Activity based questions

62) A price-discriminating monopoly

A) cannot offer discounts.

B) cannot control the price of its product.

C) sells a larger quantity than it would if it were a single-price monopoly.

D) is illegal.

E) makes a smaller economic profit than it would if it were a single-price monopoly.

62)

63) In the above figure, a perfectly competitive market will have a price of ________ and a

single-price monopoly will have a price of ________.

A)P1 and quantity ofQ1;P2 and quantity ofQ2

B)P2 and quantity ofQ2;P3 and quantity ofQ1

C)P2 and quantity ofQ1;P1 and quantity ofQ1

D)P2 and quantity ofQ2;P1 and quantity ofQ1

E)P3 and quantity ofQ3;P1 and quantity ofQ1

63)

64) A single-price monopoly transfers

A) economic profit to the government.

B) consumer surplus to producers.

C) producer surplus to consumers.

D) economic profit to deadweight loss.

E) economic profit to consumers.

64)

65) The figure above shows the demand curve, marginal revenue curve, and marginal cost curve.

The amount of consumer surplus when the market has a monopoly producer is

A)ace. B)bcef. C)bcd. D)abf. E)acd.

65)

66) The figure above shows the demand curve, marginal revenue curve, and marginal cost curve.

The amount of consumer surplus when the market has a monopoly producer is ________ and

the amount of consumer surplus when the market is perfectly competitive is ________.

A)abf;aceB) ace;bcdC)ace; abfD)abf;bcdE) bcd;ace

66)

67) Compared to a perfectly competitive market, a single-price monopoly sets

A) a higher price.

B) a lower price.

C) the same price.

D) a price that might be higher, lower, or the same depending on whether the monopoly's

marginal revenue curve lies above, below, or on its demand curve.

E) a price that might be higher, lower, or the same depending on whether the monopoly's

marginal cost curve lies above, below, or on its marginal revenue curve.

67)

68) Compared to a perfectly competitive industry, a single-price monopoly produces

A) the same output.

B) more output.

C) less output.

D) some amount that might be more, less, or the same depending on whether the monopoly's

marginal revenue curve lies above, below, or on its demand curve.

E) some amount that might be more, less, or the same depending on whether the monopoly's

marginal cost curve lies above, below, or on its marginal revenue curve.

68)

69) Mark owns a cattle ranch near Hugo, Oklahoma. Mark is currently producing beef at an output

level where marginal revenue exceeds marginal cost. In order to maximize his profit, Mark

should

A) decrease his output.

B) shut down his ranch.

C) increase his output.

D) not change his output.

E) probably change his output, but more information is needed to determine if he should

increase, decrease, or not change it.

69)

70) When compared to a perfectly competitive market, a single-price monopoly with the same costs

produces ________ output and charges ________ price.

A) a smaller; a lower

B) a larger; a lower

C) a smaller; a higher

D) a smaller; the same

E) the same; a higher

70)

71) Suppose the Busy Bee Cafe´is the monopoly producer of hamburgers in Hugo, Oklahoma. The

above figure represents the demand, marginal revenue, and marginal cost curves for this

establishment. What quantity will the Busy Bee produce to maximize its profit?

A) 20 hamburgers per hour

B) 50 hamburgers per hour

C) 10 hamburgers per hour

D) 0 hamburgers per hour.

E) 30 hamburgers per hour

71)

Price(dollars) Quantity(units)

6 1

5 2

4 3

3 4

2 5

1 6

72) The above table gives the demand schedule for a monopoly. The demand is elastic at all prices

between

A) $3 and $1.

B) $5 and $1.

C) $4 and $3.

D) $6 and $1.

E) $6 and $4.

72)

73) The above table gives the demand schedule for a monopoly. The demand is inelastic over the

entire price range between

A) $6 and $4.

B) $6 and $1.

C) $3 and $1.

D) $4 and $3.

E) $5 and $1.

73)

74) If the Boston Red Sox baseball team is currently charging a ticket price where its demand is

inelastic, then the Red Sox's marginal revenue is

A) positive.

B) zero.

C) undefined.

D) maximized.

E) negative.

74)

Quantity

(units)

Price

(dollars per unit)

1 8

2 7

3 6

4 5

5 4

6 3

75) The table above gives the demand for a monopolist's output. What is the total revenue in when 3

units of output are produced?

A) $18 B) $20 C) $21 D) $6

75)

76) The table above gives the demand for a monopolist's output. What is the marginal revenue

when output is increased from 5 to 6 units?

A) $18 B)-$2 C) $4 D) $3

76)

77) The demand curve facing a single-price monopoly is

A) the same as only the marginal revenue curve.

B) the same as both the marginal revenue curve and the marginal cost curve.

C) below the marginal revenue curve.

D) above the marginal revenue curve.

E) the same as only the marginal cost curve.

77)

78) A single-price monopoly can sell 10 units of its product at a price of $45 each but to sell 11 units,

the monopoly must cut the price to $44. What is the marginal revenue of the extra unit sold?

A) $484 B) $450 C) $34 D)-$1 E) $44

78)

79) A single-price monopoly faces a linear demand curve. If the marginal revenue for the second

unit is $20, then the marginal revenue for the

A) third unit is also $20.

B) third unit is less than $20.

C) first unit is less than $20.

D) third unit is more than $20.

E) more information is needed to determine if the marginal revenue for the third unit is more

than, less than, or equal to $20.

79)

80) For a single-price monopoly, price is

A) greater than marginal revenue.

B) equal to marginal revenue.

C) less than marginal revenue because the firm must lower its price in order to sell another

unit of output.

D) less than marginal revenue because the firm cannot increase its total revenue when the

demand curve is downward sloping.

E) equal to zero because the firm is not a price taker.

80)

81) For a monopoly, marginal revenue is equal to

A) the price of the product.

B) the amount people buy between two prices.

C) the amount people buy at a given price.

D) the change in total revenue brought about by a one-unit increase in quantity sold.

E) the price multiplied by the quantity sold.

81)

82) A single-price monopoly

A) is able to raise its price as high as it wants and consumers must still buy from it because it

is a monopoly.

B) can lower its price for only a few select consumers if it wants to increase its sales.

C) must practice price discrimination.

D) must lower the price for all customers if it wants to increase its sales.

E) will set its price equal to a consumer's willingness to pay.

82)

83) In order for a hotel to successfully price discriminate so that senior citizens are given a discount,

the hotel must be able to

A) lower its prices to younger customers too.

B) prevent senior citizens from reselling their rooms to younger customers.

C) offset the economic loss from charging senior citizens a lower price by lowering the

marginal cost of renting rooms to senior citizens.

D) shift its demand curve rightward.

E) determine if a senior citizen can pay a higher price.

83)

84) A price-discriminating monopoly is a monopoly that

A) has a license to sell the product.

B) sells its output at a single price to all of its customers.

C) illegally charges different customers different prices for the good it produces.

D) sells different units of a good or service at different prices.

E) has control over the resources used to produce the product.

84)

85) A single-price monopoly

A) sets a single price for all consumers.

B) asks each consumer what single price they would be willing to pay.

C) sets a single, different price for each consumer.

D) sells each unit of its output for the single, highest price that the buyer of that unit is

willing to pay.

E) sets a single, different price for each of two different groups.

85)

86) Which of the following statements is correct?

A) Because a monopoly is the only firm in the market, its marginal revenue curve must be the

same as the market demand curve.

B) Monopolies are guaranteed to earn an economic profit.

C) The market demand and the firm's demand are the same for a monopoly.

D) Monopolies have perfectly inelastic demand for the product sold.

E) Because a monopoly is the only firm in the market, its supply curve is the same as the

market demand curve.

86)

87) Patents

A) remove legal barriers to entry.

B) are prohibited in the United States.

C) are a legal barrier to entry.

D) decrease the incentive to innovate.

E) create economies of scale.

87)

88) A natural monopoly's average cost curve

i. intersects the demand curve while the average cost curve slopes downward.

ii. reaches its minimum before it intersects the demand curve.

iii. intersects the demand curve below the intersection of the marginal cost curve and the

demand curve.

A) i, ii, and iii.

B) ii only.

C) i and iii.

D) iii only.

E) i only.

88)

89) For a natural monopoly, economies of scale

A) as well as constant returns to scale and diseconomies of scale exist along the long-run

average cost curve at least until it crosses the market demand curve..

B) are totally absent.

C) and diseconomies of scale exist along the long-run average cost curve at least until it

crosses the market demand curve.

D) lead to a legal barrier to entry.

E) exist along the long-run average cost curve at least until it crosses the market demand

curve.

89)

90) A natural monopoly

A) occurs when one firm controls a natural resource.

B) arises when one firm can meet the entire market demand at a lower average total cost than

two or more firms.

C) arises as a result of legal barriers to entry.

D) Both answers A and B are correct.

E) Both answers A and C are correct.

90)

91) A natural barrier to entry is defined as a barrier that arises because of

A) technology that allows economies of scale over the entire relevant range of output.

B) patents or licenses that exclude others from producing a good or service.

C) many firms producing the good and thereby allowing choice for all consumers.

D) one firm owning a key natural resource.

E) anticompetitive practices by a firm that keep other firms from producing.

91)

92) A monopoly

A) must determine the price it will charge.

B) cannot price discriminate because such a pricing strategy is illegal in the United States.

C) faces extensive competition from firms making close substitutes.

D) has no control over the price it must charge.

E) Both answers B and C are correct.

92)