373 chp 11

Say a monopolist sells in two separate markets, with demand PA = 100 - 2Q and PB = 50 - Q respectively. Marginal costs in both markets are constant and equal to 8. The monopolist would charge a price of _______ in market B in order to maximize profits. A. 29 B. 21 C. 8 D. 0

A. 29

According to the text, the most important of the five factors which give rise to monopoly is A. exclusive control over important inputs. B. economies of scale. C. patents. D. government licenses. E. network economies.

B. economies of scale

The marginal revenue curve of a single price monopolist A. lies above the demand curve. B. lies below the demand curve. C. lies along the demand curve. D. is a horizontal line.

B. lies below the demand curve.

The supply curve for a monopolist A. is upward sloping. B. is vertical. C. does not exist. D. is downward sloping.

C. does not exist

Which of the following is not true for a profit maximizing single-price monopolist in the long run? A. It will make profit or breakeven. B. Price is greater than marginal revenue. C. Marginal revenue equals marginal cost. D. Demand is inelastic.

D. Demand is inelastic.

The demand equation for a single price monopolist is P = 120 - 3Q. The marginal revenue curve for this monopolist is A. 120-1.5Q. B. 60-3Q. C. 60-6Q. D. 120-6Q.

D. 120 - 6Q

The profit maximizing markup (over MC) is given by A. 1/elasticity. B. elasticity. C. elasticity2. D. elasticity+1.

A. 1/elasticity

The demand equation for a single price monopolist is P = 50 - Q. The marginal revenue equation for this monopolist is A. 25-Q. B. 50-2Q. C. 50-Q. D. 100-Q.

B. 50 - 2Q

Under rate of return regulation, A. P = MC. B. P = ATC. C. P = AVC. D. P > ATC.

B. P = ATC.

If a profit maximizing monopolist faces a linear demand curve and has zero marginal cost, it will produce where demand elasticity is __________________ if it will produce at all. A. inelastic B. elastic C. 1 D. Information is inadequate to answer the question.

C. 1

I frequently buy something which then has a rebate offer attached. I must fill in all the information requested, send off the form and then wait 8 weeks for the rebate. This practice is referred to as A. the hurdle model of price discrimination. B. exclusive contracting. C. a profit maximizing markup. D. network economics.

A. the hurdle model of price discrimination.

If a firm could perfectly price discriminate, A. the marginal revenue curve would be the same as the demand curve. B. the marginal revenue curve would lie below the demand curve. C. the marginal revenue curve would lie above the demand curve. D. there would be no marginal revenue function.

A. the marginal revenue curve would be the same as the demand curve.

Say a monopolist sells in two separate markets, with demand PA = 100 - 2Q and PB = 50 - Q respectively. Marginal costs in both markets are constant and equal to 8. The profit maximizing quantity of output in market A would be A. 46. B. 23. C. 21. D. 5.

B. 23

Which of the following is not true? A. A monopolist typically seeks to maximize profits. B. A monopolist can set price at arbitrarily high levels. C. Economies of scale are the cause of natural monopolies. D. Monopolists price on the elastic portion of their demand curves.

B. A monopolist can set price at arbitrarily high levels.

Which of the following could not be considered price discrimination? A. The issuing of discount tickets to week-end travelers. B. Airlines offering super-saver fares to everyone. C. Movies offering cheap matinees. D. Senior citizen's discounts.

B. Airlines offering super-saver fares to everyone.

Which is true of a single price monopoly firm? A. Its supply curve is equal to its marginal cost function. B. It creates more welfare loss to society than a perfect price discriminating monopolist. C. Its shutdown point is where ATC = price. D. An increased profits tax will lower the quantity the firm will produce.

B. It creates more welfare loss to society than a perfect price discrimination monopolist.

All of the following are true about a monopolist except: A. Average and marginal revenues are not the same. B. Marginal revenue is greater than price. C. Marginal revenue decreases with increases in output. D. Marginal revenue can be negative.

B. Marginal revenue is greater than price.

Which of the following is false? A. Profit is maximized when MR = MC for both monopolies and perfect competition firms B. Monopolies profit maximize and perfect competitive firms output maximize C. Both monopolies and perfect competition firms earn zero profit in the long run D. At equilibrium, price is higher than marginal cost for monopolies but not for competitive firms

B. Monopolies profit maximize and perfect competitive firms output maximize.

Which of the following would erode the monopoly pricing power of a firm that was controlling a market? A. New technology developed by the firm that lowered long run average costs. B. The development of substitutes for the product by other firms. C. A tax on corporate profits. D. All of these would reduce the monopoly power of the firm.

B. The development of substitutes for the product by other firms.

The total revenue curve for a firm is given by TR = 2Q. A. The firm is definitely a monopolist. B. The firm is definitely not a monopolist. C. The firm may be a monopolist or a perfectly competitive firm. D. One cannot tell from the equation what market form applies.

B. The firm is definitely not a monopolist.

In first-degree price discrimination, the monopolist A. knows the equilibrium price. B. can segment the market to the fullest extent. C. charges only two different prices. D. gets less of the consumer surplus than would be taken if 2nd degree price discrimination was practiced.

B. can segment the market to the fullest extent.

If a profit maximizing monopolist sells output for $100, then we know that its marginal revenue is A. more than $100 if it is a perfect price discriminator. B. less than $100 if it is a single price monopolist. C. equal to $100 in all cases. D. less than $100 if it is a perfect price discriminator.

B. less than $100 if it is a single price monopolist.

Price discrimination is possible only if A. economies of scale exist. B. markets can be segregated. C. each person in the market has the same elasticity of demand. D. prices are kept secret so those paying the high price do not know that others paid less.

B. markets can be segregated.

In long-run equilibrium for a single-price monopolist, A. the plant size is always the one at the bottom of the long-run ATC curve. B. output is at the level where short-run and long-run marginal costs are the same. C. marginal cost equals ATC. D. marginal revenue equals price.

B. output is at the level where short-run and long-run marginal costs are the same

Say a monopolist knew that at the current price for its product demand is inelastic. If marginal costs for this firm are zero, then in order to maximize profits this monopolist should A. increase output. B. reduce output. C. keep output at the same level. D. decrease its price.

B. reduce output

A monopolist has a marginal revenue curve given by MR = 102 - Q, and a total cost curve given by TC = Q2 + 16. The monopolist's profit maximizing price and quantity are _______, _____ respectively. A. 85;34 B. 52; 50 C. 100;2 D. 77;50

A. 85; 34

Suppose you own a firm that produces widgets and is a monopoly. The market demand is given by the equation P = 100 - 2Q, where P is the price of gadgets and Q is the quantity of gadgets sold per week. The firm's marginal costs are given by the equation MC = 16Q. When the monopolist maximizes profits the price elasticity of demand for widgets is A. 9. B. 36. C. 0.5. D. 0.02.

A. 9

Which statement is true for a profit maximizing monopolist? A. It always faces a downward sloping demand curve. B. It can avoid diminishing returns to production. C. It will not produce where marginal cost equals marginal revenue. D. It can charge whatever price it wants.

A. It always faces a downward sloping demand curve.

A profit maximizing monopolist sets output where A. MC=MR. B. MC=P. C. MC=demand. D. it depends on the average costs in each case.

A. MC = MR

A natural monopoly always has A. a downward sloping long run average cost curve. B. a downward sloping marginal cost curve. C. its profit maximization point where price = marginal cost. D. patent rights.

A. a downward sloping long run average cost curve.

If the demand curve for a single price monopolist always is a downward sloping straight line, then marginal revenue will be A. a straight line with a negative slope of twice the demand curve slope. B. a straight line with a negative slope of one-half the demand curve slope. C. identical to the demand curve. D. a horizontal line.

A. a straight line with a negative slope of twice the demand curve slope.

If the owner of the firm, shown above is a profit maximizer, the firm should ______ in the short run. A. continue to operate at the existing output B. shutdown C. expand output to lower costs D. More data is needed to say definitively what the firm should do.

A. continue to operate at the existing output

A single-price monopolist with a positive marginal cost will maximize profit by producing where A. demand is price elastic. B. demand is price inelastic. C. demand is unit elastic. D. Any of these may apply.

A. demand is price elastic

In second-degree price discrimination it is true that A. people who buy a lot pay a lower price. B. people who buy relatively little pay a lower price. C. the monopolist cannot earn economic profits. D. the market need not be segmented.

A. people who buy a lot pay a lower price.

Monopoly is characterized by A. many close substitutes. B. no barriers to entry. C. a downward sloping demand curve. D. a horizontal demand curve.

C. a downward sloping demand curve.

A profit maximizing monopolist faces the following information: P = $4, MR = $2, MC = $1.50. The firm should A. shutdown. B. decrease output. C. increase output. D. stay at its current level of output.

C. increase output

A single price profit maximizing monopolist is inefficient because A. it produces too much output. B. it perfectly price discriminates when it can. C. the sum of consumer and producer surplus is less than it could be. D. it produces where price equals marginal cost rather than where marginal cost equals marginal revenue.

C. the sum of consumer and producer surplus is less than it could be.

If a monopolist had no costs, its best possible price would be where demand is A. infinitelyelastic. B. relatively (but not perfectly) elastic. C. unit elastic. D. relatively (but not completely) inelastic.

C. unit elastic

Under rate of return regulation, firms earn A. positive economic profits. B. negative economic profits. C. zero economic profits. D. zero accounting profits.

C. zero economic profits

If a profit maximizing monopolist faces a linear demand curve and has zero marginal cost, it will produce at A. the lowest point of marginal revenue curve. B. elasticity of demand equals 1. C. the lowest point of marginal profit curve. D. All of the choices are correct.

D. All of the choices are correct.

In the long run, equilibrium for a monopolist is when A. the short-run average cost curve is at its lowest point. B. the long-run average cost curve is at its lowest point. C. the short-run and long-run average cost curves are at their lowest points. D. None of these is necessarily true.

D. None of these is necessarily true.

Which of the following is not a source of monopoly power? A. Exclusive control over inputs B. Economies of scale C. Patents D. Rapid low cost technological change in the industry

D. Rapid low cost technological change in the industry.

Which of the following explains why theater prices for popcorn are three or four times higher than the popcorn price in the grocery store? A. The grocery store sells a much higher volume and gets its profits that way. B. The cost of popping the popcorn is high. C. Grocery stores are satisfied with normal profit while theaters seek economic profit. D. The demand curve for popcorn in a theater is more inelastic than the demand for popcorn at the grocery store.

D. The demand curve for popcorn in a theater is more inelastic than the demand for popcorn at the grocery store.

For the output maximizing monopolist A. average total cost must be falling. B. marginal revenue equals marginal cost. C. long-run marginal cost equals demand. D. price equals average total cost.

D. price equals average total cost

A profit maximizing monopolist faces the following information: P = $10, MR = $5, ATC = $6, MC = $5. The firm should A. shutdown. B. decrease output. C. increase output. D. stay at its current level of output.

D. stay at its current level of output

In the long-run, profit maximizing monopolists A. price where MC and price are equal. B. never make positive economic profits. C. produce where average total costs are minimized. D. will produce where MC is below long run ATC.

D. will produce where MC is below long run ATC.