ECO111_Part_9

B

QN=401 (17481) Scenario 14-1 Assume a certain firm is producing Q = 1,000 units of output. At Q = 1,000, the firm's marginal cost equals $15 and its average total cost equals $11. The firm sells its output for $12 per unit. Refer to Scenario 14-1. At Q = 1,000, the firm's profits equal a. $-200. b. $1,000 c. $3,000. d. $4,000.

D

QN=402 (17500) Suppose a firm operates in the short run at a price above its average total cost of production. In the long run the firm should expect a. (i) new firms to enter the market. b. (ii) the market price to fall. c. (iii) its profits to fall. d. All of (i), (ii), and (iii) are correct.

D

QN=403 (17476) A competitive firm would benefit from charging a price below the market price because the firm would achieve a. (i) higher average revenue. b. (ii) higher profits. c. (iii) lower total costs. d. None of (i), (ii), and (iii) is correct.

D

QN=404 (17493) 5. Refer to Table 14-5. The maximum profit available to this firm is a. $2. b. $3. c. $4. d. $5.

C

QN=405 (17505) Suppose that a firm operating in a perfectly competitive market sells 400 units of output at a price of $4 each. Which of the following statements is correct? (i) Marginal revenue equals $4. (ii) Average revenue equals $100. (iii) Total revenue equals $1,600. a. (i) only b. (iii) only c. (i) and (iii) only d. (i), (ii), and (iii)

A

QN=406 (17484) When a firm has little ability to influence market prices it is said to be in what kind of a market? a. a competitive market b. a strategic market c. a thin market d. a power market

B

QN=407 (17557) For a monopolist, when the price effect is greater than the output effect, marginal revenue is a. positive. b. negative. c. zero. d. maximized.

B

QN=408 (17542) Refer to Table 15-5. If the monopolist faces a constant marginal cost of $2, how much output should the firm produce? a. 3 units b. 4 units c. 5 units d. 6 units

B

QN=409 (17555) A natural monopoly occurs when a. the product is sold in its natural state, such as water or diamonds. b. there are economies of scale over the relevant range of output. c. the firm is characterized by a rising marginal cost curve. d. production requires the use of free natural resources, such as water or air.

D

QN=410 (17553) When a monopolist is able to sell its product at different prices, it is engaging in a. distribution pricing. b. quality-adjusted pricing. c. price differentiation. d. price discrimination.

A

QN=411 (17538) If one were to compare a competitive market to a monopoly that engages in perfect price discrimination, one could say that a. in both cases, total social welfare is the same. b. total social welfare is maximized in the competitive market, but not in the perfectly discriminating monopoly. c. in both cases, some potentially mutually beneficial trades do not occur. d. consumer surplus is the same in both cases.

B

QN=412 (17540) Name brand drugs are able to continue capitalizing on their market power even after generic drugs enter the market because (i) almost all people fear the generic drug companies are devoting too few resources to research and development. (ii) some people fear that generic drugs are inferior. (iii) some people are loyal to the name brand. a. (i) and (ii) only b. (ii) and (iii) only c. (i) and (iii) only d. (i), (ii), and (iii)

B

QN=413 (17556) What is the shape of the monopolist's marginal revenue curve? a. a downward-sloping line that is identical to the demand curve b. a downward-sloping line that lies below the demand curve c. a horizontal line that is identical to the demand curve d. a horizontal line that lies below the demand curve

B

QN=414 (17552) Price discrimination is the business practice of a. bundling related products to increase total sales. b. selling the same good at different prices to different customers. c. pricing above marginal cost. d. hiring marketing experts to increase consumers' brand loyalty.

C

QN=415 (17551) Refer to Figure 15-3. What area measures the monopolist's profit? a. (B-F)*K b. (A-H)*J c. (B-G)*K d. 0.5[(B-F)*(L-K)]

A

QN=416 (17539) If a monopolist sells 100 units at $8 per unit and realizes an average total cost of $6 per unit, what is the monopolist's profit? a. $200 b. $400 c. $600 d. $800

B

QN=417 (17544) Refer to Figure 15-1. Considering the relationship between average total cost and marginal cost, the marginal cost curve for this firm a. must lie entirely above the average total cost curve. b. must lie entirely below the average total cost curve. c. must be upward sloping. d. does not exist.

D

QN=418 (17534) Which of the following is an example of a barrier to entry? (i) A key resource is owned by a single firm. (ii) The costs of production make a single producer more efficient than a large number of producers. (iii) The government has given the existing monopoly the exclusive right to produce the good. a. (i) and (ii) b. (ii) and (iii) c. (i) only d. All of these examples are barriers to entry.

B

QN=419 (17536) Refer to Figure 15-1. The shape of the average total cost curve reveals information about the nature of the barrier to entry that might exist in a monopoly market. Which of the following monopoly types best coincides with the figure? a. (i) ownership of a key resource by a single firm b. (ii) natural monopoly c. (iii) government-created monopoly d. None of (i), (ii), and (iii) is correct.

C

QN=420 (17531) Monopolies use their market power to a. charge prices that equal minimum average total cost. b. increase the quantity sold as they increase price. c. charge a price that is higher than marginal cost. d. dump excess supplies of their product on the market.

B

QN=421 (17526) When a monopolist decreases the price of its good, consumers a. continue to buy the same amount. b. buy more. c. buy less. d. may buy more or less, depending on the price elasticity of demand.

D

QN=422 (17547) A monopoly chooses to supply the market with a quantity of a product that is determined by the intersection of the a. marginal cost and demand curves. b. average total cost and demand curves. c. marginal revenue and average total cost curves. d. marginal revenue and marginal cost curves.

A

QN=423 (17549) For a profit-maximizing monopolist, a. P > MR = MC. b. P = MR = MC. c. P > MR > MC. d. MR < MC < P.

C

QN=424 (17545) When a firm has a natural monopoly, the firm's a. marginal cost always exceeds its average total cost. b. total cost curve is horizontal. c. average total cost curve is downward sloping. d. marginal cost curve must lie above the firm's average total cost curve.

A

QN=425 (17560) A perfectly price-discriminating monopolist is able to a. maximize profit and produce a socially-optimal level of output. b. maximize profit, but not produce a socially-optimal level of output. c. produce a socially-optimal level of output, but not maximize profit. d. exercise illegal preferences regarding the race and/or gender of its employees.

B

QN=426 (17524) A perfectly competitive market a. may not be in the best interests of society, whereas a monopoly market promotes general economic well-being b. promotes general economic well-being, whereas a monopoly market may not be in the best interests of society. c. and a monopoly market are equally likely to promote general economic well-being. d. is less likely to promote general economic well-being than a monopoly market.

C

QN=427 (17522) Financial aid to college students, quantity discounts, and senior citizen discounts are all examples of a. consumer surplus. b. deadweight loss. c. price discrimination. d. nonprofit pricing strategies.

C

QN=428 (17559) Refer to Figure 15-8. The deadweight loss caused by a profit-maximizing monopoly amounts to a. $150. b. $200. c. $250. d. $500.

A

QN=429 (17533) Refer to Figure 15-11. If the monopoly firm perfectly price discriminates, then consumer surplus amounts to a. $0. b. $250. c. $500. d. $1,000.

C

QN=430 (17527) Refer to Figure 15-5. A profit-maximizing monopoly's profit is equal to a. P4 * Q3. b. (P4-P2) * Q3. c. (P4-P1) * Q3. d. (P5-P0) * Q1.

D

QN=431 (17525) Which of the following is not a reason for the existence of a monopoly? a. sole ownership of a key resource b. patents c. copyrights d. diseconomies of scale

D

QN=432 (17537) Refer to Figure 15-2. Profit will be maximized by charging a price equal to a. P0. b. P1. c. P2. d. P3.

A

QN=433 (17532) If a monopolist has zero marginal costs, it will produce a. the output at which total revenue is maximized. b. in the range in which marginal revenue is still increasing. c. at the point at which marginal revenue is at a maximum. d. in the range in which marginal revenue is negative.

D

QN=434 (17541) A monopoly chooses to supply the market with a quantity of a product that is determined by the intersection of the a. marginal cost and demand curves. b. average total cost and demand curves. c. marginal revenue and average total cost curves. d. marginal revenue and marginal cost curves.

C

QN=435 (17520) Which of the following statements is correct? a. The demand curve facing a competitive firm is horizontal, as is the demand curve facing a monopolist. b. The demand curve facing a competitive firm is downward sloping, whereas the demand curve facing a monopolist is horizontal. c. The demand curve facing a competitive firm is horizontal, whereas the demand curve facing a monopolist is downward sloping. d. The demand curve facing a competitive firm is downward sloping, as is the demand curve facing a monopolist.

D

QN=436 (17530) Most markets are not monopolies in the real world because a. firms usually face downward-sloping demand curves. b. supply curves slope upward. c. price is usually set equal to marginal cost by firms. d. there are reasonable substitutes for most goods.

D

QN=437 (17528) Suppose when a monopolist produces 75 units its average revenue is $10 per unit, its marginal revenue is $5 per unit, its marginal cost is $6 per unit, and its average total cost is $5 per unit. What can we conclude about this monopolist? a. The monopolist is currently maximizing profits, and its total profits are $375. b. The monopolist is currently maximizing profits, and its total profits are $300. c. The monopolist is not currently maximizing profits; it should produce more units and charge a lower price to maximize profits. d. The monopolist is not currently maximizing profits; it should produce fewer units and charge a higher price to maximize profits.

D

QN=438 (17543) A movie theater can increase its profits through price discrimination by charging a higher price to adults and a lower price to children if it a. (i) can prevent children from buying the lower-priced tickets and selling them to adults. b. (ii) has some degree of monopoly pricing power. c. (iii) can easily distinguish between the two groups of customers. d. All of (i), (ii), and (iii) are correct.

C

QN=439 (17529) A monopoly market is characterized by a. many buyers and sellers b. "natural" products. c. barriers to entry. d. a Nash equilibrium.

C

QN=440 (17558) A monopoly market a. always maximizes total economic well-being. b. always minimizes consumer surplus. c. generally fails to maximize total economic well-being. d. generally fails to maximize producer surplus.

B

QN=441 (17523) During the holiday season, high-end retailers frequently place a high price on merchandise on weekends and discount the price during the week. They do this because they believe that two groups of customers exist: shoppers with little free time and bargain hunters. Bargain hunters have time to shop around and frequently shop during the week. What do economists call this price strategy used by high-end retailers? a. oligopoly b. price discrimination c. compensating differential d. in-kind transfers

B

QN=442 (17535) Patent and copyright laws are major sources of a. (i) natural monopolies. b. (ii) government-created monopolies. c. (iii) resource monopolies. d. None of (i), (ii), and (iii) is correct.

A

QN=443 (17519) One difference between a perfectly competitive firm and a monopoly is that a perfectly competitive firm produces where a. marginal cost equals price, while a monopolist produces where price exceeds marginal cost. b. marginal cost equals price, while a monopolist produces where marginal cost exceeds price. c. price exceeds marginal cost, while a monopolist produces where marginal cost equals price. d. marginal cost exceeds price, while a monopolist produces where marginal cost equals price.

B

QN=444 (17554) Suppose most people regard emeralds, rubies, and sapphires as close substitutes for diamonds. Then DeBeers, a large diamond company, has a. less incentive to advertise than it would otherwise have. b. less market power than it would otherwise have. c. more control over the price of diamonds than it would otherwise have. d. higher profits than it would otherwise have.

A

QN=445 (17521) The deadweight loss that arises from a monopoly is a consequence of the fact that the monopoly a. quantity is lower than the socially-optimal quantity. b. price equals marginal revenue. c. price is the same as average revenue. d. earns positive profits.

A

QN=446 (17548) Antitrust laws allow the government to a. (i) prevent mergers. b. (ii) break up companies. c. (iii) promote competition. d. All of (i), (ii), and (iii) are correct.

C

QN=447 (17550) A monopolist will choose to increase output when a. market price increases. b. at all levels of output, marginal cost increases. c. at the present level of output, marginal revenue exceeds marginal cost. d. the demand curve shifts to the left.

D

QN=448 (17546) A profit-maximizing monopolist charges a price of $14. The intersection of the marginal revenue curve and the marginal cost curve occurs where output is 15 units and marginal cost is $7. What is the monopolist's profit? a. $90 b. $105 c. $180 d. Not enough information is given to determine the answer.

A

QN=449 (17582) A monopolistically competitive market is like both a competitive market and a monopoly in that firms in all three market structures a. (i) can earn economic profits in the short run. b. (ii) can earn economic profits in the long run. c. (iii) charge a price above marginal cost. d. All of (i), (ii), and (iii) are correct.

D

QN=450 (17568) Markets with only a few sellers, each offering a product similar or identical to the others, are typically referred to as a. competitive markets. b. monopoly markets. c. monopolistically competitive markets. d. oligopoly markets.