Deck 12: Pure Monopoly

Question 1

In the short run a pure monopolist will charge the highest price the market will bear for its product.

Answer 1

False

Question 2

Successful price discrimination requires that buyers charged the different prices be physically separated.

Answer 2

False

Question 3

Price discrimination will result in consumers with more elastic demand purchasing more of the good than when a single price is charged to all consumers in the market.

Answer 3

True

Question 4

Refer to the diagram for a nondiscriminating monopolist. At output M total cost will be 0CHM.

Question 5

Natural monopoly may result where products produce substantial network effects and can be simultaneously consumed by a large number of consumers.

Question 6

Price discrimination occurs whenever a firm sells a good for two different prices.

Question 7

Refer to the diagram for a nondiscriminating monopolist. If the government regulates the monopolist so that it charges the "fair return" price, the monopolist will produce output N.

Question 8

Because of the ability to influence price, a pure monopolist can increase price and increase volume of sales simultaneously.

Question 9

Refer to the diagram for a nondiscriminating monopolist. At output R economic profits will be zero.

Question 10

Refer to the diagram for a nondiscriminating monopolist. At the profit-maximizing output, the firm's economic profit will be BAFG.

Question 11

In the short run a pure monopolist will maximize profits by producing at that level of output where the difference between price and average total cost is at a maximum.

Question 12

Refer to the diagram for a nondiscriminating monopolist. The profit-maximizing output for this firm is M.

Question 13

Because of their large-scale level of production, pure monopolists overallocate resources to their industry by producing beyond the P = MC output.

Question 14

Refer to the diagram for a nondiscriminating monopolist. The profit-maximizing price for this firm is J.

Question 15

If the XYZ Company can sell 4 units per week at $10 per unit and 5 units per week at $9 per unit, the marginal revenue of the fifth unit is $5.

Question 16

Extensive network effects may drive a market toward natural monopoly because consumers tend to choose a common, standard product that everyone else is using.

Question 17

Refer to the diagram for a nondiscriminating monopolist. From society's point of view, it would be desirable to have the monopolist produce a larger output than M.

Question 18

Pure monopolists always earn economic profits.

Question 19

Price discrimination is illegal in the United States under all circumstances due to antitrust regulations.

Question 20

Refer to the diagram for a nondiscriminating monopolist. At output Q production will be unprofitable.

Question 21

A monopolist, being the sole seller in a market, is assured of positive economic profits.

Question 22

In a monopoly at equilibrium, price is greater than marginal cost.

Question 23

A firm sells 99 units of output when price equals $10, and 100 units of output when price equals $9. Its marginal revenue for the 100th unit of output is negative.

Question 24

A monopolist can use its pricing strategy as a barrier to entry by other firms.

Question 25

Refer to the diagram for a nondiscriminating monopolist. If the government regulates the monopolist so that it charges the socially optimal price, the monopolist will produce output Q.

Question 26

In an unregulated monopoly at equilibrium, the output level is higher than the economically efficient level.

Question 27

In the long-run equilibrium, a monopolist will earn zero economic profits.

Question 28

"Price maker" means that a monopoly can decide whatever price it wants to, in order to sell a specific given quantity of its product.

Question 29

As a monopolist lowers the price of its product from a high level, it finds that its total revenue may at first increase and then, below a certain price, its total revenue begins to decrease.

Question 30

The monopolist's demand curve is more elastic than the industry demand curve.

Question 31

A monopolist is free to charge whatever price it wishes, to sell a certain level of output.

Question 32

A monopolist will avoid setting a price in the elastic segment of the demand curve and prefer to set the price in the inelastic segment.

Question 33

The government may create barriers to entry that serve to foster monopoly power of firms.

Question 34

If a monopolist finds itself operating in the inelastic portion of its demand curve, then it should never lower its price because doing so would reduce its profits.

Question 35

At the inelastic portion of a monopolist's demand curve, the marginal revenue of each extra unit of output is positive.

Question 36

In order to maximize profits, the monopolist will produce the output level where MR = MC and charge a price equal to MR and MC.

Question 37

One of the economic effects of monopoly is an income transfer from consumers to the firm.

Question 38

The supply curve for a monopolist is the upward-sloping portion of the marginal cost curve that lies above the average variable cost curve.

Question 39

For a monopolist, maximum profits will occur when the gap between average revenue (or price)and average cost is biggest.

Question 40

A patent for a new product or a new business process is typically granted for a hundred years.

Question 41

Answer the question on the basis of the accompanying table, which shows the demand schedule facing a nondiscriminating monopolist. Assume that this monopolist faces zero production costs. The profit-maximizing monopolist will set a price of

A)$12.
B)$9.
C)$6.
D)$8.

Question 42

A monopolist sells 6 units of a product per day at a unit price of $15. If it lowers the price to $14, its total revenue increases by $22. This implies that its sales quantity increases by

A)4 units per day.
B)3 units per day.
C)2 units per day.
D)1 unit per day.

Question 43

Answer the question on the basis of the accompanying demand schedule. The marginal revenue obtained from selling the fourth unit of output is

A)$2.
B)$16.
C)$8.
D)$14.

Question 44

Price discrimination is not viable if consumers can resell the products they purchase to other consumers.

Question 45

Answer the question on the basis of the accompanying demand schedule. The marginal revenue obtained from selling the third unit of output is

A)$1.
B)$5.
C)$10.
D)$20.

Question 46

In a natural monopoly case, the socially optimal pricing policy rule will often yield a higher price than the fair-return pricing rule.

Question 47

A price-discriminating monopolist will set a higher price where demand is more elastic and a lower price where demand is less elastic.

Question 48

If a nondiscriminating imperfectly competitive firm is selling its 100th unit of output for $35, its marginal revenue

A)may be either greater or less than $35.
B)will also be $35.
C)will be less than $35.
D)will be greater than $35.

Question 49

A pure monopolist is selling nine units at a price of $50. If the marginal revenue of the tenth unit is $30, then the

A)price of the tenth unit is $49.
B)price of the tenth unit is $48.
C)price of the tenth unit is greater than $50.
D)firm's demand curve is perfectly elastic.

Question 50

Suppose that a pure monopolist can sell 47 units of output at $16 per unit and 48 units at $15.80 per unit. The marginal revenue of the 48th unit of output is

A)$15.80.
B)$758.40
C)$6.40.
D)$0.20.

Question 51

The table shows the demand schedule facing Nina, a monopolist selling baskets. What is the change in total revenue if she raises the price from $10 to $12?

A)$-300
B)$300
C)$-120
D)$120

Question 52

In a natural monopoly case, the socially optimal pricing policy rule will often result in negative economic profits for the firm.

Question 53

A monopolist can sell 10 toys per day for $10.00 each. To sell 11 toys per day, the price must be cut to $9.50. The marginal revenue of the 11th toy is

A)$9.50.
B)$-0.50.
C)$4.50 .
D)$11.

Question 54

The table shows the demand schedule facing Nina, a monopolist selling baskets. If Nina had no production costs, what price would she charge to maximize profits?

A)$12
B)$16
C)$14
D)$10

Question 55

A nondiscriminating pure monopolist finds that it can sell its 82nd unit of output for $12. We can surmise that the marginal

A)cost of the 82nd unit is also $12.
B)revenue of the 82nd unit is also $12.
C)revenue of the 82nd unit is less than $12.
D)revenue of the 82nd unit is greater than $12.

Question 56

A monopolistic firm has a sales schedule such that it can sell 10 prefabricated garages per week at $10,000 each, but if it restricts its output to 9 per week it can sell these at $11,000 each. The marginal revenue of the 10th unit of sales per week is

A)$-1,000.
B)$9,000.
C)$1,000.
D)$10,000.

Question 57

In most cases, a monopolist practicing price discrimination will end up earning less economic profits than a nondiscriminating monopolist.

Question 58

Answer the question on the basis of the accompanying table, which shows the demand schedule facing a nondiscriminating monopolist. The profit-maximizing monopolist will sell at a price

A)of $5.
B)of $4.
C)of $8.
D)that cannot be determined with the information provided.

Question 59

Given a linear demand curve, at which combination of price and marginal revenue ( P, MR)is the price elasticity of demand less than 1?

A)P = 15, MR = -4
B)P = 20, MR = 0
C)P = 28, MR = 13
D)P = 22, MR = 9

Question 60

The table shows the demand schedule facing Nina, a monopolist selling baskets. What is the change in total revenue if she lowers the price from $20 to $18?

A)$10
B)$20
C)$30
D)$40

Question 61

Suppose that a pure monopolist can sell 15 units of output at $6 per unit and 16 units at $5.70 per unit. For the monopolist to profitably produce and sell the sixteenth unit of output, its marginal cost must be anywhere at or below

A)$6.
B)$5.70.
C)$1.80.
D)$1.20.

Question 62

At its profit-maximizing output, the nondiscriminating pure monopolist whose information is in the accompanying table

A)incurs a loss.
B)earns an economic profit of $250.
C)earns a normal profit of $250.
D)earns an economic profit of $150.

Question 63

Suppose that a pure monopolist can sell 9 units of output at $12 per unit and 10 units at $11.50 per unit. For the monopolist to profitably produce and sell the tenth unit of output, its marginal cost must be anywhere at or below

A)$12.
B)$11.50.
C)$9.00.
D)$7.00.

Question 64

Refer to the demand and cost data for a pure monopolist given in the table. An unregulated, nondiscriminating monopolist would earn maximum profits of

A)$420.
B)$70.
C)$190.
D)$360.

Question 65

If the profit-maximizing pure monopolist whose information is in the accompanying table is able to price discriminate, charging each customer the price associated with each given level of output, how much profit will the firm earn?

A)$1,100
B)$550
C)$620
D)$400

Question 66

Suppose that a monopolist calculates that at its present output level, marginal cost is $2.00 and marginal revenue is $3.00. The firm could increase profits by

A)increasing price and decreasing output.
B)decreasing price and increasing output.
C)decreasing price and leaving output unchanged.
D)decreasing output and leaving price unchanged.

Question 67

Suppose that a monopolist calculates that at its present output level, marginal revenue is $4.50 and marginal cost is $2.75. It could maximize profits or minimize losses by

A)increasing price and decreasing output.
B)decreasing price and increasing output.
C)decreasing price and leaving output unchanged.
D)decreasing output and leaving price unchanged.

Question 68

A pure monopolist is producing an output such that ATC = $9, P = $11, MC = $5, MR = $6, and AVC = $4.50. This firm is realizing

A)an economic loss that could be reduced by producing more output.
B)an economic loss that could be reduced by producing less output.
C)an economic profit that could be increased by producing more output.
D)an economic profit that could be increased by producing less output.

Question 69

Answer the question on the basis of the demand and cost data for a pure monopolist. At the profit-maximizing price and quantity of output, the monopolist will realize profit of

A)$11.25.
B)$10.00.
C)$6.50.
D)$4.50.

Question 70

A pure monopolist is producing an output such that ATC = $4, P = $5, MC = $2, MR = $3, and AVC = $2.50. This firm is realizing

A)an economic loss that could be reduced by producing more output.
B)an economic loss that could be reduced by producing less output.
C)an economic profit that could be increased by producing more output.
D)an economic profit that could be increased by producing less output.

Question 71

Answer the question on the basis of the demand and cost data for a pure monopolist. The profit-maximizing price for the monopolist will be

A)$3.50.
B)$3.75.
C)$3.25.
D)$4.00.

Question 72

Answer the question on the basis of the provided demand and cost data for a pure monopolist. The profit-maximizing monopolist will realize a

A)profit of $8.50.
B)profit of $7.50.
C)profit of $16.
D)loss of $14.

Question 73

Based on the accompanying table, how many units would the given profit-maximizing nondiscriminating pure monopolist produce?

A)4
B)3
C)2
D)1

Question 74

Answer the question on the basis of the provided demand and cost data for a pure monopolist. The profit-maximizing level of output will be

A)4 units.
B)7 units.
C)6 units.
D)5 units.

Question 75

Answer the question on the basis of the demand and cost data for a pure monopolist. The profit-maximizing quantity of output for the monopolist will be

A)5.
B)4.
C)6.
D)3.

Question 76

If the profit-maximizing pure monopolist whose information is in the accompanying table is able to price discriminate, charging each customer the price associated with each given level of output, how many units will the firm produce?

A)5
B)4
C)3
D)2

Question 77

Refer to the demand and cost data for a pure monopolist given in the table. An unregulated, nondiscriminating monopolist would maximize profits at a price and quantity of

A)$175 and 5 units.
B)$225 and 3 units.
C)$200 and 4 units.
D)$250 and 2 units.

Question 78

Based on the accompanying table, this nondiscriminating pure monopolist should set its price at

A)$150.
B)$100.
C)$200.
D)$50.

Question 79

The data relate to a pure monopolist and the product it produces. What is the profit-maximizing output and price for this monopolist?

A)P = $48; Q = 6
B)P = $56; Q = 5
C)P = $64; Q = 4
D)P = $72; Q = 3

Question 80

Answer the question on the basis of the provided demand and cost data for a pure monopolist. The profit-maximizing price for the monopolist will be

A)$4.60.
B)$4.40.
C)$4.20.
D)$4.00.