Question 1

Predatory pricing is:

Accepted Answer

A)  temporarily slashing prices below cost to force competitors out of the market.
B)  an aggressive business move to maintain market power.
C)  used to discourage competitors.
D)  All of these are true.E) None of the above
F) C) and D)

Question 2

Which of the following is a key reason why monopolies exist?

Accepted Answer

A)  There is easy entry and exit into and out of the market.
B)  The goods sold are highly inaccessible to buyers.
C)  There are barriers to entry into the market.
D)  Geographical differences exist.E) B) and D)
F) All of the above

Question 3

The graph shown represents the cost and revenue curves faced by a monopoly.  If Q2 units are being produced, the monopolist:

Accepted Answer

A)  is earning negative profits.
B)  should decrease production to increase profits.
C)  is maximizing revenue.
D)  is maximizing profits.E) A) and C)
F) B) and C)

Question 4

When a monopolist increases output, total revenue will:

Accepted Answer

A)  increase if the price effect outweighs the quantity effect.
B)  decrease if the quantity effect outweighs the price effect.
C)  increase if the quantity effect outweighs the price effect.
D)  increase, but there will be no price effect.E) C) and D)
F) None of the above

Question 5

The graph shown represents the cost and revenue curves faced by a monopoly.  If Q1 units are being produced, the monopolist should:

Accepted Answer

A)  increase production to increase profits.
B)  charge P0 to maximize profits.
C)  charge P1 to maximize profits.
D)  charge P3 to maximize profits.E) B) and C)
F) A) and B)

Question 6

The monopolist faces a:

Accepted Answer

A)  perfectly elastic demand curve.
B)  downward sloping demand curve.
C)  perfectly inelastic demand curve.
D)  perfectly elastic supply curve.E) A) and D)
F) A) and C)

Question 7

For a monopoly producing at any output level greater than one, the average revenue curve:

Accepted Answer

A)  lies below the demand curve.
B)  lies above the marginal revenue curve.
C)  is the same as the marginal revenue curve.
D)  lies above the demand curve.E) C) and D)
F) B) and D)

Question 8

The graph shown represents the cost and revenue curves faced by a monopoly.  The quantity the monopolist will produce is _______ and the efficient quantity is _______.

Accepted Answer

A)  60; 80
B)  50; 60
C)  60; 50
D)  50; 80E) B) and D)
F) All of the above

Question 9

A monopolist chooses its profit-maximizing quantity by:

Accepted Answer

A)  selling as much as it can produce.
B)  producing at the level of output at which marginal revenue equals zero.
C)  following the same rule as a perfectly competitive firm does.
D)  selling the amount at which price equals average total cost.E) B) and C)
F) A) and D)

Question 10

The graph shown represents the cost and revenue curves faced by a monopoly.  Which of the following statements is true?Deadweight loss is $50.The efficient quantity is 160.The monopoly quantity is 100.

Accepted Answer

A)  II only
B)  I and II only
C)  II and III only
D)  I and III onlyE) C) and D)
F) B) and C)

Question 11

A monopoly:

Accepted Answer

A)  is a price taker.
B)  faces competition from other firms producing close substitutes.
C)  restricts its output.
D)  sets a low price by controlling the level of output.E) A) and B)
F) C) and D)

Question 12

Antitrust activities by the government:

Accepted Answer

A)  can cause inefficiencies.
B)  are accused of being politically motivated.
C)  sometimes increase the efficiency of a market.
D)  All of these are true.E) C) and D)
F) All of the above

Question 13

One way DeBeers managed to maintain control over the diamond industry was to:

Accepted Answer

A)  continue to be the sole diamond producer by buying all existing diamonds.
B)  create the illusion of no close substitutes through marketing.
C)  punish consumers who sought to store their wealth in diamonds.
D)  All of these statements are true.E) B) and D)
F) C) and D)

Question 14

The graph shown represents the cost and revenue curves faced by a monopoly.  Which of the following statements is true?The monopolist's profit maximizing price is $12.The monopolist's profit maximizing quantity is 100.The monopolist will earn zero profits.

Accepted Answer

A)  II only
B)  I and III only
C)  I only
D)  II, and III onlyE) None of the above
F) All of the above

Question 15

The monopolist's outcome happens at a _______ the perfectly competitive one.

Accepted Answer

A)  lower quantity than
B)  lower price than
C)  higher quantity than
D)  cost that is equal toE) None of the above
F) All of the above

Question 16

A market in which a single firm can produce, at a lower cost than multiple firms, the entire quantity of output demanded is called:

Accepted Answer

A)  diseconomies of scale.
B)  government intervention.
C)  a natural monopoly.
D)  price gouging.E) A) and B)
F) B) and D)

Question 17

Which of the following is a characteristic of a firm that has a high degree of monopoly power, but is not a perfect monopoly?

Accepted Answer

A)  Is the single producer of a good
B)  Controls 80 to 90 percent of the market
C)  Only has a small number of competitors
D)  Intimidates the other businesses in the marketE) B) and C)
F) A) and D)

Question 18

For markets operating at quantities lower than the equilibrium quantity that would be produced in an equivalent perfectly competitive market:

Accepted Answer

A)  the outcome is efficient.
B)  total surplus is increased.
C)  consumer surplus is always increased.
D)  total surplus for society is reduced.E) A) and D)
F) B) and C)

Question 19

The table shown represents the revenues faced by a monopolist.

Marginal revenue for the firm:

Accepted Answer

A)  increases at first, then decreases as output increases.
B)  is negative after the sixth unit.
C)  increases constantly as output increases.
D)  decreases at first, then increases after the sixth unit.E) None of the above
F) A) and C)

Question 20

A perfect monopoly:

Accepted Answer

A)  can be a single seller or a small group of firms.
B)  can offer a product at the lowest cost possible.
C)  controls 100 percent of the market for a product.
D)  always engages in price discrimination.E) A) and B)
F) B) and D)

Exam 14: Monopoly

A perfect monopoly:

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When a monopolist increases output, total revenue will:

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A market in which a single firm can produce, at a lower cost than multiple firms, the entire quantity of output demanded is called:

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One way DeBeers managed to maintain control over the diamond industry was to:

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The graph shown represents the cost and revenue curves faced by a monopoly. If Q2 units are being produced, the monopolist:

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The monopolist faces a:

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The graph shown represents the cost and revenue curves faced by a monopoly. Which of the following statements is true?The monopolist's profit maximizing price is $12.The monopolist's profit maximizing quantity is 100.The monopolist will earn zero profits.

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The graph shown represents the cost and revenue curves faced by a monopoly. The quantity the monopolist will produce is _______ and the efficient quantity is _______.

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For a monopoly producing at any output level greater than one, the average revenue curve:

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Which of the following is a key reason why monopolies exist?

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The table shown represents the revenues faced by a monopolist. Marginal revenue for the firm:

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Which of the following is a characteristic of a firm that has a high degree of monopoly power, but is not a perfect monopoly?

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The graph shown represents the cost and revenue curves faced by a monopoly. Which of the following statements is true?Deadweight loss is $50.The efficient quantity is 160.The monopoly quantity is 100.

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The monopolist's outcome happens at a _______ the perfectly competitive one.

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Predatory pricing is:

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A monopoly:

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A monopolist chooses its profit-maximizing quantity by:

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The graph shown represents the cost and revenue curves faced by a monopoly. If Q1 units are being produced, the monopolist should:

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Antitrust activities by the government:

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For markets operating at quantities lower than the equilibrium quantity that would be produced in an equivalent perfectly competitive market:

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The graph shown represents the cost and revenue curves faced by a monopoly. The quantity the monopolist will produce is _ and the efficient quantity is _.

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