Question 1

Suppose most people regard emeralds,rubies,and sapphires as close substitutes for diamonds.Then DeBeers,a large diamond company,has

Accepted Answer

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.E) A) and D)
F) B) and C)

Question 2

In theory,perfect price discrimination

Accepted Answer

A)   decreases the monopolist's profits.
B)   decreases consumer surplus.
C)   increases deadweight loss.
D)   reduces the number of consumers who purchase the monopoly's product.E) All of the above
F) A) and D)

Question 3

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) All of the above
F) A) and D)

Question 4

A monopoly creates a deadweight loss to society because it earns both short-run and long-run positive economic profits.

Accepted Answer

A) True 
 B)False

Question 5

The first major piece of antitrust legislation was the

Accepted Answer

A)   Clayton Act.
B)   Reagan-Bush Act.
C)   Sherman Act.
D)   Clinton-Gore Act.E) A) and B)
F) A) and C)

Question 6

The simplest way for a monopoly to arise is for a single firm to

Accepted Answer

A)   decrease its price below its competitors' prices.
B)   decrease production to increase demand for its product.
C)   make pricing decisions jointly with other firms.
D)   own a key resource.E) A) and B)
F) B) and C)

Question 7

At the profit-maximizing quantity of output for a monopolist,average revenue,marginal revenue,and price are all equal.

Accepted Answer

A) True 
 B)False

Question 8

A monopolist's average revenue is always

Accepted Answer

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

Question 9

Even with market power,monopolists cannot achieve any level of profit they desire because they will sell lower quantities at higher prices.

Accepted Answer

A) True 
 B)False

Question 10

After the patent runs out on a brand name drug,generic drugs enter the market.What happens next in the market?

Accepted Answer

A)   Price increases, and total surplus decreases.
B)   Price decreases, and total surplus decreases.
C)   Price decreases, and total surplus increases.
D)   Price increases, and total surplus increases.E) C) and D)
F) B) and D)

Question 11

When a certain monopoly sets its price at $8 it sells 64 units.When the monopoly sets its price at $10 it sells 60 units.The marginal revenue for the firm over this range is

Accepted Answer

A)   $11.
B)   $22.
C)   $33.
D)   $44.E) B) and C)
F) A) and D)

Question 12

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.

Accepted Answer

A)   (i)  and (ii)  only
B)   (i)  and (iii)  only
C)   (i) , (ii) , and (iii)  only
D)   (i) , (ii) , (iii) , and (iv) E) B) and D)
F) A) and D)

Question 13

Which of the following is not an example of a barrier to entry?

Accepted Answer

A)   A soybean farmer is the first in her county to use a new brand of fertilizer.
B)   Microsoft obtains a copyright for its Windows operating system.
C)   A pharmaceutical company obtains a patent for a new medication to treat migraine headaches.
D)   A taxi cab driver in New York City obtains a license to legally provide transportation in New York City.E) A) and D)
F) A) and B)

Question 14

The defining characteristic of a natural monopoly is

Accepted Answer

A)   constant marginal cost over the relevant range of output.
B)   economies of scale over the relevant range of output.
C)   constant returns to scale over the relevant range of output.
D)   diseconomies of scale over the relevant range of output.E) A) and B)
F) C) and D)

Question 15

Scenario 15-8
Mega Media Cable TV is able to purchase an exclusive right to sell a premium sports channel in its market area. Let's assume that Mega Media pays $100,000 a year for the exclusive marketing rights to the sports channel. Since Mega Media has already installed cable to all of the homes in its market area, the marginal cost of delivering the sports channel to subscribers is zero. The manager of Mega Media needs to know what price to charge for the sports channel service to maximize her profit. Before setting price, she hires an economist to estimate demand for the sports channel. The economist discovers that there are two types of subscribers who value premium sporting channels. First are the 3,000 die-hard sports fans who will pay as much as $150 a year for the new channel. Second, the premium sports channel will appeal to 20,000 occasional sports viewers who will pay as much as $25 a year for a subscription to it.
-Refer to Scenario 15-8.If Mega Media Cable TV is able to price discriminate,what would be the maximum amount of profit it could generate?

Accepted Answer

A)   $950,000
B)   $850,000
C)   $400,000
D)   $350,000E) A) and C)
F) A) and B)

Question 16

Assume that a monopolist decides to maximize revenue rather than profit.How does this operating objective change the size of the deadweight loss? If you are a "benevolent" manager of a monopoly firm and are interested in reducing the deadweight loss of monopoly,should you maximize profits or maximize revenue? Explain your answer.

Accepted Answer

A revenue maximizer operates where MR = ...

Question 17

A profit-maximizing monopolist will produce the level of output at which

Accepted Answer

A)   average revenue is equal to average total cost.
B)   average revenue is equal to marginal cost.
C)   marginal revenue is equal to marginal cost.
D)   total revenue is equal to opportunity cost.E) None of the above
F) C) and D)

Question 18

Patent and copyright laws encourage

Accepted Answer

A)   creative activity.
B)   research and development.
C)   competition among firms.
D)   Both a and b are correct.E) A) and B)
F) B) and C)

Question 19

Scenario 15-8
Mega Media Cable TV is able to purchase an exclusive right to sell a premium sports channel in its market area. Let's assume that Mega Media pays $100,000 a year for the exclusive marketing rights to the sports channel. Since Mega Media has already installed cable to all of the homes in its market area, the marginal cost of delivering the sports channel to subscribers is zero. The manager of Mega Media needs to know what price to charge for the sports channel service to maximize her profit. Before setting price, she hires an economist to estimate demand for the sports channel. The economist discovers that there are two types of subscribers who value premium sporting channels. First are the 3,000 die-hard sports fans who will pay as much as $150 a year for the new channel. Second, the premium sports channel will appeal to 20,000 occasional sports viewers who will pay as much as $25 a year for a subscription to it.
-Refer to Scenario 15-8.How much profit will Mega Media Cable TV earn if it sets the price at $25?

Accepted Answer

A)   $350,000
B)   $450,000
C)   $475,000
D)   $575,000E) B) and D)
F) A) and B)

Question 20

Table 15-17
 
-Refer to Table 15-17.If a monopolist faces a constant marginal cost of $3,how much output should the firm produce in order to equate marginal revenue with marginal cost?

Accepted Answer

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

Exam 15: Monopoly.

Correct Answer
verified

After the patent runs out on a brand name drug,generic drugs enter the market.What happens next in the market?

Correct Answer
verified

The first major piece of antitrust legislation was the

Correct Answer
verified

Table 15-17 -Refer to Table 15-17.If a monopolist faces a constant marginal cost of $3,how much output should the firm produce in order to equate marginal revenue with marginal cost?

Correct Answer
verified

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.

Correct Answer
verified

Even with market power,monopolists cannot achieve any level of profit they desire because they will sell lower quantities at higher prices.

Correct Answer
verified

When a certain monopoly sets its price at $8 it sells 64 units.When the monopoly sets its price at $10 it sells 60 units.The marginal revenue for the firm over this range is

Correct Answer
verified

In theory,perfect price discrimination

Correct Answer
verified

Suppose most people regard emeralds,rubies,and sapphires as close substitutes for diamonds.Then DeBeers,a large diamond company,has

Correct Answer
verified

Patent and copyright laws encourage

Correct Answer
verified

The simplest way for a monopoly to arise is for a single firm to

Correct Answer
verified

A profit-maximizing monopolist will produce the level of output at which

Correct Answer
verified

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

Correct Answer
verified

Correct Answer
verified

At the profit-maximizing quantity of output for a monopolist,average revenue,marginal revenue,and price are all equal.

Correct Answer
verified

A monopoly creates a deadweight loss to society because it earns both short-run and long-run positive economic profits.

Correct Answer
verified

Correct Answer
verified
A revenue maximizer operates where MR = ...
View Answer

The defining characteristic of a natural monopoly is

Correct Answer
verified

Which of the following is not an example of a barrier to entry?

Correct Answer
verified

A monopolist's average revenue is always

Correct Answer
verified

Exam 15: Monopoly.

Correct AnswerverifiedShow Answer

After the patent runs out on a brand name drug,generic drugs enter the market.What happens next in the market?

Correct AnswerverifiedShow Answer

The first major piece of antitrust legislation was the

Correct AnswerverifiedShow Answer

Table 15-17 -Refer to Table 15-17.If a monopolist faces a constant marginal cost of $3,how much output should the firm produce in order to equate marginal revenue with marginal cost?

Correct AnswerverifiedShow 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.

Correct AnswerverifiedShow Answer

Even with market power,monopolists cannot achieve any level of profit they desire because they will sell lower quantities at higher prices.

Correct AnswerverifiedShow Answer

When a certain monopoly sets its price at $8 it sells 64 units.When the monopoly sets its price at $10 it sells 60 units.The marginal revenue for the firm over this range is

Correct AnswerverifiedShow Answer

In theory,perfect price discrimination

Correct AnswerverifiedShow Answer

Suppose most people regard emeralds,rubies,and sapphires as close substitutes for diamonds.Then DeBeers,a large diamond company,has

Correct AnswerverifiedShow Answer

Patent and copyright laws encourage

Correct AnswerverifiedShow Answer

The simplest way for a monopoly to arise is for a single firm to

Correct AnswerverifiedShow Answer

A profit-maximizing monopolist will produce the level of output at which

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

At the profit-maximizing quantity of output for a monopolist,average revenue,marginal revenue,and price are all equal.

Correct AnswerverifiedShow Answer

A monopoly creates a deadweight loss to society because it earns both short-run and long-run positive economic profits.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedA revenue maximizer operates where MR = ...View AnswerShow Answer

The defining characteristic of a natural monopoly is

Correct AnswerverifiedShow Answer

Which of the following is not an example of a barrier to entry?

Correct AnswerverifiedShow Answer

A monopolist's average revenue is always

Correct AnswerverifiedShow Answer

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A revenue maximizer operates where MR = ...
View Answer

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