Chapter 12

The table shows the demand schedule facing Nina, a monopolist selling baskets. What is the change in total revenue if she lowers the price from $16 to $14?

A) $20 B) $6 C) $28 D) $140 Answer: C) $28 ?

Refer to the data for a nondiscriminating monopolist. At its profit-maximizing output, this firm's price will exceed its marginal cost by _____ and its average total cost by _____.

A) $20; $27.33 B) $10; $10.40 C) $24; $27.33 D) $30; $20.50 Answer: D) $30; $20.50

A monopolistic firm has a sales schedule such that it can sell 7 prefabricated garages per week at $450 each, but if it restricts its output to 6 per week it can sell these at $500 each. The marginal revenue of the 7th unit of sales per week is:

A) $3,150 B) $50 C) $150 D) $450 Answer: C) $150 ?

Refer to the demand and cost data for a pure monopolist given in the table. An unregulated, nondiscriminating monopolist would earn maximum profits of

A) $600 B) $250 C) $500 D) $400 Answer: B) $250 ?

The table shows the demand schedule facing Nina, a monopolist selling baskets. What is the change in total revenue if she raises the price from $12 to $14?

A) -$180 B) $180 C) -$40 D) $40 Answer: D) $40

Refer to the graphs of D and MR for a monopolist. Which of the following statements is true?

A) A price cut from P1 to P2 would lead to a decrease in the amount of dollars consumers spend on the product. B) A price cut from P1 to P2 would lead to an increase in the amount of dollars consumers spend on the product C) A price cut from P2 to P3 would lead to no change in the amount of dollars consumers spend on the product D) A price cut from P2 to P3 would lead to an increase in the amount of dollars consumers spend on the product Answer: B) A price cut from P1 to P2 would lead to an increase in the amount of dollars consumers spend on the product

Refer to the diagram. To maximize profits of minimize losses, this firm should produce

A) E units and charge price C B) E units and charge price A C) M units and charge price N D) L units and charge price LK Answer: B) E units and charge price A

Any activity designed to transfer income or wealth to a particular individual or firm at society's expense is called

A) Patient protection B) X-inefficiency C) price discrimination D) rent-seeking Answer: D) rent-seeking

Refer to the two diagrams for individual firms. Figure 1 pertains to ______, while Figure 2 refers to ________.

A) an imperfectly competitive firm; a purely competitive firm B) a purely competitive firm; an imperfectly competitive firm C) an oligopolist; a monopolistcally competitive firm D) a pure monopolist; a monopolistically competitive firm Answer: B) a purely competitive firm; an imperfectly competitive firm

Assuming no change in product demand, a pure monopolist:

A) can increase price and increase sales simultaneously because it dominates the market B) adds an amount to total revenue that is equal to the price of incremental sales C) should produce in the range where marginal revenue is negative D) must lower price to increase sales Answer: D) must lower price to increase sales

The problem with adopting a fair-return pricing policy for a natural monopoly is that

A) economic profits will be positive B) economic profits will be negative C) it is not productively efficient D) it is not allocatively efficient Answer: D) it is not allocatively efficient

Assume that a monopolist faces a linear demand curve. If the firm is operating at an output level where marginal revenue is positive, the firm

A) has maximized total revenues B) could raise revenues by raising prices C) can always increase profits by lowering its price D) is operating on the elastic portion of its demand curve Answer: B) could raise revenues by raising prices

Which of the following is not a possible source of natural monopoly?

A) large-scale network effects B) simultaneous consumption C) greater use of specialized inputs D) rent-seeking behavior Answer: D) rent-seeking behavior

A firm will earn economic profits whenever:

A) marginal revenue exceeds marginal costs B) marginal revenue exceeds variable costs C) average revenue exceeds average total costs D) Average revenue exceeds average total costs Answer: D) Average revenue exceeds average total costs

In many large U.S. cities, taxicab companies operate as near monopolies because of

A) patents B) licenses C) economies of scale D) strategic pricing Answer: B) licenses

A pure monopolist is selling five units at a price of $10. If the marginal revenue of the sixth unit is $4, then the

A) price of the sixth unit is $6 B) price of the sixth unit is $9 C) price of the sixth unit is greater than $10 D) firm's demand curve is perfectly elastic Answer: A) price of the sixth unit is $6 ?

Assume that the owners of the only gambling casino in Wisconsin spend large sums of money lobbying state government officials to protect their gambling monopoly. Economists refer to these expenditures as

A) rent-seeking B) price discrimination C) X-efficiency D) network effects Answer: A) rent-seeking

A profit-maximizing monopolist facing the situation shown in the graph should

A) shut down in the short run B) continue producing to minimize losses. C) continue producing to make economic profits D) continue producing as long as price is greater than marginal cost Answer: A) shut down in the short run

The vertical distance between the horizontal axis and any point on the nondiscriminating monopolist's demand curve measures

A) the quantity demanded B) product price and marginal revenue C) total revenue D) product price and average revenue Answer: D) product price and average revenue

For an imperfectly competitive firm:

A) total revenue is a straight, upsloping line because a firm's sales are independent of product price/ B) the marginal revenue curve lies about the demand curve because any reduction in price applies to all units sold. C) the marginal revenue curve lies below the demand curve because any reduction in price applies to all units sold. D) the marginal revenue curve lies below the demand curve because any reduction in price applies only to the extra unit sold Answer: C) the marginal revenue curve lies below the demand curve because any reduction in price applies to all units sold.