduce total cost by increasing price.
C) inelastic segment of its demand curve because it can always increase total revenue by more than it increases total cost by reducing price.
D) segment of its demand curve where the price elasticity coefficient is greater than one.
B
57. Assuming no change in product demand, a pure monopolist
A) can increase price and increase sales simultaneously because it dominates the market.
B) adds an amount to total revenue which is equal to the price of incremental sales.
C) should produce in the range where marginal revenue is negative.
D) must lower price to increase sales
D
58. If a monopolist were to produce in the inelastic segment of its demand curve:
A) total revenue would be at a maximum. C) the firm would be maximizing profits.
B) marginal revenue would be negative. D) it would necessarily incur a loss.
D
59. If a pure monopolist is operating in a range of output where demand is elastic:
A) it cannot possibly be maximizing profits. C) marginal revenue will be positive and rising.
B) marginal revenue will be positive but declining. D) total revenue will be declining.
B
60. Suppose a pure monopolist is charging a price of $12 and the associated marginal revenue is $9. We thus know that:
A) demand is inelastic at this price. C) the firm is maximizing profits.
B) total revenue is increasing. D) total revenue is at a maximum.
B
61. A pure monopolist is selling 6 units at a price of $12. If the marginal revenue of the seventh unit is $5, then:
A) price of the seventh unit is $10. C) price of the seventh unit is greater than $12.
B) price of the seventh unit is $11. D) firm's demand curve is perfectly elastic.
B
62. The vertical distance between the horizontal axis and any point on a nondiscriminating monopolist's demand curve measures:
A) the quantity demanded. C) total revenue.
B) product price and average revenue.
B
64. Which of the following is incorrect? Imperfectly competitive producers: A) face downsloping demand curves.
B) do not compete with one another.
C) can alter their output by changing price.
D) find that, when they reduce price, their total revenue increases by less than the new price.
B
P Qd
$10 1
7 2
5 3
3 4
1 5

Type: T Topic: 3 E: 443 MI: 199
65. The monopolist will select its profit-maximizing level of output somewhere within the:
A) 3-5 unit range of output. C) 1-4 unit range of output.
B) 1-3 unit range of output. D) 2-4 unit range of output
B
66. A nondiscriminating pure monopolist finds that it can sell its fiftieth unit of output for $50. We can surmise that the marginal:
A) cost of the fiftieth unit is also $50. C) revenue of the fiftieth unit is less than $50.
B) revenue of the fiftieth unit is also $50. D) revenue of the fiftieth unit is greater than $50.
C
67. If a nondiscriminating pure monopolist decides to sell one more unit of output, the marginal revenue associated with that unit will be:
A) equal to its price.
B) the price at which that unit is sold less the price reductions which apply to all other units of output.
C) the price at which that unit is sold plus the price increases which apply to all other units of output.
D) indeterminate unless marginal cost data are known.
B
68. Assuming a pure monopolist's demand curve is downsloping, its total revenue:
A) is rising. B) is falling. C) may be either rising or falling. D) must be negative
C
69. Which of the above diagrams correctly portray a nondiscriminating pure monopolist's demand (D) and marginal revenue (MR) curves?
A) A B) B C) C D) D
B
70. Which of the above diagrams correctly portray the demand (D) and marginal revenue (MR) curves of a pure monopolist that is practicing perfect price discrimination?
A) A B) B C) C D)
A
71. Which of the above diagrams correctly portray the demand (D) and marginal revenue (MR) curves of a purely competitive seller?
A) A B) B C) C D) D
C
72. Suppose that a pure monopolist can sell 20 units of output at $10 per unit and 21 units at $9.75 per unit.
The marginal revenue of the twenty-first unit of output is: A) $9.75. B) $204.75. C) $4.75. D) $.25.
C
73. Suppose that a pure monopolist can sell 10 units of output at $5 per unit and 11 units at $4.90 per unit. The marginal revenue of the eleventh unit is:
A) $3.90. B) $.10. C) $53.90. D) $4.
A
74. The MR = MC rule:
A) applies only to pure competition.
B) applies only to pure monopoly.
C) does not apply to pure monopoly because price exceeds marginal revenue.
D) applies both to pure monopoly and pure competition.
D
75. In the long run a pure monopolist will maximize profits by producing that output at which marginal cost is equal to:
A) average total cost. B) marginal revenue. C) average variable cost. D) average cost.
B
76. An unregulated pure monopolist will maximize profits by producing that output at which: A) P = MC. B) P = ATC. C) MR = MC. D) MC = AC.
C
77. Suppose that a pure monopolist can sell 5 units of output at $4 per unit and 6 units at $3.90 per unit. The monopolist will produce and sell the sixth unit if its marginal cost is:
A) $4 or less. B) $3.90 or less. C) $3.50 or less.. D) $3.40 or less.
D
Suppose that a pure monopolist can sell 4 units of output at $2 per unit and 5 units at $1.75 per unit. The monopolist will produce and sell the fifth unit if its marginal cost is: A) $1 or less. B) $.75 or less. C) $1.75 or less. D) $2 or less
B
79-84 Average
Total Marginal total Marginal output Price revenue cost cost
1 $100 $100 $ 30
2 90 80 63.00 26
3 80 60 52.67 32
4 70 40 49.50 40
5 60 20 49.60 50
6 50 0 50.00 52
7 40 -20 52.29 66
8 30 -40 55.75 80
9 20 -60 60.67 100 10 10 -80 67.60 130
SEE NEXT CARD
79. Refer to the above data for a nondiscriminating monopolist. This firm will maximize its profit by producing:
A) 3 units. B) 4 units. C) 5 units. D) 6 units.
B
80. Refer to the above data for a nondiscriminating monopolist. At its profit-maximizing output, this firm will be operating in the:
A) perfectly elastic portion of its demand curve. C) elastic portion of its demand curve.
B) perfectly inelastic portion of its demand curve. D) inelastic portion of its demand curve.
C
81. Refer to the above data for a nondiscriminating monopolist. At its profit-maximizing output, this firm's price will exceed its marginal cost by ____ and its average total cost by ____. A) $20; $27.33. B) $10; $10.40. C) $24; $27.33. D) $30; $20.50.
D
Type: G Topic: 4 E: 444-445 MI: 200-201 Status: New
82. Refer to the above data for a nondiscriminating monopolist. At its profit-maximizing output, this firm's total costs will be:
A) $300. B) $248. C) $198. D) $126.
C
83. Refer to the above data. At its profit-maximizing output, this firm's total revenue will be: A) $300. B) $198. C) $180. D) $280
D
84. Refer to the above data for a nondiscriminating monopolist. At its profit-maximizing output, this firm's total profit will be:
A) $82. B) zero. C) $54. D) $27.
A
85. A pure monopolist is producing an output such that ATC = $4, P = $5, MC = $2, and MR = $3. This firm is realizing:
A) a loss that could be reduced by producing more output.
B) a loss that could be reduced by producing less output.
C) an economic profit that could be increased by producing more output.
D) an economic profit that could be increased by producing less output.
C
86. Which of the following statements is incorrect?
A) A monopolist's 100 percent market share ensures economic profits.
B) The monopolist's marginal revenue is less than price for any given output greater than 1.
C) A monopolistic firm produces a product having no close substitutes.
D) A pure monopolist's demand curve is the industry demand curve.
A
87. If a monopolist's marginal revenue is $3.00 and its marginal cost is $4.50, it will increase its profits by:
A) reducing output and raising price. C) increasing both price and output.


B) reducing both output and price. D) raising price while keeping output unchanged
A
Use the following to answer questions 88-90:

Answer the next question(s) on the basis of the following demand and cost data for a pure monopolist:

Demand Data Cost Data
Quantity Total
Price demanded Output cost
$5.50 3 3 $ 5
5.00 4 4 6
4.50 5 5 6.50
3.85 6 6 7.50
3.35 7 7 9
2.90 8 8 11
2.50 9 9
SEE NEXT CARD
88. Refer to the above data. Equilibrium price for the monopolist will be: A) $5.00 B) $2.90. C) $3.35. D) $4.50
D
89. Refer to the above data. The equilibrium level of output will be: A) 4 units. B) 7 units. C) 6 units. D) 5 units.
D
90. Refer to the above data. The monopolist will realize a:
A) profit of $8.50. B) profit of $7.50. C) profit of $16. D) loss of $14
C
91. Refer to the above diagram. To maximize profits or minimize losses this firm should produce:
A) E units and charge price C. C) M units and charge price N.
B) E units and charge price A. D) L units and charge price LK.
B
92. Refer to the above diagram. In equilibrium total revenue will be: A) NM times 0M. B) 0AJE. C) 0EGC. D) 0EHB.
B
94. Refer to the above diagram. In equilibrium the firm will realize:
A) an economic profit of ABHJ. C) a loss of GH per unit.
B) an economic profit of ACGJ. D) a loss of JH per unit.
A
95. In equilibrium which of the following conditions are common to both unregulated monopoly and to pure competition?
A) MC = P B) MC = ATC C) MR = MC D) P = MR
C
A pure monopolist:
A) will realize an economic profit if price exceeds ATC at the equilibrium output.
B) will realize an economic profit if ATC exceeds MR at the equilibrium output.
C) will realize an economic loss if MC intersects the downsloping portion of MR.
D) always realizes an economic profit.
A
If a pure monopolist is producing at that output where P = ATC, then:
A) its economic profits will be zero.
B) it will be realizing losses.
C) it will be producing less than the profit-maximizing level of output.
D) it will be realizing an economic profit.
A
A pure monopolist's short-run profit-maximizing or loss-minimizing position is such that price:
A) equals marginal revenue. C) will always equal ATC.
B) may be greater or less than ATC. D) always exceeds ATC.
B
The short-run profit maximizing position of an unregulated pure monopolist is characterized by:
A) P = minimum ATC. B) P = MC. C) MR = MC. D) MC = ATC.
C
(PAGE 749 OF TEST BANK)
Refer to the above diagram for a pure monopolist. Monopoly output will be:
A) between f and g. B) h. C) g. D) f .
D
Refer to the above diagram for a pure monopolist. Monopoly profit:
A) cannot be determined from the information given.
B) will be ae per unit.
C) will be bc per unit.
D) will be ac per unit.
A
In the short run a pure monopolist's profit:
A) will be maximized where price equals average total cost.
B) may be positive, zero, or negative.
C) are always positive.
D) will be zero.
B
Purely competitive firms and pure monopolists are similar in that:
A) the demand curves of both are perfectly elastic. C) both are price makers.
B) significant entry barriers are common to both. D) both maximize profit where MR = MC.
D
In the short run, a monopolist's economic profits:
A) are always positive because the monopolist is a price-maker.
B) are usually negative because of government price regulation.
C) are always zero because consumers prefer to buy from competitive sellers.
D) may be positive or negative depending on market demand and cost.
D
A profit-maximizing monopolist will set its price:
A) as far above ATC as possible.
B) along the elastic portion of its demand curve.
C) where the marginal cost curve intersects the demand curve.
D) as close as possible to the minimum point of ATC.
B
A profit-maximizing monopolist will set its price:
A) as far above ATC as possible.
B) along the elastic portion of its demand curve.
C) where the marginal cost curve intersects the demand curve.
D) as close as possible to the minimum point of ATC.
B
Under which of the following situations would a monopolist increase profits by lowering price (and
increasing output):
A) if it discovered that it was producing where MC = MR
B) if it discovered that it was producing where its MC curve intersects its demand curve
C) if it discovered that it was producing where MC < MR
D) under none of the above circumstances because a monopolist would never lower price
C
Refer to the above diagram. If this industry is comprised of only one seller, the profit-maximizing price and
quantity will be:
A) P3 and Q3. B) P1 and Q1. C) P2 and Q2. D) indeterminate on the basis of the information given.
A
If the variable costs of a profit-maximizing pure monopolist decline, the firm should:
A) produce more output and charge a higher price. C) reduce both output and price.
B) produce more output and charge a lower price. D) raise both output and price.
B
In the short run a pure monopolist:
A) always earns an economic profit.
B) always earns a normal profit.
C) always realizes a loss.
D) may realize an economic profit, a normal profit, or a loss.
D
To maximize profit a pure monopolist must:
A) maximize its total revenue.
B) maximize the difference between marginal revenue and marginal cost.
C) maximize the difference between total revenue and total cost.
D) produce where average total cost is at a minimum.
C
Economic profit in the long run is:
A) possible for both a pure monopoly and a pure competitor.
B) possible for a pure monopoly, but not for a pure competitor.
C) impossible for both a pure monopolist and a pure competitor.
D) only possible when barriers to entry are nonexistent.
B
Which of the following statements is correct?
A) The pure monopolist will maximize profit by producing at that point on the demand curve where
elasticity is zero.
B) In seeking the profit-maximizing output the pure monopolist underallocates resources to its production.
C) The pure monopolist maximizes profits by producing that output at which the differential between
price and average cost is the greatest.
D) Purely monopolistic sellers earn only normal profits in the long run.
B
Confronted with the same unit cost data, a monopolistic producer will charge:
A) the same price and produce the same output as a competitive firm.
B) a higher price and produce a larger output than a competitive firm.
C) a higher price and produce a smaller output than a competitive firm.
D) a lower price and produce a smaller output than a competitive firm.
C
115. In the short run a pure monopolist:
A) always earns an economic profit.
B) always earns a normal profit.
C) always realizes a loss.
D) may realize an economic profit, a normal profit, or a loss
D
116. To maximize profit a pure monopolist must: A) maximize its total revenue.
B) maximize the difference between marginal revenue and marginal cost.
C) maximize the difference between total revenue and total cost.
D) produce where average total cost is at a minimum.
c
117. Refer to the above diagrams. Firm A is a:
A) pure competitor and Firm B is a pure monopoly.
B) pure competitor, as is Firm B.
C) pure monopoly and Firm B is a pure competitor.
D) pure monopoly, as is Firm B
A
118. Refer to the above diagrams. The demand for Firm A's product is
A) perfectly elastic over all ranges of output.
B) perfectly inelastic over all ranges of output.
C) elastic for prices above $1 and inelastic for prices below $1.
D) inelastic for prices above $1 and inelastic for prices below $1.
A
119. Refer to the above diagrams. The demand for Firm B's product is: A) perfectly elastic over all ranges of output.
B) perfectly inelastic over all ranges of output.
C) elastic for prices above $4 and inelastic for prices below $4.
D) inelastic for prices above $4 and inelastic for prices below $4
C
120. If $4 is Firm B's profit-maximizing price, its:
A) ATC must be $4. B) MC must be $4. C) MR must be $4. D) MC must be zero
D
21. Firm A's average revenue is:
A) zero. B) $1. C) less than $1. D) more than $1.
B
122. Economic profit in the long run is:
A) possible for both a pure monopoly and a pure competitor.
B) possible for a pure monopoly, but not for a pure competitor
C) impossible for both a pure monopolist and a pure competitor.
D) only possible when barriers to entry are nonexistent
B
123. Which of the following statements is correct?
A) The pure monopolist will maximize profit by producing at that point on the demand curve where elasticity is zero.
B) In seeking the profit-maximizing output the pure monopolist underallocates resources to its production.
C) The pure monopolist maximizes profits by producing that output at which the differential between price and average cost is the greatest.
D) Purely monopolistic sellers earn only normal profits in the long
B
124. Confronted with the same unit cost data, a monopolistic producer will charge: A) the same price and produce the same output as a competitive firm.
B) a higher price and produce a larger output than a competitive firm.
C) a higher price and produce a smaller output than a competitive firm.
D) a lower price and produce a smaller output than a competitive firm
C
125. An important economic problem associated with pure monopoly is that, at the profit maximizing outputs, resources are:
A) overallocated because price exceeds marginal cost. B) overallocated because marginal cost exceeds price.
C) underallocated because price exceeds marginal cost.
D) underallocated because marginal cost exceeds price.
C
126. A single-price monopoly is economically undesirable because, at the profit maximizing output: A) marginal revenue exceeds product price at all profitable levels of production.
B) monopolists always price their products on the basis of the ability of consumers to pay rather than on costs of production.
C) MC > P.
D) society values additional units of the monopolized product more highly than it does the alternative products those resources could otherwise produce
D
127. If a pure monopolist is producing more output than the MR = MC output: A) the firm may, or may not, be maximizing profits.
B) it will be in the interest of the firm, but not necessarily of society, to reduce output.
C) it will be in the interest of the firm and society to increase output.
D) it will be in the interest of the firm and society to reduce output
B
128. At its profit-maximizing output, a pure nondiscriminating monopolist achieves: A) neither productive efficiency nor allocative efficiency.
B) both productive efficiency and allocative efficiency.
C) productive efficiency but not allocative efficiency.
D) allocative efficiency but not productive efficiency.
A
129. The profit-maximizing output of a pure monopoly is economically inefficient because in equilibrium: A) price equals minimum average total cost. C) marginal cost exceeds price. B) marginal revenue equals marginal cost. D) price exceeds marginal cost
D
130. A single-price pure monopoly is economically inefficient:
A) only because it produces beyond the point of minimum average total cost.
B) only because it produces short of the point of minimum average total cost.
C) because it produces short of minimum average cost and price is greater than marginal cost.
D) because it produces beyond minimum average total cost and marginal cost is greater than price. Answer:
C
131. Comparing a pure monopoly and a purely competitive firm with identical costs, we would find in long-run equilibrium that the pure monopolist's
A) price, output, and average total cost would all be higher.
B) price and average total cost would be higher, but output would be lower.
C) price, output, and average total cost would all be lower.
D) price and output would be lower, but average total cost would be higher
B
(PG 1383)
132. Refer to the above diagrams. Diagram (A) represents:
A) equilibrium price and quantity in a purely competitive industry.
B) the pure monopoly model.
C) an industry in which there is productive efficiency but not allocative efficiency
D) a single firm operating in a purely competitive industry.
A
133. Refer to the above diagrams. Diagram (B) represents: A) the pure competition model.
B) an industry in which there is allocative efficiency but not productive efficiency.
C) the pure monopoly model.
D) a long-run constant-cost industry
C
133. Refer to the above diagrams. Diagram (B) represents: A) the pure competition model.
B) an industry in which there is allocative efficiency but not productive efficiency.
C) the pure monopoly model.
D) a long-run constant-cost industry
D
135. Refer to the above diagrams. With the industry structure represented by diagram:
A) (A) there will be only a normal profit in the long run, while in (B) an economic profit can persist.
B) (A) price exceeds marginal cost, resulting in allocative inefficiency.
C) (B) price equals marginal cost, resulting in allocative efficiency.
D) (B) equilibrium price and quantity will be e and h, respectively
A
136. Refer to the above diagrams. With the industry structure represented by diagramA) (A) there will be allocative inefficiency. C) (B) output will be less than in diagram (A).
B) (A) economic profit can persist in the long run. D) (B) output will be the same as in diagram (A). Answer
D
133. Refer to the above diagrams. Diagram (B) represents: A) the pure competition model.
B) an industry in which there is allocative efficiency but not productive efficiency.
C) the pure monopoly model.
D) a long-run constant-cost industry.
C
134. Refer to the above diagrams. In diagram (B) the profit-maximizing quantity is:
A) g and the profit-maximizing price is e. C) g and the profit-maximizing price is f.
B) h and the profit-maximizing price is e. D) g and the profit-maximizing price is D
D
A) (A) there will be only a normal profit in the long run, while in (B) an economic profit can persist.
B) (A) price exceeds marginal cost, resulting in allocative inefficiency.
C) (B) price equals marginal cost, resulting in allocative efficiency.
D) (B) equilibrium price and quantity will be e and h, respectively
A
136. Refer to the above diagrams. With the industry structure represented by diagram
A) (A) there will be allocative inefficiency. C) (B) output will be less than in diagram (A).
B) (A) economic profit can persist in the long run. D) (B) output will be the same as in diagram (A).
C
137. Refer to the above diagrams. The price will be _______ and the quantity will be _______ with the industry structure represented by diagram (B) compared to the one reprsented in (A).
A) higher; higher. B) higher, lower. C) lower, lower. D) lower, higher
B
138. X-inefficiency refers to a situation in which a firm:
A) is not as technologically progressive as it might be.
B) encounters diseconomies of scale.
C) fails to realize all existing economies of scale.
D) fails to achieve the minimum average total costs attainable at each level of output
D
139. Which of the following is not a possible source of natural monopoly?
A) large-scale network effects. C) greater use of specialized inputs.
B) simultaneous consumption. D) rent-seeking behavior
D
140. There is some evidence to suggest that X-inefficiency is:
A) absent whenever two or more producers are competing with one another.
B) not encountered in either competitive or monopolistic firms.
C) more likely to occur in monopolistic firms than in competitive firms. D) more likely to occur in competitive firms than in monopolistic firms.
C
P 1387
141. Refer to the above long-run cost diagram for a firm. If the firm produces output Q1 at an average total cost of ATC1, then the firm is:
A) producing the potentially profit-maximizing output, but is failing to minimize production costs.
B) incurring X-inefficiency, but is realizing all existing economies of scale.
C) incurring X-inefficiency and is failing to realize all existing economies of scale.
D) producing that output with the most efficient combination of inputs and is realizing all economies of scale.
B
142. Refer to the above long-run cost diagram for a firm. If the firm produces output Q2 at an average cost of ATC 2, then the firm is:
A) producing the potentially profit-maximizing output, but is failing to minimize production costs. B) incurring X-inefficiency, but is producing that output at which all existing economies of scale might be realized.
C) incurring X-inefficiency and is failing to produce the output at which all economies of scale might be realized.
D) producing that output with the most efficient combination of inputs and is realizing all existing economies of scale
B
143. Refer to the above long-run cost diagram for a firm. If the firm produces output Q2 at an average cost of ATC3, then the firm is:
A) producing the potentially profit-maximizing output, but is failing to minimize production costs.
B) incurring X-inefficiency, but is realizing all existing economies of scale.
C) incurring X-inefficiency and is failing to realize all existing economies of scale.
D) producing that output with the most efficient combination of inputs and is realizing all existing economies of scale.
D
144. In which one of the following market models is X-inefficiency most likely to be the greatest? A) pure competition B) oligopoly C) monopolistic competition D) pure monopoly
D
145. In which one of the following market models is X-inefficiency least likely to be present?
A) pure competition B) oligopoly C) monopolistic competition D) pure monopoly
A
143. Refer to the above long-run cost diagram for a firm. If the firm produces output Q2 at an average cost of ATC3, then the firm is:
A) producing the potentially profit-maximizing output, but is failing to minimize production costs.
B) incurring X-inefficiency, but is realizing all existing economies of scale.
C) incurring X-inefficiency and is failing to realize all existing economies of scale.
D) producing that output with the most efficient combination of inputs and is realizing all existing economies of scale
D
144. In which one of the following market models is X-inefficiency most likely to be the greatest? A) pure competition B) oligopoly C) monopolistic competition D) pure monopoly
D
145. In which one of the following market models is X-inefficiency least likely to be present?
A) pure competition B) oligopoly C) monopolistic competition D) pure monopoly
a
147. If a monopolist engages in price discrimination, we can expect: A) profits to increase and output to fall.
B) both profits and output to increase.
C) both profits and output to decrease.
D) the demand curve to lie below the marginal revenue curve
b
148. The practice of price discrimination is associated with pure monopoly because: A) it can be practiced whenever a firm's demand curve is downsloping.
B) monopolists have considerable ability to control output and price.
C) monopolists usually realize economies of scale.
D) most monopolists sell differentiated products
b
149. Which of the following is not a precondition for price discrimination? A) The commodity involved must be a durable good.
B) The good or service cannot be resold by original buyers
C) The seller must be able to segment the market, that is, to distinguish buyers with different elasticities of demand.
D) The seller must possess some degree of monopoly power.
A
150. A perfectly discriminating pure monopolist will charge each buyer:
A) different prices to compensate for differences in the characteristics of the product.
B) the same price if per unit cost is constant for each unit of the product.
C) that price which equals the buyer's marginal cost.
D) the maximum price each would be willing to pay.
D
151. Other things equal, in which of the following cases would economic profit be the greatest?
A) an unregulated monopolist which is able to engage in price discrimination
B) an unregulated monopolist
C) a regulated monopolist charging a price equal to average total cost
D) a regulated monopolist charging a price equal to marginal cost
A
152. If a pure monopolist can engage in perfect price discrimination:
A) the marginal revenue curve and the total revenue curve will now coincide.
B) the marginal revenue curve will now shift to a position above the demand curve
C) the marginal revenue curve will now coincide with the demand curve.
D) marginal revenue will become less at each level of output than it would be without price discrimination
C
153. If a monopolist engages in perfect price discrimination, it will: A) realize a smaller profit.
B) charge a higher price where individual demand is inelastic and a lower price where individual demand
is elastic.
C) produce a smaller output than when it did not discriminate.
D) charge a competitive price to all its customers
B
154. The vertical distance between the horizontal axis and any point on a perfectly discriminating monopolist's demand curve measures:
A) the quantity demanded. C) product price and marginal revenue.
B) total revenue. D) average revenue and average total cost.
C