Question 1

By adhering to the MR = MC rule, a single-price monopoly

Accepted Answer

By maximizing profit where MR=MC, the single-price monopoly will produce the quantity where the marginal revenue from selling one more unit equals the marginal cost of producing one more unit. This maximizes the difference between total revenue and total cost, resulting in the highest possible profit or the lowest possible loss in some cases. Therefore, choice C is the correct answer. Choices A and B are incorrect because a single-price monopoly can also earn zero economic profit by setting price equal to average total cost. Choice D is incorrect because setting MR = (MC - P) would result in a lower output and lower profit for the monopoly.

Question 2

Individuals who spend resources to influence public policy in a way that will redistribute income to themselves are

Accepted Answer

Rent seeking refers to the act of spending resources to influence public policy in order to redistribute income to oneself or one's interest group. It is not an activity that stabilizes the economy, involves collusion, or minimizes explicit costs.

Question 3

The demand curve facing a monopolist is always

Accepted Answer

The demand curve facing a monopolist is the same as the industry demand curve because the monopolist is the sole supplier in the market, thus facing the entire market demand.

Question 4

In general, electric, gas, and water companies are examples of __________  monopolies.

Accepted Answer

Electric, gas, and water companies operate as natural monopolies because of the high fixed costs required to enter these markets. Due to economies of scale, it is more efficient for a single company to supply these services to an entire region rather than multiple companies competing with duplicative infrastructure. However, these natural monopolies are often subjected to government regulation to prevent exploitation of consumers.

Question 5

A monopolist can sell 10,000 units at a price of $17. Lowering price by $2 raises the quantity demanded by 2,000 units. What is the change in total revenue that results from this price change?

Accepted Answer

The initial revenue is 10,000 units * $17 = $170,000. After the price decrease, the new price is $15, and the quantity sold is 12,000 units, leading to a revenue of 12,000 units * $15 = $180,000. The change in total revenue is $180,000 - $170,000 = $10,000.

Question 6

Exhibit 23-1 
Refer to Exhibit 23-1. If the product is produced under single-price monopoly, what do profits equal at the profit maximizing level of output?

Accepted Answer

The answer of Exhibit 23-1 
Refer to Exhibit 23-1. If...

Question 7

At the level of output at which a single-price monopolist maximizes profit, price is

Accepted Answer

A single-price monopolist maximizes profit where marginal revenue equals marginal cost, and at this point, the price charged is greater than the marginal cost.

Question 8

Exhibit 23-1 
Refer to Exhibit 23-1 The deadweight loss of the profit-maximizing monopoly is identified by what area?

Accepted Answer

The answer of Exhibit 23-1 
Refer to Exhibit 23-1 The...

Question 9

"Rent seeking" is socially wasteful because

Accepted Answer

Rent seeking involves the use of resources for the purpose of transferring wealth or a share of an existing resource, rather than creating new wealth through production. This is socially wasteful because the resources used for rent seeking could have been put to better use, such as investing in new technologies, improving production methods, or expanding businesses. Rent seeking can also lead to inequality and economic inefficiencies, as well as higher prices for consumers.

Question 10

For the perfectly competitive firm, price ________ MR; for the monopolist price ______ MR. The perfectly competitive firm's demand curve _______ its marginal revenue curve; the monopolist's demand curve ____________ its marginal revenue curve.

Accepted Answer

The answer of For the perfectly competitive firm, price ________...

Question 11

Exhibit 23-1 
Refer to Exhibit 23-1. If the product is produced under single-price monopoly, what quantity will be produced and what price will be charged in order to maximize profit?

Accepted Answer

Under single-price monopoly, the profit maximizing quantity is where marginal revenue (MR) equals marginal cost (MC). From the graph, we can see that MR intersects MC at point Q=S1U1B11. At this quantity, the corresponding price on the demand curve is P=S1U1B12. Therefore, the monopoly will produce QS1U1B11S1U1B0 units at a price of PS1U1B12S1U1B0 in order to maximize profit.

Question 12

Barriers to entry include all of the following except

Accepted Answer

Diseconomies of scale refer to the increase in production costs as a firm grows too large, which can act as a barrier to entry for new firms. The other options (A, B, C, and E) all represent factors that can limit the ability of new firms to enter a market.

Question 13

Exhibit 23-1 
Refer to Exhibit 23-1. According to economist Gordon Tullock, what area is subject to rent seeking activity?

Accepted Answer

The answer of Exhibit 23-1 
Refer to Exhibit 23-1. According...

Question 14

Which of the following is true at the level of output which maximizes profits for a perfectly price-discriminating monopolist?

Accepted Answer

A perfectly price-discriminating monopolist charges each customer the maximum price they are willing to pay, so the marginal revenue (MR) of each customer is equal to the price (P). In order to maximize profits, the monopolist produces at the level of output where MR = MC. Since in perfect price discrimination, P = MR, this means the monopolist will produce at the level of output where P = MC. Therefore, the correct answer is D.

Question 15

Exhibit 23-1 
Refer to Exhibit 23-1. If the product is produced under single-price monopoly, what do total costs equal at the profit maximizing level of output?

Accepted Answer

The answer of Exhibit 23-1 
Refer to Exhibit 23-1. If...

Question 16

Exhibit 23-1 
Refer to Exhibit 23-1. If the product is produced under single-price monopoly, what does total revenue equal at the profit maximizing level of output?

Accepted Answer

The answer of Exhibit 23-1 
Refer to Exhibit 23-1. If...

Question 17

For a single-price monopoly, marginal revenue is

Accepted Answer

The answer of For a single-price monopoly, marginal revenue is
...

Question 18

A single-price monopolist sets its price for good X at $75 and is selling more than one unit of good X. Which of the following must be true?

Accepted Answer

For a monopolist, the marginal revenue is always less than the price due to the downward-sloping demand curve. Selling an additional unit requires lowering the price on all units sold, which makes the marginal revenue less than the price.

Question 19

If a price-discriminating monopoly charges a lower price to individuals in city X, it is likely that the firm

Accepted Answer

Price discrimination involves charging different prices to different groups based on their elasticity of demand. A lower price is charged to those with a relatively elastic demand to increase quantity sold, as these consumers are more sensitive to price changes.

Question 20

The term "arbitrage" refers to

Accepted Answer

Arbitrage involves buying a good in a market where its price is low and selling it in another market where its price is higher. This allows the arbitrageur to make a profit from the price difference between the two markets. Option A describes the opposite of arbitrage, where the good is bought in a high-priced market and sold in a low-priced market. Options C and D describe simply selling a good in a high or low-priced market, without reference to any price differences.

Quiz 10: Monopoly

By adhering to the MR = MC rule, a single-price monopoly

Individuals who spend resources to influence public policy in a way that will redistribute income to themselves are

The demand curve facing a monopolist is always

In general, electric, gas, and water companies are examples of __________ monopolies.

A monopolist can sell 10,000 units at a price of $17. Lowering price by $2 raises the quantity demanded by 2,000 units. What is the change in total revenue that results from this price change?

Exhibit 23-1 Refer to Exhibit 23-1. If the product is produced under single-price monopoly, what do profits equal at the profit maximizing level of output?

At the level of output at which a single-price monopolist maximizes profit, price is

Exhibit 23-1 Refer to Exhibit 23-1 The deadweight loss of the profit-maximizing monopoly is identified by what area?

"Rent seeking" is socially wasteful because

For the perfectly competitive firm, price ____ MR; for the monopolist price MR. The perfectly competitive firm's demand curve _ its marginal revenue curve; the monopolist's demand curve ________ its marginal revenue curve.

Exhibit 23-1 Refer to Exhibit 23-1. If the product is produced under single-price monopoly, what quantity will be produced and what price will be charged in order to maximize profit?

Barriers to entry include all of the following except

Exhibit 23-1 Refer to Exhibit 23-1. According to economist Gordon Tullock, what area is subject to rent seeking activity?

Which of the following is true at the level of output which maximizes profits for a perfectly price-discriminating monopolist?

Exhibit 23-1 Refer to Exhibit 23-1. If the product is produced under single-price monopoly, what do total costs equal at the profit maximizing level of output?

Exhibit 23-1 Refer to Exhibit 23-1. If the product is produced under single-price monopoly, what does total revenue equal at the profit maximizing level of output?

For a single-price monopoly, marginal revenue is

A single-price monopolist sets its price for good X at $75 and is selling more than one unit of good X. Which of the following must be true?

If a price-discriminating monopoly charges a lower price to individuals in city X, it is likely that the firm

The term "arbitrage" refers to