Question 1

Monopolistic firms do not have supply curves because

Accepted Answer

A)   they are not constrained by the marginal costs of production.
B)   their output is a fixed quantity.
C)   monopolists get to choose their price-quantity combination along the demand curve.
D)   monopolists face a given market price.
E)   their marginal costs cannot be calculated.F) All of the above
G) B) and D)

Question 2

Suppose that a single-price monopolist knows the following information:
The total profit being earned by this firm at the current level of output is which the maximum profit possible.

Accepted Answer

A)   $3000; is not
B)   $7500; is not
C)   $15 000; is
D)   $97 500; is not
E)   $105 000; isF) A) and E)
G) C) and D)

Question 3

TABLE 10-1
-Refer to Table 10-1. For a single-price monopolist producing and selling 9 units, the marginal revenue earned by selling the 9th unit is

Accepted Answer

A)   -4.
B)   -2.
C)   0.
D)   2.
E)   4.F) C) and E)
G) A) and B)

Question 4

Your food-services company has been named as the monopoly provider of meals at a small university. The cost and demand schedules are:
  TABLE 10-2
-Refer to Table 10-2. For a single-price monopolist, the profit-maximizing price and number of meals per day is best approximated by

Accepted Answer

A)   650 meals at $1.87 per meal.
B)   550 meals at $2.12 per meal.
C)   450 meals at $2.37 per meal.
D)   350 meals at $2.62 per meal.
E)   250 meals at $2.87 per meal.F) D) and E)
G) A) and B)

Question 5

The average revenue curve for a single-price monopolist

Accepted Answer

A)   is a horizontal line, equal to the price of its product.
B)   lies below its demand curve.
C)   coincides with its demand curve.
D)   slopes upward to the right.
E)   does not exist.F) None of the above
G) A) and B)

Question 6

The two characteristic problems for cartels are

Accepted Answer

A)   agreeing on the price to be set and preventing new entrants.
B)   policing membersʹ output restrictions and preventing new entrants.
C)   coordinating marketing policies and policing membersʹ quotas.
D)   agreeing on the price to be set and coordinating marketing policies.
E)   policing membersʹ prices and restricting output.F) A) and B)
G) B) and D)

Question 7

Suppose the technology of production is such that the typical firmʹs minimum efficient scale is 1400 units per week at an average long-run cost of $9 per unit. If the total quantity demanded in this market at a price of $9 per unit is 22 million units per week, the likely result will be

Accepted Answer

A)   a cartel.
B)   price discrimination.
C)   a natural monopoly.
D)   a concentrated oligopoly.
E)   a competitive industry.F) A) and B)
G) A) and E)

Question 8

The diagram below shows total revenue for a single-price monopolist.
  FIGURE 10-3
-Refer to Figure 10-3. The firmʹs marginal revenue at Q1 is

Accepted Answer

A)   zero.
B)   positive and rising.
C)   positive but falling.
D)   negative and falling.
E)   not determinable from the diagram.F) C) and D)
G) A) and B)

Question 9

The diagram below shows the demand curve and marginal cost and marginal revenue curves for a new heart medication for which the pharmaceutical firm holds a 20-year patent on its production and sales. This protection gives the firm monopoly power for the 20 years of the patent.
  FIGURE 10-6
-Refer to Figure 10-6. Assume this pharmaceutical firm charges a single price for its drug. At its profit-maximizing level of output it will produce

Accepted Answer

A)   Q0 units and charge the perfectly competitive price.
B)   Q0 units and charge a price of p0.
C)   Q1 units and charge a price of p1.
D)   Q0 units and charge a price of p2.
E)   Q1 units and charge a price greater than its average total variable cost.F) A) and B)
G) A) and D)

Question 10

Consider a single-price monopolist that is operating in the inelastic range of its linear demand curve. This firm

Accepted Answer

A)   would be operating where its AR is negative.
B)   would have a marginal revenue curve that is negative.
C)   would have a marginal revenue that is negative although its total revenues would be at a maximum.
D)   could raise its total revenue by lowering its price.
E)   would be operating at its profit-maximizing position.F) A) and D)
G) A) and C)

Question 11

One similarity between a monopolist and a perfectly competitive firm is that both

Accepted Answer

A)   are large relative to their markets.
B)   may have similarly shaped cost curves.
C)   choose the price at which to sell their product.
D)   can make economic profits in the long run.
E)   need to know the shape of the market demand curve.F) B) and D)
G) C) and E)

Question 12

Suppose a monopolist faces the demand curve and cost curves shown below.
  FIGURE 10-5
-Refer to Figure 10-5. In order to maximize its profits, a perfect-price-discriminating monopolist produces the quantity

Accepted Answer

A)   Q0.
B)   Q1.
C)   Q2.
D)   Q3.
E)   Q4.F) A) and C)
G) A) and B)

Question 13

Suppose all of the firms in a perfectly competitive industry form a cartel and agree to restrict output, thereby raising the price of the product. Individual Firm A will gain the most from the existence of the cartel if

Accepted Answer

A)   all firms, including A, cooperate and restrict output.
B)   Firm A restricts output, while the other firms do not.
C)   all firms, except Firm A, cooperate and restrict output.
D)   no firms restrict output.
E)   all firms revert back to their competitive outputs.F) A) and B)
G) None of the above

Question 14

A number of firms agreeing together to restrict output and thereby raise prices is known as

Accepted Answer

A)   a monopoly.
B)   a natural monopoly.
C)   a cartel.
D)   a barrier to entry.
E)   an oligopoly.F) A) and B)
G) A) and E)

Question 15

Suppose a monopolist faces the demand curve and cost curves shown below.
  FIGURE 10-5
-Relative to a firm that must charge a single price for all of its output, the ability to charge multiple prices gives a firm with market power the ability to capture some or all of the

Accepted Answer

A)   producer surplus.
B)   consumer surplus.
C)   fixed costs.
D)   variable costs.
E)   marginal costs.F) B) and D)
G) A) and D)

Question 16

Consider the following statement: ʺPrice discrimination is harmful to society and should not be tolerated under any circumstance.ʺ Why is this statement false?

Accepted Answer

A)   Price discrimination always leads to lower prices and higher quantities.
B)   Price discrimination can allow for some consumers to be made better off because they are able to buy a product or service that was otherwise unaffordable.
C)   Price discrimination leads to higher prices for all consumers and a reduction in consumer surplus.
D)   Price discrimination reduces total quantity exchanged and therefore reduces the sum of producer and consumer surplus.
E)   Price discrimination violates the Canadian Charter of Rights and Freedoms.F) A) and C)
G) B) and E)

Question 17

For a single-price monopolist, marginal revenue falls faster than price as output rises)  because

Accepted Answer

A)   in order to sell additional units, the price must be lowered on all units.
B)   profits are maximized when marginal cost equals marginal revenue.
C)   the firm has no supply curve.
D)   the cost of producing extra units of output increases as production is increased.
E)   none of the above marginal revenue does not fall faster than price.F) A) and B)
G) B) and C)

Question 18

Suppose a monopolist faces the demand curve and cost curves shown below.
  FIGURE 10-5
-Suppose the market for some product can be divided into two segments, each with a linear demand curve. A monopolist can set a different price but only one price)  in each segment. The profit -maximizing price discrimination across these two market segments will lead to

Accepted Answer

A)   higher output with average revenue higher than the best single price.
B)   lower output with total revenue higher than the single best price.
C)   lower output with a higher average revenue than the best single price.
D)   higher output with average revenue lower than the best single price.
E)   the same output but higher average revenue than the best single price.F) B) and D)
G) None of the above

Question 19

It is common for a cartel to collapse when one or more firms in the cartel

Accepted Answer

A)   exceed its output quota.
B)   produce more efficiently than other member firms.
C)   is much larger than other cartel members.
D)   increase its price above the monopoly price.
E)   exit the industry.F) A) and B)
G) A) and C)

Question 20

A single-price monopolist is currently producing an output level where price equals marginal cost, and profits are positive. In order to maximize profits, this monopolist should

Accepted Answer

A)   produce zero output.
B)   increase production and reduce price.
C)   decrease production and increase price.
D)   not change his output level, because he is currently earning profits.
E)   reduce price and let production adjust to the new price.F) C) and D)
G) B) and E)

Exam 10: Monopoly, Cartels, and Price Discrimination

The diagram below shows total revenue for a single-price monopolist. FIGURE 10-3 -Refer to Figure 10-3. The firmʹs marginal revenue at Q1 is

Correct Answer
verified

Suppose all of the firms in a perfectly competitive industry form a cartel and agree to restrict output, thereby raising the price of the product. Individual Firm A will gain the most from the existence of the cartel if

Correct Answer
verified

Your food-services company has been named as the monopoly provider of meals at a small university. The cost and demand schedules are: TABLE 10-2 -Refer to Table 10-2. For a single-price monopolist, the profit-maximizing price and number of meals per day is best approximated by

Correct Answer
verified

A single-price monopolist is currently producing an output level where price equals marginal cost, and profits are positive. In order to maximize profits, this monopolist should

Correct Answer
verified

Consider a single-price monopolist that is operating in the inelastic range of its linear demand curve. This firm

Correct Answer
verified

Monopolistic firms do not have supply curves because

Correct Answer
verified

One similarity between a monopolist and a perfectly competitive firm is that both

Correct Answer
verified

The average revenue curve for a single-price monopolist

Correct Answer
verified

Suppose a monopolist faces the demand curve and cost curves shown below. FIGURE 10-5 -Refer to Figure 10-5. In order to maximize its profits, a perfect-price-discriminating monopolist produces the quantity

Correct Answer
verified

For a single-price monopolist, marginal revenue falls faster than price as output rises) because

Correct Answer
verified

Correct Answer
verified

Suppose the technology of production is such that the typical firmʹs minimum efficient scale is 1400 units per week at an average long-run cost of $9 per unit. If the total quantity demanded in this market at a price of $9 per unit is 22 million units per week, the likely result will be

Correct Answer
verified

Consider the following statement: ʺPrice discrimination is harmful to society and should not be tolerated under any circumstance.ʺ Why is this statement false?

Correct Answer
verified

Correct Answer
verified

Suppose that a single-price monopolist knows the following information: The total profit being earned by this firm at the current level of output is which the maximum profit possible.

Correct Answer
verified

It is common for a cartel to collapse when one or more firms in the cartel

Correct Answer
verified

A number of firms agreeing together to restrict output and thereby raise prices is known as

Correct Answer
verified

TABLE 10-1 -Refer to Table 10-1. For a single-price monopolist producing and selling 9 units, the marginal revenue earned by selling the 9th unit is

Correct Answer
verified

The two characteristic problems for cartels are

Correct Answer
verified

Suppose a monopolist faces the demand curve and cost curves shown below. FIGURE 10-5 -Relative to a firm that must charge a single price for all of its output, the ability to charge multiple prices gives a firm with market power the ability to capture some or all of the

Correct Answer
verified

Exam 10: Monopoly, Cartels, and Price Discrimination

The diagram below shows total revenue for a single-price monopolist. FIGURE 10-3 -Refer to Figure 10-3. The firmʹs marginal revenue at Q1 is

Correct AnswerverifiedShow Answer

Suppose all of the firms in a perfectly competitive industry form a cartel and agree to restrict output, thereby raising the price of the product. Individual Firm A will gain the most from the existence of the cartel if

Correct AnswerverifiedShow Answer

Your food-services company has been named as the monopoly provider of meals at a small university. The cost and demand schedules are: TABLE 10-2 -Refer to Table 10-2. For a single-price monopolist, the profit-maximizing price and number of meals per day is best approximated by

Correct AnswerverifiedShow Answer

A single-price monopolist is currently producing an output level where price equals marginal cost, and profits are positive. In order to maximize profits, this monopolist should

Correct AnswerverifiedShow Answer

Consider a single-price monopolist that is operating in the inelastic range of its linear demand curve. This firm

Correct AnswerverifiedShow Answer

Monopolistic firms do not have supply curves because

Correct AnswerverifiedShow Answer

One similarity between a monopolist and a perfectly competitive firm is that both

Correct AnswerverifiedShow Answer

The average revenue curve for a single-price monopolist

Correct AnswerverifiedShow Answer

Suppose a monopolist faces the demand curve and cost curves shown below. FIGURE 10-5 -Refer to Figure 10-5. In order to maximize its profits, a perfect-price-discriminating monopolist produces the quantity

Correct AnswerverifiedShow Answer

For a single-price monopolist, marginal revenue falls faster than price as output rises) because

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose the technology of production is such that the typical firmʹs minimum efficient scale is 1400 units per week at an average long-run cost of $9 per unit. If the total quantity demanded in this market at a price of $9 per unit is 22 million units per week, the likely result will be

Correct AnswerverifiedShow Answer

Consider the following statement: ʺPrice discrimination is harmful to society and should not be tolerated under any circumstance.ʺ Why is this statement false?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Suppose that a single-price monopolist knows the following information: The total profit being earned by this firm at the current level of output is which the maximum profit possible.

Correct AnswerverifiedShow Answer

It is common for a cartel to collapse when one or more firms in the cartel

Correct AnswerverifiedShow Answer

A number of firms agreeing together to restrict output and thereby raise prices is known as

Correct AnswerverifiedShow Answer

TABLE 10-1 -Refer to Table 10-1. For a single-price monopolist producing and selling 9 units, the marginal revenue earned by selling the 9th unit is

Correct AnswerverifiedShow Answer

The two characteristic problems for cartels are

Correct AnswerverifiedShow Answer

Suppose a monopolist faces the demand curve and cost curves shown below. FIGURE 10-5 -Relative to a firm that must charge a single price for all of its output, the ability to charge multiple prices gives a firm with market power the ability to capture some or all of the

Correct AnswerverifiedShow Answer

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