Chapter 13

Refer to Figure 13.1. The area on the graph that represents the consumer surplus in the case of a monopoly is: A. AB. B. ABCD. C. ABCDE. D. ABCDEFGHI.

A. AB

The ability to raise price above average cost without fear that other firms will enter the market is called: A. market power. B. mark-up. C. buying power. D. profit maximization.

A. market power.

The __________ inelastic the demand curve, the __________ a monopolist will raise its price above __________. A. more; more; marginal cost B. more; less; marginal cost C. less; less; average cost D. less; more; average cost

A. more; more; marginal cost

Refer to Figure 13.1. The area on the graph that represents the monopolist's profit is: A. CDFGJ. B. CDFG. C. FGHJKL. D. FGH.

B. CDFG.

Refer to Figure 13.1. The profit maximizing monopolist will sell output equal to: A. Q1. B. Q2. C. Q3. D. Q4.

B. Q2.

At the profit-maximizing level of output, the monopolist will set the price at the point on the _________. A. marginal revenue curve B. demand curve C. marginal cost curve D. total profit curve

B. demand curve

All of the following are examples of sources of market power, EXCEPT: A. patents. B. diseconomies of scale. C. exclusive access to an important input. D. technological innovation.

B. diseconomies of scale.

To maximize profits, the monopolist will select a quantity where marginal revenue ________ marginal cost. A. is greater than B. is equal to C. is less than D. has the same absolute value as

B. is equal to

The change in ________ revenue from selling an additional unit is known as _______ revenue. A. total; average B. total; marginal C. average; total D. average; marginal

B. total; marginal

If the demand curve is a straight line, the marginal revenue curve is a straight line beginning at the same point on the _______ axis as the demand curve but with _______ the slope. A. vertical; half B. vertical; twice C. horizontal; half D. horizontal; twice

B. vertical; twice

By setting the price charged by a monopolist at the point at which the marginal cost curve intersects the demand curve, government regulators can achieve: A. lower prices and lower output. B. higher prices and lower output. C. lower prices and higher output. D. higher prices and higher output.

C. lower prices and higher output.

The monopolist's profit can be calculated by using the formula: A. (P - AC) × Q. B. (MR - AC) × Q. C. (P - MC) × Q. D. (MR - MC) × Q.

A. (P - AC) × Q.

Refer to Figure 13.1. The area on the graph that represents the deadweight loss in the case of a monopolist is: A. AB. B. CDFG. C. EHI. D. I.

C. EHI.

Refer to Figure 13.1. The monopolist will maximize profits by setting a price equal to: A. P1. B. P2. C. P3. D. P4.

C. P3.

A natural monopoly gets market power from ___________. A single firm is able to supply the entire market at a ________cost than can two or more firms. A. the government; lower B. the government; higher C. economies of scale; lower D. economies of scale; higher

C. economies of scale; lower

. For a monopolist, the relationship between marginal revenue and price: A. is MR > P. B. is MR = P. C. is MR < P. D. depends on the elasticity of demand.

C. is MR < P.

All of the following are sources of market power, EXCEPT: A. patents. B. laws preventing entry of competitors. C. hard-to-duplicate inputs. D. diseconomies of scale.

D. diseconomies of scale.

When a firm's output of a product is ________ relative to the entire market's output of that product, an increase in the firm's output will cause the market price of that product to __________. A. small; rise B. small; fall C. large; rise D. large; fall

D. large; fall

Patents give firms an expectation of ________, and this can potentially ________ innovation and therefore economic growth. A. losses; discourage B. losses; encourage C. profits; discourage D. profits; encourage

D. profits; encourage

In an economy dominated by monopolies, firms want to _________ prices, and the changes in cost spread throughout the economy resulting in ___________. A. lower; economic growth B. lower; poverty and stagnation C. raise; economic growth D. raise; poverty and stagnation

D. raise; poverty and stagnation