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1 | |
Monopoly differs from perfect competition in that |
| | A) | the industry demand curve in perfect competition is horizontal while the demand curve facing a monopolist is downward sloping. |
| | B) | the cost structure of a monopolist is higher than the cost structure of a perfectly competitive firm producing the same product. |
| | C) | the total revenue function of a perfectly competitive firm is linear and a monopolist''s total revenue function increases and then decreases, with increases in quantity sold. |
| | D) | a monopolist has a specific supply curve and a perfectly competitive firm has no specific supply curve. |
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2 | |
If the demand curve for a monopolist is P = 100 -20Q, then the marginal revenue of that firm is given by the equation: |
| | A) | MR = 200 -20Q |
| | B) | MR = 50 -40Q |
| | C) | MR = 100 - 20Q |
| | D) | MR = 100 - 40Q |
| | E) | something other than the four options above. |
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3 | |
If the demand facing a monopolist is P = 100 - 10Q and marginal cost is constant at 20, then the profit maximizing price and quantity for this monopolist are: |
| | A) | P = 4 and Q = 60 |
| | B) | P = 20 and Q = 8 |
| | C) | P = 90 and Q = 10 |
| | D) | P = 60 and Q = 4 |
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4 | |
If the firm described in question 3 above has fixed costs of 200, what is the profit or loss situation of the firm and what should its strategy be? |
| | A) | Profit = 40; firm should continue as is in short-run and long-run. |
| | B) | Loss = 40; firm should shut down now. |
| | C) | Loss = 40; firm should continue operating in the short-run but reassess its long run strategy. |
| | D) | None of the above can be certain without more information. |
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5 | |
A profit-maximizing monopoly firm with a demand curve P = 50 - Q is a perfect price-discriminator. If it has marginal costs of $10/unit and fixed costs of $30, it will produce _____ units of output and will make______ profit. |
| | A) | 40; $400 |
| | B) | 40; $770 |
| | C) | 40; $800 |
| | D) | 20; $370 |
| | E) | 20; $400 |
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6 | |
From the point of view of consumers as a group, a single-price monopolist is preferred to a price-discriminating monopolist. A price-discriminating monopolist will always make more profit or lose less than if it were a single-price monopolist. |
| | A) | Both statements are true. |
| | B) | The first statement is true and the second is false. |
| | C) | The first statement is false and the second is true. |
| | D) | Both statements are false. |
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7 | |
For airlines to price discriminate effectively, they must |
| | A) | be selling tickets in more than one market, and the elasticities in the different markets must be different for any given market price. |
| | B) | be sure that the two markets can sell to each other. |
| | C) | have a horizontal marginal cost function. |
| | D) | ensure that all of the above are true. |
| | E) | have both a and b present. |
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8 | |
Which is an example of the hurdle model of price discrimination? |
| | A) | stores that use coupons and mail-in rebates |
| | B) | stores that have sale prices that end tomorrow |
| | C) | water companies that lower price as larger quantities of water are used. |
| | D) | bookstores that give senior citizens a 10% discount off the regular price |
| | E) | All of the above are examples of hurdle price discrimination. |
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9 | |
The efficiency loss that makes single-price monopoly suspect to economists exists because |
| | A) | monopolies transfer value to the producer that would normally go to the consumer in perfect competition. |
| | B) | the monopolist does not equate marginal cost and marginal revenue. |
| | C) | the monopolist stops producing where price is greater than marginal cost, and so some output that is valued above cost never gets produced. |
| | D) | the threat of monopoly power, even if not used, makes people feel helpless. |
| | E) | all of the above are true. |
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10 | |
Natural monopolies exist because |
| | A) | of patent laws. |
| | B) | one company controls key inputs into production. |
| | C) | of government regulations which privilege one company. |
| | D) | of economies of scale. |
| | E) | of all of the above. |
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11 | |
Public transportation systems are often regulated monopolies that receive subsidies. The subsidies exist because: |
| | A) | the regulated price is below ATC. |
| | B) | the regulated price allows only normal profit, and so the subsidy partially offsets the loss of monopoly profit for the firm. |
| | C) | the lower fares and the subsidy system are an efficient way to help low-income people who need transportation. |
| | D) | they result in campaign contributions back to the politicians that provide the subsidies. |
| | E) | of all of the above. |
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12 | |
The strongest argument against the notion that monopoly suppresses innovation is |
| | A) | that government regulatory penalties are severe if suppression is discovered. |
| | B) | that innovation usually is profitable for monopolists. |
| | C) | that it is impossible to keep original research secret in an era of electronic information and corporate espionage. |
| | D) | that humans are creative beings who enjoy innovation for its own sake, and they would not permit their creativity to be stifled in the interest of monopoly profit. |
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2002 McGraw-Hill Higher Education