Microeconomics [ch. 15]

30 Questions  I  By Emy_2
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Microeconomics Quizzes & Trivia
Monopoly

  
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Questions and Answers

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  • 1. 
    Monopolists are price takers
    • A. 

      True

    • B. 

      False


  • 2. 
    The most common source of a barrier to entry into a monopolist's market is that the monopolist owns a key resource necessary for production of that good
    • A. 

      True

    • B. 

      False


  • 3. 
    A monopoly is the sole seller of a product with no close substitutes 
    • A. 

      True

    • B. 

      False


  • 4. 
    A natural monopoly is a monopoly that uses its ownership of natural resrouces as a barrier to entry into its market
    • A. 

      True

    • B. 

      False


  • 5. 
    The demand curve facing a monopolist is the market demand curve for its product
    • A. 

      True

    • B. 

      False


  • 6. 
    For the monopolist, marginal revenue is always less than the price of the good
    • A. 

      True

    • B. 

      False


  • 7. 
    The monopolist chooses the quantity of output at which marginal revenue equals marginal cost and then uses the demand curve to find the price that will induce consumers to buy the quantity
    • A. 

      True

    • B. 

      False


  • 8. 
    The supply curve for a monopolist is always positively sloped
    • A. 

      True

    • B. 

      False


  • 9. 
    A monopolist produces an efficient quantity of output but it is still inefficient because it charges a price that exceeds  marginal cost and the resulting profit is a social cost
    • A. 

      True

    • B. 

      False


  • 10. 
    Price discrimination is only possible if there is no arbitrage
    • A. 

      True

    • B. 

      False


  • 11. 
    Price discrimination can raise economic welfare because output increases beyond that which would result under monopoly pricing
    • A. 

      True

    • B. 

      False


  • 12. 
    Perfect price discrimination is efficient but all of the surplus is received by the consumer 
    • A. 

      True

    • B. 

      False


  • 13. 
    Universities are engaging in price discrimination when they charge different levels of tuition to poor and wealthy students
    • A. 

      True

    • B. 

      False


  • 14. 
    Using regulations to force a natural monopoly to charge a price equal to its marginal cost of production will cause the monopoly to lose money and exit the industry 
    • A. 

      True

    • B. 

      False


  • 15. 
    Most economists argue that the most efficient solution to the problem of monopoly is that the monopoly should be publicly owned. 
    • A. 

      True

    • B. 

      False


  • 16. 
    Which of the following is not a barrier to entry in a monopolized market? 
    • A. 

      The government gives a single firm the exclusive right to produce some good

    • B. 

      The cost of production make a single producer more efficient than a large number of producers

    • C. 

      A key resource is owned by a single firm

    • D. 

      A single firm is very large


  • 17. 
    A firm whose average total cost continually declines at least to the quantity that could supply the entire market is known as a 
    • A. 

      Perfect competitor

    • B. 

      Natural monopoly

    • C. 

      Government monopoly

    • D. 

      Regulated monopoly


  • 18. 
    A monopolist maximizes profit by producing the quantity at which
    • A. 

      Marginal revenue equals marginal cost

    • B. 

      Marginal revenue equals price

    • C. 

      Marginal cost equals price

    • D. 

      Marginal cost equals demand

    • E. 

      None of the above occurs


  • 19. 
    Which of the following statements about price and marginal cost in competitive and monopolized markets is true?
    • A. 

      In competitive markets, price equals marginal cost; in monopolized markets, price equals marginal cost

    • B. 

      In competitive markets, price exceeds marginal cost; in monopolized markets, price exceeds marginal cost

    • C. 

      In competitive markets, price equals marginal cost; in monopolized markets, price exceeds marginal cost

    • D. 

      In competitive markets, price exceeds marginal cost; in monopolized markets, price equals marginal cost


  • 20. 
    South-Western is a monopolist in the production of your textbook because
    • A. 

      South-Western owns a key resource in the production of textbooks

    • B. 

      South-Western is a natural monopoly

    • C. 

      The government has granted South-Western exclusive rights to produce this textbook

    • D. 

      South-Western is a very large company


  • 21. 
    The inefficiency associated with monopoly is due to 
    • A. 

      The monopoly's profits

    • B. 

      The monopoly's losses

    • C. 

      Overproduction of the good

    • D. 

      Underproduction of the good


  • 22. 
    Compared to a perfectly competitive market, a monopoly market will usually generate
    • A. 

      Higher prices and higher output

    • B. 

      Higher prices and lower output

    • C. 

      Lower prices and lower output

    • D. 

      Lower prices and higher output


  • 23. 
    The monopolist's supply curve
    • A. 

      Is the marginal-cost curve above average variable cost

    • B. 

      Is the marginal-cost curve above average total cost

    • C. 

      Is the upward-sloping portion of the average-total cost curve

    • D. 

      Is the upward-sloping portion of the average variable cost

    • E. 

      Does not exist


  • 24. 
    Using government regulations to force a natural monopoly to charge a price equal to its marginal cost will 
    • A. 

      Improve efficiency

    • B. 

      Raise the price of the good

    • C. 

      Attract additional firms to enter the market

    • D. 

      Cause the monopolist to exit the market


  • 25. 
    The purpose of antitrust laws is to
    • A. 

      Regulate the prices charged by a monopoly

    • B. 

      Increase competition in an industry by preventing mergers and breaking up large firms

    • C. 

      Increase merger activity to help generate synergies that reduce costs and raise efficiency

    • D. 

      Create public ownership of natural monopolies

    • E. 

      Do all of the above


  • 26. 
    Public ownership of natural monopolies
    • A. 

      Tends to be inefficient

    • B. 

      Usually lowers the cost of production dramatically

    • C. 

      Creates synergies between the newly acquired firm and other government-owned companies

    • D. 

      Does none of the above


  • 27. 
    Which of the following statements about price discrimination is not true?
    • A. 

      Price discrimination can raise economic welfare

    • B. 

      Price discrimination requires that the seller be able to separate buyers according to their willingness to pay

    • C. 

      Perfect price discrimination generates a deadweight loss

    • D. 

      Price discrimination increases a monopolist's profits

    • E. 

      For a monopolist to engage in price discrimination, buyers must be unable to engage in arbitrage


  • 28. 
    If regulators break up a natural monopoly into many smaller firms, the cost of production
    • A. 

      Will fall

    • B. 

      Will rise

    • C. 

      Will remain the same

    • D. 

      Could either rise or fall depending on the elasticity of the monopolist's supply curve


  • 29. 
    A monopoly is able to continue to generate economic profits in the long run because
    • A. 

      Potential competitors sometimes don't notice the profits

    • B. 

      There is some barrier to entry to that market

    • C. 

      The monopolist is financially powerful

    • D. 

      Antitrust laws eliminate competitors for a specified number of years

    • E. 

      Of all of the above


  • 30. 
    If marginal revenue exceeds marginal cost, a monopolist should
    • A. 

      Increase ouput

    • B. 

      Decrease output

    • C. 

      Keep output the same because profits are maximized when marginal revenue exceeds marginal cost

    • D. 

      Raise the price


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