AP Economics Monopoly Review Questions Module 61-63

a. P2; EF b. P3; the rectangle P2P3EF c. P3; the rectangle P1P3EG d. P3; EF e. P3; the rectangle P1P2FG b. P3; the rectangle P2P3EF

(Figure 61-2: Computing Monopoly Profit) The profit-maximizing price is ________ and will generate total economic profit of ________.

a. SPDB. b. 0SBJ. c. IPDH. d. ISBH. e. 0PDJ. a. SPDB

(Figure 61-4: Monopoly Model) When the firm is in equilibrium (that is, maximizing its economic profit), its profit is the area of rectangle:

a. 100; $50 b. 120; $40 c. 70; $30 d. 150; $46 e. 70; $65 e

(Figure 62-1: Demand, Revenue, and Cost Curves) The figure shows the demand, marginal revenue, marginal cost, and average total cost curves for Figglenuts-R-Us, a monopolist in the figglenut market. Figglenuts-R-Us will sell ________ figglenuts and set a price of ________ to maximize profits.

a. produce 60 figglenuts to maximize profit. b. produce 120 figglenuts to maximize short-run profit and might exit the market in the long run. c. produce 120 figglenuts to maximize profits that continue into the long run. d. exit the market in the short run. e. earn positive economic profit in the short run. b

(Figure 62-1: Demand, Revenue, and Cost Curves) The figure shows the demand, marginal revenue, marginal cost, and average total cost curves for Figglenuts-R-Us, a monopolist in the figglenut market. If the government regulated the figglenut market by setting a price ceiling of $40, Figglenuts-R-Us might:

a. equivalent elasticity of demand b. more elastic demand c. greater demand d. less elastic demand e. lower demand b

The city bus system charges lower fares to senior citizens than to other passengers. Assuming that this pricing strategy increases the profits of the bus system, we can conclude that senior citizens must have a(n) ________ for bus service than other passengers.

a. paying different prices to suppliers of different goods. b. equating price to marginal revenue. c. charging different prices to buyers of the same good. d. equating price to marginal cost. e. offering differentiated products to consumers with different tastes c

Price discrimination is the practice of:

a. six b. seven c. three d. four e. five c. three

Prof. Dumbler has a monopoly on magic hats. He sells at most one hat to each customer, and the table shows each customer's willingness to pay. The marginal cost of producing a hat is $18. Suppose Dumbler can perfectly price discriminate. How many hats will he produce?

a. $200; 16 units b. $200; 8 units c. $600; 16 units d. $600; 8 units e. $0; 20 units a. $200; 16 units

(Figure 61-1: Profit-Maximizing Output and Price) In the figure, a perfect competitor would produce at a price of ________ and output of ________.

a. NH b. P30QE c. P10QG d. P2P3EF e. P20QF e.P20QF

(Figure 61-2: Computing Monopoly Profit) At the profit-maximizing output, total cost is:

a. I. b. E. c. Z. d. F. e. P. e

(Figure 61-4: Monopoly Model) The profit-maximizing price is the one indicated by:

a. K. b. J. c. W. d. L. e. N. b. J

(Figure 61-4: Monopoly Model) The profit-maximizing quantity is the one indicated by the distance:

a. ISBH. b. 0IHJ. c. 0SBJ. d. IPDH. e. 0PDJ. c

(Figure 61-4: Monopoly Model) When the firm is in equilibrium (that is, maximizing its economic profit), its total cost is the area of rectangle:

a. $65 b. $0 c. $30 d. $50 e. $40 d

(Figure 62-1: Demand, Revenue, and Cost Curves) The figure shows the demand, marginal revenue, marginal cost, and average total cost curves for Figglenuts-R-Us, a monopolist in the figglenut market. If the government wanted to regulate Figglenuts-R-Us such that it would minimize the deadweight loss while allowing the firm to break even, it would impose a price ceiling of ________ in the market.

a. 5 megawatts. b. 3 megawatts. c. 2 megawatts. d. 4 megawatts. e. 6 megawatts d. 4 megawatts

(Table 61-1: Demand and Total Cost) Lenoia runs a natural monopoly producing electricity for a small mountain village. The table shows Lenoia's demand and total cost of producing electricity. The profit-maximizing quantity of electricity for her to produce is:

a. Q3; P3 b. Q3; P2 c. Q1; P1 d. Q2; P1 e. Q4; P3 e. Q4; P3

The graph shows a monopoly firm that sells gadgets. If the firm is regulated such that the firm earns zero economic profit, the firm will sell ________ units at a price of ________ per unit.

a. Q3; P3 b. Q2; P1 c. Q4; P3 d. Q3; P2 e. Q1; P1 d. Q3; P2

The graph shows a monopoly firm that sells gadgets. If the firm is regulated such that there is no dead weight loss, the firm will sell ________ units at a price of ________ per unit.

a. price discrimination. b. output competition. c. product differentiation d. monopolization. e. privatization. a. price discrimination

The practice of charging different prices to different customers for the same good or service even though the cost of supplying those customers is the same is:

a. P = MC. b. P < MR. c. P > MR. d. P = MR. e. economic profit is zero. c. P > MR

When a single-price monopolist sells output along a demand curve that is downward-sloping, we know that:

a. 0IHJ; IPDH b. 0SBJ; ISBH. c. 0PDJ; SPDB d. IPDH; 0SBJ e. 0SBJ; 0PDJ e

(Figure 61-4: Monopoly Model) When the firm is in equilibrium (that is, maximizing its economic profit), its total cost is the area of rectangle ________ and its total revenue is the area of rectangle ________.

a. 0SBJ. b. IPDH. c. ISBH. d. SPDB. e. 0PDJ. e

(Figure 61-4: Monopoly Model) When the firm is in equilibrium (that is, maximizing its economic profit), its total revenue is the area of rectangle:

a. lower; more elastic b. higher; more elastic c. lower; perfectly inelastic d. higher; perfectly elastic e. lower; less elastic a. lower; more elastic

A ________ price in the market with a ________ demand is likely due to price discrimination.

a. generally lower prices at Wal-Mart than at Target. b. cheaper air fares if the traveler stays over a Saturday. c. discounts for senior citizens at the movies. d. discounts for families with young children at motels. e. discounts for customers who buy products in large bulk quantities. a

All of the following are examples of price discrimination except:

a. the intersection of demand and average total cost. b. the intersection of marginal revenue and demand. c. the intersection of marginal revenue and marginal cost. d. the intersection of marginal revenue and average total cost. e. the intersection of demand and marginal cost. e

In the figure, a perfect competitor will produce at:

a. $2; eight b. $4; six c. $5; five d. $0; ten e. $1; nine a. $2; eight

Lenny's Cafe is the only source of coffee for hundreds of miles in any direction. The demand schedule for Lenny's coffee is given by the table. If Lenny's marginal cost of selling coffee is a constant $2, and the government forced Lenny to charge a price that eliminated deadweight loss, Lenny would charge a price of ________ per cup and sell ________ cups.

a. $450. b. $350. c. $400. d. $500. e. $300. c. $400

(Table 61-1: Demand and Total Cost) Lenoia runs a natural monopoly firm producing electricity for a small mountain village. The table shows Lenoia's demand and total cost of producing electricity. To maximize profits, Lenoia should charge a price of:

a. $425. b. $400. c. $600. d. $1,800. e. $225. e

(Table 61-1: Demand and Total Cost) Lenoia runs a natural monopoly producing electricity for a small mountain village. The accompanying table shows Lenoia's demand and total cost of producing electricity. The maximum profit Lenoia can make is:

a. $500. b. $200. c. $450. d. $400. e. $250. c. incorrect

(Table 61-1: Demand and Total Cost) Lenoia runs a natural monopoly producing electricity for a small mountain village. The table shows Lenoia's demand and total cost of producing electricity. The marginal revenue of the fourth unit of production is:

a. - $400 b. -$150. c. $500. d. $450. e. $-50 d. $450 (unsure)

(Table 61-1: Demand and Total Cost) Lenoia runs a natural monopoly producing electricity for a small mountain village. The table shows Lenoia's demand and total cost of producing electricity. The price effect of increasing production from 3 megawatts to 4 megawatts is:

a. $1,600; $800; $800 b. $600; $200; $400 c. $4,800; $3,200; $1,600 d. $4,800; $1,600; $3,200 e. $1,600; $3,200; $1,600 d. $4,800; $1,600; $3,200

(Figure 61-1: Profit-Maximizing Output and Price) Assume there are no fixed costs and AC = MC. In the figure, at the profit-maximizing quantity of production for the monopolist, total revenue is ________, total cost is ________, and profit is ________.

a. J b. N c. K d. G e. H d

(Figure 61-2: Computing Monopoly Profit) In order to obtain maximum profits, the monopoly should produce the output determined at the point ________.

a. result in the most efficient level of output. b. result in the firm breaking even. c. never be profit-maximizing, since at this output MR < 0 and MC > 0. d. result in MR = MC. e. result in positive economic profits. a. result in the most efficient level of output. (unsure)

(Figure 61-2: Computing Monopoly Profit) Producing at point N would:

a. $40 b. $65 c. $46 d. $50 e. $30 a.$40

(Figure 62-1: Demand, Revenue, and Cost Curves) The figure shows the demand, marginal revenue, marginal cost, and average total cost curves for Figglenuts-R-Us, a monopolist in the figglenut market. If the government wanted to regulate Figglenuts-R-Us such that the entire deadweight loss would be eliminated, it would impose a price ceiling of ________ in the market.

a. produce more; charge a lower b. produce more; charge a higher c. produce fewer; charge a lower d. produce fewer; charge a higher e. produce equivalent; charge a higher d. produce fewer; charge a higher

A monopoly is likely to ________ units of output and ________ price than a perfectly competitive firm.

a. is investor-owned but has been granted the exclusive right by the government to operate in a market. b. has gained control over a strategic input of an important production process. c. earns economic profits in the long run. d. experiences economies of scale over the entire range of production that is relevant to its market. e. is owned and operated by the federal or local government. d

A natural monopoly exists whenever a single firm:

a. higher quality. b. larger quantities. c. more consumer surplus. d. more choices. e. higher prices. e

Because of monopoly, consumers typically have:

a. producer surplus is minimized. b. each consumer pays the lowest possible price. c. the monopolist may shut down in the short run. d. it produces at the socially efficient level. e. consumer surplus is maximized. d.it produces at the socially efficient level

If a monopolist can engage in perfect price discrimination, then:

a. can charge a higher price. b. will increase profits. c. can charge a lower price. d. will decrease marginal revenue. e. will induce other firms to enter the market. a. can charge a higher price

Suppose a monopoly is producing the level of output where marginal revenue equals marginal cost. If the monopolist reduces output, it:

a. downward-sloping, the same as that facing a perfectly competitive firm. b. horizontal, the same as that facing a perfectly competitive firm. c. downward-sloping, unlike the horizontal demand curve facing a perfectly competitive firm. d. horizontal, unlike the downward-sloping demand curve facing a perfectly competitive firm. e. upward-sloping, the same as that facing a perfectly competitive firm. c. downward-sloping, unlike the horizontal demand curve facing a perfectly competitive firm.

The demand curve facing a monopolist is:

a. A monopolist has market power while a perfect competitor does not. b. The demand for the monopolist's product is highly elastic due to many available substitutes. c. Monopoly profits cannot continue to exist in the long run, because there are no barriers to entry. d. Like a perfectly competitive firm, a monopoly can make positive economic profits in the long run. e. A monopoly will charge a higher price and produce a larger quantity than a competitive market with the same demand and cost structure. a

The following are four statements about monopoly and perfect competition. Which of these is correct?

a. lower demand b. greater demand c. less elastic demand d. equivalent elasticity of demand e. more elastic demand c. less elastic demand

The municipal swimming pool charges lower entrance fees to local residents than to nonresidents. Assuming that this pricing strategy increases the profits of the pool, we can conclude that nonresidents must have a(n) ________ for swimming at the pool than residents.

a. P2Q2. b. (P2 - P4)(Q2). c. P4Q4 d. 1/2(P2 - P4)(Q4 - Q2). e. 1/2(P1 - P3)Q2. b. (P2 - P4)(Q2).

The profit associated with this unregulated monopoly can be measured as the area:

a. excise tax. b. two-part tariff. c. inferior good strategy. d. coupon strategy. e. profit minimizing strategy. e. profit minimizing strategy.

When a club store (like Costco) charges an annual membership, but sells goods at extremely low prices, it is using what economists call a: