Question 1

Under normal monopoly, price exceeds marginal cost, which implies that the:

Accepted Answer

A)  total cost to society of producing output is less than the total benefit.
B)  total benefit to society of producing output is less than the total cost.
C)  marginal cost to society of increasing output is lower than the marginal benefit.
D)  marginal cost to society of increasing output is greater than the marginal benefit.E) All of the above
F) None of the above

Question 2

Refer to the graph shown. Area B represents: m to Qc. C) consumer surplus redistributed to the monopolist. D) the loss of surplus by producers resulting from a monopoly." class="answers-bank-image d-inline" rel="preload" >

Accepted Answer

A)  the loss of surplus by consumers resulting from a monopoly.
B)  the cost to society of increasing output from Qm to Qc.
C)  consumer surplus redistributed to the monopolist.
D)  the loss of surplus by producers resulting from a monopoly.E) B) and C)
F) C) and D)

Question 3

(a)Complete the following table: $$\begin{array} { | c | c | c | c | } 
\hline \text { P } & \text { Q } & \text { TR } & \text { MR } \
\hline \$ 10 & 1 & & \
\hline 9 & 2 & & \
\hline 8 & 3 & & \
\hline 7 & 4 & & \
\hline 6 & 5 & & \
\hline 5 & 6 & & \
\hline 4 & 7 & & \
\hline 3 & 8 & & \
\hline 2 & 9 & & \
\hline 1 & 10 & & \
\hline
\end{array}$$ Note: Marginal values are values between levels of output.
(b)Suppose the firm's variable costs are as given in the accompanying table.What is the firm's profit-maximizing level of output? $$\begin{array} { | c | c | } 
\hline Q & V C \
\hline 1 & 5 \
\hline 2 & 9 \
\hline 3 & 12 \
\hline 4 & 16 \
\hline 5 & 21 \
\hline 6 & 27 \
\hline 7 & 34 \
\hline 8 & 42 \
\hline 9 & 51 \
\hline 10 & 61 \
\hline
\end{array}$$ (c)What would the profit-maximizing output be if the government offered to pay the firm's variable costs of production?
(d)What would profit-maximizing output be if instead the government decided to levy a tax of $100 on the firm,independent of its output decision?
(e)Do we know whether the firm will exit the industry in the short run? How about in the long run? Why or why not?

Accepted Answer

(a)The completed table:
\[\begin{array} ...

Question 4

Demonstrate graphically and explain verbally the case of a monopolistically competitive firm earning a positive economic profit.Is this firm in a short run or a long-run equilibrium? In the short run,how does this case differ from the monopoly market outcome?

Accepted Answer

The monopolistically competitive firm de...

Question 5

A perfectly price-discriminating monopolist:

Accepted Answer

A)  shifts the demand curve for its product to the right by producing where MC = MR.
B)  will cause a greater welfare loss than will a monopolist that is not price-discriminating.
C)  captures some or all of the consumer surplus.
D)  increases both consumer surplus and producer surplus.E) A) and B)
F) B) and C)

Question 6

The best-selling mystery To the Nines by Janet Evanovich was sold in hardcover for $25.95 when it was released. One year later, the publisher issued a softcover edition for $7.99. If the marginal cost of printing a softcover book is not much less than the marginal cost of printing a hardcover, the pricing difference:

Accepted Answer

A)  cannot be explained by economic theory.
B)  is probably due to price discrimination in which the seller charges a higher price to consumers with a more elastic demand.
C)  is probably due to price discrimination in which the seller charges a higher price to consumers with less elastic demand.
D)  must be due to a difference in fixed costs.E) B) and D)
F) A) and D)

Question 7

Consider the following diagram:  Explain why producing output level Q0 is not the monopolist's profit-maximizing output level.How much output should the firm produce? Illustrate as Q1 in the diagram below.

Accepted Answer

At Q₀ we see that MR < MC.This means that...

Question 8

Refer to the table shown, which shows the demand schedule for a product sold by a monopolist. Marginal revenue is closest to zero:   Price d product($)  Quantity demanded per year $143$124$105$86$67\begin{array} { | c | c | } \hline	ext { Price d product(\$) }&	ext { Quantity demanded per year }\\hline \$ 14 & 3 \\hline \$ 12 & 4 \\hline \$ 10 & 5 \\hline \$ 8 & 6 \\hline \$ 6 & 7 \\hline\end{array} Price d product($) $14$12$10$8$6​ Quantity demanded per year 34567​​

Accepted Answer

A)  when price is $10.
B)  when price is above $10.
C)  when price is below $10.
D)  for every price. E) A) and C)
F) None of the above

Question 9

If P = 3Qs + 3 represents market supply for a competitive industry and market demand is given by Qd = 31 - 1/3 P, the equilibrium price is:

Accepted Answer

A)  $10.
B)  $15.
C)  $20.
D)  $48.E) None of the above
F) A) and B)

Question 10

Charging different prices to different individuals or groups for the same product is called:

Accepted Answer

A)  market segmentation.
B)  price differentiation.
C)  quantity discrimination.
D)  price discrimination.E) B) and C)
F) A) and B)

Question 11

The deadweight loss from monopoly exists because:

Accepted Answer

A)  there are no net gains to society at the output level produced by a monopolist.
B)  resource owners hired by the monopolist gain at the expense of consumers.
C)  the monopolist produces at an output level at which no one can be made better off without making someone worse off.
D)  the marginal benefit of the monopolist's product to society exceeds the monopolist's marginal cost.E) A) and B)
F) A) and C)

Question 12

Refer to the graph shown of a monopolistically competitive firm. In the long run:

Accepted Answer

A)  marginal cost will fall for firms that remain as other firms exit the industry.
B)  average total cost will rise for firms that remain as other firms enter the industry.
C)  demand will fall for firms that remain as other firms enter the industry.
D)  demand will rise for firms that remain as other firms exit the industry.E) A) and C)
F) B) and D)

Question 13

Refer to the graph shown depicting a monopolistically competitive firm. The average total cost curve is represented by curve:

Accepted Answer

A)  A.
B)  B.
C)  C.
D)  D.E) All of the above
F) A) and C)

Question 14

Refer to the graph shown. If regulators wanted this monopolist to earn only a normal profit, they would set price equal to:

Accepted Answer

A)  $2.
B)  $3.
C)  $8.
D)  $12.00.E) A) and C)
F) C) and D)

Question 15

Refer to the graph shown of average costs for a typical firm. The lowest per-unit costs for the industry could be achieved if:

Accepted Answer

A)  one firm produced 333 units of output.
B)  two firms each produced 500 units of output.
C)  one firm produced 1,000 units of output.
D)  three firms each produced 333 units of output.E) B) and D)
F) A) and D)

Question 16

Briefly discuss three possible barriers to entry for an industry and assess whether these barriers are good or bad for consumers or society as a whole.

Accepted Answer

(1)Natural ability represents a barrier ...

Question 17

What is a natural monopoly?

Accepted Answer

A natural monopoly is an indus...

Question 18

Natural monopoly exists when:

Accepted Answer

A)  one firm can supply the entire quantity demanded at higher cost than two or more firms.
B)  one firm can supply the entire quantity demanded at lower cost than two or more firms.
C)  one firm can supply the entire quantity demanded at the same cost as two or more firms.
D)  the long-run average cost curve exhibits constant returns to scale.E) All of the above
F) A) and D)

Question 19

If the market for tires is monopolistically competitive:

Accepted Answer

A)  the demand curve for each seller's product is perfectly elastic.
B)  no seller can control the price of the product.
C)  sellers can influence the market price of the product.
D)  no firm has any monopoly power.E) None of the above
F) A) and B)

Question 20

Refer to the graph shown. If this graph represents a monopoly market, the equilibrium price and quantity will be:

Accepted Answer

A)  $13.50 and 325, respectively.
B)  $7 and 325, respectively.
C)  $10 and 500, respectively.
D)  $7 and 750, respectively.E) A) and D)
F) A) and C)

Exam 14: Monopoly and Monopolistic Competition

Briefly discuss three possible barriers to entry for an industry and assess whether these barriers are good or bad for consumers or society as a whole.

Correct Answer
verified
(1)Natural ability represents a barrier ...
View Answer

If the market for tires is monopolistically competitive:

Correct Answer
verified

Correct Answer
verified

The deadweight loss from monopoly exists because:

Correct Answer
verified

Under normal monopoly, price exceeds marginal cost, which implies that the:

Correct Answer
verified

Refer to the graph shown. If this graph represents a monopoly market, the equilibrium price and quantity will be:

Correct Answer
verified

Refer to the graph shown depicting a monopolistically competitive firm. The average total cost curve is represented by curve:

Correct Answer
verified

Refer to the graph shown of average costs for a typical firm. The lowest per-unit costs for the industry could be achieved if:

Correct Answer
verified

Correct Answer
verified
(a)The completed table:
\[\begin{array} ...
View Answer

What is a natural monopoly?

Correct Answer
verified
A natural monopoly is an indus...
View Answer

If P = 3Q_s + 3 represents market supply for a competitive industry and market demand is given by Q_d = 31 - 1/3 P, the equilibrium price is:

Correct Answer
verified

Charging different prices to different individuals or groups for the same product is called:

Correct Answer
verified

Refer to the graph shown. Area B represents:

Correct Answer
verified

Consider the following diagram: Explain why producing output level Q₀ is not the monopolist's profit-maximizing output level.How much output should the firm produce? Illustrate as Q₁ in the diagram below.

Correct Answer
verified
At Q₀ we see that MR < MC.This means that...
View Answer

A perfectly price-discriminating monopolist:

Correct Answer
verified

Correct Answer
verified

Natural monopoly exists when:

Correct Answer
verified

Refer to the graph shown. If regulators wanted this monopolist to earn only a normal profit, they would set price equal to:

Correct Answer
verified

Demonstrate graphically and explain verbally the case of a monopolistically competitive firm earning a positive economic profit.Is this firm in a short run or a long-run equilibrium? In the short run,how does this case differ from the monopoly market outcome?

Correct Answer
verified
The monopolistically competitive firm de...
View Answer

Refer to the graph shown of a monopolistically competitive firm. In the long run:

Correct Answer
verified

Exam 14: Monopoly and Monopolistic Competition

Briefly discuss three possible barriers to entry for an industry and assess whether these barriers are good or bad for consumers or society as a whole.

Correct Answerverified(1)Natural ability represents a barrier ...View AnswerShow Answer

If the market for tires is monopolistically competitive:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

The deadweight loss from monopoly exists because:

Correct AnswerverifiedShow Answer

Under normal monopoly, price exceeds marginal cost, which implies that the:

Correct AnswerverifiedShow Answer

Refer to the graph shown. If this graph represents a monopoly market, the equilibrium price and quantity will be:

Correct AnswerverifiedShow Answer

Refer to the graph shown depicting a monopolistically competitive firm. The average total cost curve is represented by curve:

Correct AnswerverifiedShow Answer

Refer to the graph shown of average costs for a typical firm. The lowest per-unit costs for the industry could be achieved if:

Correct AnswerverifiedShow Answer

Correct Answerverified (a)The completed table: \[\begin{array} ...View AnswerShow Answer

What is a natural monopoly?

Correct AnswerverifiedA natural monopoly is an indus...View AnswerShow Answer

If P = 3Qs + 3 represents market supply for a competitive industry and market demand is given by Qd = 31 - 1/3 P, the equilibrium price is:

Correct AnswerverifiedShow Answer

Charging different prices to different individuals or groups for the same product is called:

Correct AnswerverifiedShow Answer

Refer to the graph shown. Area B represents:

Correct AnswerverifiedShow Answer

Consider the following diagram: Explain why producing output level Q0 is not the monopolist's profit-maximizing output level.How much output should the firm produce? Illustrate as Q1 in the diagram below.

Correct AnswerverifiedAt Q0 we see that MR < MC.This means that...View AnswerShow Answer

A perfectly price-discriminating monopolist:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Natural monopoly exists when:

Correct AnswerverifiedShow Answer

Refer to the graph shown. If regulators wanted this monopolist to earn only a normal profit, they would set price equal to:

Correct AnswerverifiedShow Answer

Demonstrate graphically and explain verbally the case of a monopolistically competitive firm earning a positive economic profit.Is this firm in a short run or a long-run equilibrium? In the short run,how does this case differ from the monopoly market outcome?

Correct AnswerverifiedThe monopolistically competitive firm de...View AnswerShow Answer

Refer to the graph shown of a monopolistically competitive firm. In the long run:

Correct AnswerverifiedShow Answer

Correct Answer
verified
(1)Natural ability represents a barrier ...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
(a)The completed table:
\[\begin{array} ...
View Answer

Correct Answer
verified
A natural monopoly is an indus...
View Answer

If P = 3Q_s + 3 represents market supply for a competitive industry and market demand is given by Q_d = 31 - 1/3 P, the equilibrium price is:

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Consider the following diagram: Explain why producing output level Q₀ is not the monopolist's profit-maximizing output level.How much output should the firm produce? Illustrate as Q₁ in the diagram below.

Correct Answer
verified
At Q₀ we see that MR < MC.This means that...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
The monopolistically competitive firm de...
View Answer

Correct Answer
verified