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Pre-test
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1

Refer to the graph below.
<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0070901651/60160/pretest121.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (12.0K)</a>
If this firm were forced to set price equal to marginal cost, it would likely:
A)charge a price of $1.
B)charge a price of $2.
C)charge a price of $9.00.
D)eventually stop producing.
2

Refer to the graph below.
<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0070901651/60160/pretest122.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (6.0K)</a>
Which rectangle represents monopolists' profit?
A)A.
B)A + B + C.
C)C + D.
D)none of the above.
3

A monopoly firm selling textbooks to students in a small town is currently maximizing profits by charging a price of $50 per book. It follows that the marginal cost of textbooks:
A)is equal to $50.
B)is less than $50.
C)is greater than $50.
D)is greater than the average total cost.
4

If a firm has a monopoly over the sale of photographic paper and seeks to maximize profits, then:
A)it adjusts the price of the product until demand becomes perfectly inelastic.
B)it will set the price of the product equal to the marginal cost of production.
C)it will set the price of the product equal to the average total cost of production.
D)it will set the price of the product so that its marginal revenue equals its marginal cost.
5

A natural monopoly is a monopoly:
A)that exists because of economies of scale.
B)that is created by natural law.
C)where natural legal barriers prevent entry.
D)in which patents exist.
6

Refer to the graph below.
<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0070901651/60160/pretest126.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (11.0K)</a>
If the firm produces 700 units of output per day, it:
A)can increase profit by producing more.
B)can increase profit by producing less.
C)will be maximizing profit.
D)will incur economic losses.
7

Refer to the graph below.
<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0070901651/60160/pretest127.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (9.0K)</a>
Assuming that the monopoly maximizes profit it will earn profits of:
A)$8,000 per day.
B)$20,000 per day.
C)$40,000 per day.
D)$160,000 per day.
8

The deadweight loss associated with monopolies is not the only social cost of monopolies.
A)True
B)False
9

Refer to the graph below.
<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0070901651/60160/pretest129.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (7.0K)</a>
If the government set the selling price equal to the marginal cost, the firm in the graph would:
A)be making economic profits.
B)be making normal profits.
C)be sustaining losses and would eventually go out of business.
D)be making zero economic profits.
10

Refer to the graph below.
<a onClick="window.open('/olcweb/cgi/pluginpop.cgi?it=jpg::::/sites/dl/free/0070901651/60160/pretest1210.jpg','popWin', 'width=NaN,height=NaN,resizable,scrollbars');" href="#"><img valign="absmiddle" height="16" width="16" border="0" src="/olcweb/styles/shared/linkicons/image.gif"> (11.0K)</a>
If the price of the product is $1 and the firm is a natural monopoly:
A)there will be a surplus of the product.
B)the firm will earn economic profit by satisfying the market quantity demanded at that price.
C)the firm can earn profit by producing more than Qc.
D)the firm will incur losses by producing the quantity demanded at that price.







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