Question 1

In the final analysis,cost-plus regulation of natural monopolies

Accepted Answer

A)   produces an efficient solution.
B)   fails to achieve the efficient solution of price equal to marginal cost.
C)   restores the incentive to implement cost-saving innovations.
D)   has few administrative difficulties.
E)   is losing popularity as a solution to the problem of natural monopolies.F) B) and E)
G) A) and E)

Question 2

It must always be true that if regulator forces a natural monopolist to produce where __________,the firm will earn __________.

Accepted Answer

A)   MR = MC;an economic profit
B)   MR = MC;an economic loss
C)   P = MC;zero economic profit
D)   P = MC;an economic loss
E)   P = AC;an economic lossF) A) and B)
G) All of the above

Question 3

In long-run equilibrium,a typical monopolistically competitive firm will

Accepted Answer

A)   earn a positive economic profit.
B)   earn a normal profit.
C)   earn a negative economic profit.
D)   sometimes earn a positive economic profit and sometimes earn a negative economic profit.
E)   have taken over all the other firms in the industry.F) A) and B)
G) C) and D)

Question 4

If anyone was free to copy a new product,or an exclusive work of art,there would be

Accepted Answer

A)   a proliferation of innovations.
B)   minimal developmental costs.
C)   minimal fixed costs.
D)   fewer innovations than otherwise.
E)   more innovations than otherwise.F) B) and D)
G) D) and E)

Question 5

-Refer to the graph above.If this firm were allowed to choose the profit-maximizing level of output,it would produce

Accepted Answer

A)   300 units of output.
B)   1000 units of output.
C)   1400 units of output.
D)   1600 units of output.
E)   1800 units of output.F) A) and E)
G) A) and D)

Question 6

The nature of the loss of total economic surplus from monopoly is that

Accepted Answer

A)   the marginal cost of the last unit the monopolist produces is greater than the marginal benefit.
B)   the marginal benefit of the last unit the monopolist produces is greater than the marginal cost.
C)   through the use of his market power,the monopolist can force consumers to pay higher prices.
D)   the monopolist produces too much output.
E)   the monopolist earns huge profits at the expense of the consumer,who has few alternatives.F) All of the above
G) B) and D)

Question 7

In long-run equilibrium,a monopolistically competitive firm can _______ fully realize economies of scale.

Accepted Answer

A)   always
B)   never
C)   sometimes
D)   usually
E)   seldomF) C) and E)
G) A) and B)

Question 8

What is a major characteristic of a natural monopoly?

Accepted Answer

A)   The firm is a single seller of a resource.
B)   The firm sets price equal to marginal revenue.
C)   There is extensive product advertising.
D)   There is a large range of output to which economies of scale apply.
E)   There are major legal restraints preventing other firms from entering the market.F) C) and E)
G) A) and B)

Question 9

-Refer to the data above.Assume that firm L loses sales of 75,000 units,with 40,000 units going to firm N and 35,000 units going to firm M.Firm N now has average total cost of

Accepted Answer

A)   $240.
B)   $184.50.
C)   $153.
D)   $150.
E)   $142.50.F) C) and D)
G) A) and E) E

Question 10

Which of the following is NOT an example of the hurdle method of price discrimination?

Accepted Answer

A)   A rebate offer.
B)   Eliminating all sales specials and reducing all prices by 10%.
C)   After-Christmas sales.
D)   In-store specials.
E)   End-of-year clearance sales.F) A) and B)
G) C) and D) B

Question 11

-Refer to the diagram above.If left unregulated,the firm would produce __________ units and charge a price of __________.

Accepted Answer

A)   Q2;P2
B)   Q1;P1
C)   Q3;P3
D)   Q1;P3
E)   Q4;P1F) None of the above
G) B) and E)

Question 12

Taxicab drivers who hold exclusive licences do not have market power because

Accepted Answer

A)   they charge too much for their services.
B)   they face competition from other modes of transportation.
C)   some cab drivers lease their cabs to others during their off hours.
D)   there are insufficient cabs in the city.
E)   not enough licences are issued.F) A) and B)
G) A) and C)

Question 13

In order to sell another unit,an imperfectly competitive firm must

Accepted Answer

A)   raise its price.
B)   increase the value of its product.
C)   lower its price.
D)   lower its quality.
E)   increase its advertising.F) C) and D)
G) A) and B)

Question 14

-Refer to the table above.When the perfectly price-discriminating monopolist maximizes profit,consumer surplus is

Accepted Answer

A)   $0.
B)   maximized.
C)   $9.
D)   $45.
E)   $36.F) A) and B)
G) C) and E)

Question 15

Suppose that a firm increases inputs by 10% and observes a 13% increase in output.If the prices of its inputs remain constant,then

Accepted Answer

A)   constant returns to scale are present.
B)   average cost decreases.
C)   total cost decreases.
D)   average cost is unchanged.
E)   average cost could be higher or lower.F) A) and E)
G) A) and B)

Question 16

-Refer to the table above.At the point of profit maximization,a perfectly price-discriminating monopolist would earn a profit of

Accepted Answer

A)   $26.
B)   $35.
C)   $41.
D)   $44.
E)   $67.F) D) and E)
G) B) and E)

Question 17

-Refer to the table above.Comparing the monopoly outcome without price discrimination to the monopoly outcome with perfect price discrimination,profit is

Accepted Answer

A)   the same.
B)   lower when price discriminating.
C)   greater when price discriminating.
D)   greater when changing a uniform price.
E)   either higher of lower;one cannot generalize.F) B) and D)
G) A) and B) C

Question 18

Suppose that a monopolist has a constant marginal cost of $7,and 25 consumers have reservation prices of at least $7.Under perfect price discrimination,one can infer that there will be

Accepted Answer

A)   at least 25 different prices.
B)   7 different prices.
C)   2 different prices.
D)   at most 25 different prices.
E)   an indeterminate number of prices.F) A) and B)
G) B) and E)

Question 19

If a monopolist increases output from 14 to 15 units by lowering its price from $32 to $30 per unit,its marginal revenue would be

Accepted Answer

A)   -$2.
B)   $2.
C)   $448.
D)   $450.
E)   $452.F) C) and D)
G) All of the above

Question 20

-Refer to the graph above.If this monopolist applies perfect price discrimination,it will produce _______ units of output.

Accepted Answer

A)   0
B)   3.5
C)   7
D)   between 0 and 3.5
E)   more than 7F) None of the above
G) A) and B)

Exam 8: Monopoly and Other Forms of Imperfect Competition

In the final analysis,cost-plus regulation of natural monopolies

Correct AnswerverifiedShow Answer

It must always be true that if regulator forces a natural monopolist to produce where __________,the firm will earn __________.

Correct AnswerverifiedShow Answer

In long-run equilibrium,a typical monopolistically competitive firm will

Correct AnswerverifiedShow Answer

If anyone was free to copy a new product,or an exclusive work of art,there would be

Correct AnswerverifiedShow Answer

-Refer to the graph above.If this firm were allowed to choose the profit-maximizing level of output,it would produce

Correct AnswerverifiedShow Answer

The nature of the loss of total economic surplus from monopoly is that

Correct AnswerverifiedShow Answer

In long-run equilibrium,a monopolistically competitive firm can _______ fully realize economies of scale.

Correct AnswerverifiedShow Answer

What is a major characteristic of a natural monopoly?

Correct AnswerverifiedShow Answer

-Refer to the data above.Assume that firm L loses sales of 75,000 units,with 40,000 units going to firm N and 35,000 units going to firm M.Firm N now has average total cost of

Correct AnswerverifiedE

Which of the following is NOT an example of the hurdle method of price discrimination?

Correct AnswerverifiedB

-Refer to the diagram above.If left unregulated,the firm would produce __________ units and charge a price of __________.

Correct AnswerverifiedShow Answer

Taxicab drivers who hold exclusive licences do not have market power because

Correct AnswerverifiedShow Answer

In order to sell another unit,an imperfectly competitive firm must

Correct AnswerverifiedShow Answer

-Refer to the table above.When the perfectly price-discriminating monopolist maximizes profit,consumer surplus is

Correct AnswerverifiedShow Answer

Suppose that a firm increases inputs by 10% and observes a 13% increase in output.If the prices of its inputs remain constant,then

Correct AnswerverifiedShow Answer

-Refer to the table above.At the point of profit maximization,a perfectly price-discriminating monopolist would earn a profit of

Correct AnswerverifiedShow Answer

-Refer to the table above.Comparing the monopoly outcome without price discrimination to the monopoly outcome with perfect price discrimination,profit is

Correct AnswerverifiedC

Suppose that a monopolist has a constant marginal cost of $7,and 25 consumers have reservation prices of at least $7.Under perfect price discrimination,one can infer that there will be

Correct AnswerverifiedShow Answer

If a monopolist increases output from 14 to 15 units by lowering its price from $32 to $30 per unit,its marginal revenue would be

Correct AnswerverifiedShow Answer

-Refer to the graph above.If this monopolist applies perfect price discrimination,it will produce _______ units of output.

Correct AnswerverifiedShow Answer

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It must always be true that if regulator forces a natural monopolist to produce where ,the firm will earn .

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E

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B

-Refer to the diagram above.If left unregulated,the firm would produce units and charge a price of .

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C

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