Question 1

A single-price monopolist with the same demand and cost conditions as a perfectly price-discriminating monopolist produces __________ output than the perfectly price-discriminating monopolist and __________ resource-allocative efficient.
A)less; is
B)less; is not
C)more; is
D)more; is not

Accepted Answer

A single-price monopolist produces less output than a perfectly price-discriminating monopolist because it cannot capture all consumer surplus by charging different prices for each unit sold. This results in a deadweight loss, indicating that the single-price monopolist is not resource-allocatively efficient, unlike the perfectly price-discriminating monopolist who can achieve an efficient allocation of resources by equating price with marginal cost for every unit sold.

Question 2

For the perfectly price-discriminating monopolist, its __________ curve is the same as its __________ curve.
A)marginal cost; average fixed cost
B)average variable cost; average total cost
C)demand; marginal revenue
D)demand; marginal cost
E)marginal revenue; marginal product of labor

Accepted Answer

For a perfectly price-discriminating monopolist, the demand curve is the same as its marginal revenue curve because it can charge each consumer exactly their willingness to pay, thus capturing the entire area under the demand curve as revenue.

Question 3

Exhibit 23-9
 
-Refer to Exhibit 23-9. Assuming that the firm is maximizing profits, the marginal cost of the last unit produced equals
A)$4.
B)$40.
C)$5.
D)$50.
E)$6.

Accepted Answer

The marginal cost of the last unit produced is equal to the price of the last unit sold, which is $4.

Question 4

When a monopolist can perfectly price discriminate, it follows that
A)price equals marginal revenue.
B)price equals marginal cost at the quantity of output it chooses to produce.
C)the monopolist is resource-allocative efficient.
D)b and c
E)a, b, and c

Accepted Answer

When a monopolist can perfectly price discriminate, it means they charge each consumer the maximum they are willing to pay for each unit, thus equating price to marginal revenue for every unit sold. This also means that the monopolist will produce where price equals marginal cost, achieving productive efficiency. Additionally, by equating price to marginal cost across all units, the monopolist achieves allocative efficiency, making statements B and C correct. Therefore, all statements A, B, and C are correct, making E the correct choice.

Question 5

Which of the following statements is false?
A)A perfectly price-discriminating monopolist does not lower price on all previous units in order to sell an additional unit of its product.
B)Second-degree price discrimination is when the seller charges a uniform price per unit for one specific quantity, a lower price of an additional quantity, and so on.
C)Charging senior citizens less for medicine is an act of third-degree price discrimination.
D)Charging women less for a car wash is an act of second-degree price discrimination.
E)A price taker cannot practice price discrimination.

Accepted Answer

Second-degree price discrimination involves charging different prices based on the quantity of the product purchased, not based on the characteristics of the buyer. Charging women less for a car wash is an example of third-degree price discrimination, where different prices are charged to different groups based on their attributes or willingness to pay.

Question 6

Exhibit 23-9
 
-Refer to Exhibit 23-9. Assuming that the firm is maximizing profits, the marginal revenue of the last unit produced equals
A)$4.
B)$40.
C)$5.
D)$50.
E)$6.

Accepted Answer

The marginal revenue of the last unit produced is equal to the price of the last unit sold, which is $4.

Question 7

Which of the following is descriptive of rent-seeking?
A)A domestic company hires a lobbyist to go to Washington, D.C.and try to influence legislators to impose tariffs on Brazilian (imported) goods that compete with the good it produces.
B)Company X hires an accountant to work for it.
C)Jill pays her apartment rent a few days late each month and usually ends up having to pay a late fee.
D)This year Bob earned a large profit from the small business he owns and operates.
E)b and d

Accepted Answer

Rent-seeking involves seeking to increase one's share of existing wealth without creating new wealth. In choice A, hiring a lobbyist to influence legislation for tariffs to reduce competition is a classic example of rent-seeking, as it aims to gain economic advantage through political influence rather than by creating new value.

Question 8

Exhibit 23-9
 
-Refer to Exhibit 23-9. A single-price monopolist that seeks to maximize profits will sell __________ units and charge a per-unit price of __________.
A)20; $9
B)40; $7
C)50; $6
D)10; $10
E)7; $40

Accepted Answer

A single-price monopolist maximizes profits where marginal revenue (MR) equals marginal cost (MC). Without the specific exhibit, we typically look for the quantity where MR=MC and then use the demand curve to find the price at that quantity. Choice B is a common structure for such a scenario, suggesting a higher quantity (40 units) at a lower price ($7) compared to monopolistic pricing strategies that do not aim for profit maximization.

Question 9

Exhibit 23-9
 
-Refer to Exhibit 23-9. A single-price monopolist earns a total profit of __________ when it produces and sells 20 units of its good.
A)$80.
B)$100.
C)$30.
D)$61.
E)$49.

Accepted Answer

The monopolist's total profit is equal to the difference between its total revenue and its total cost. At a quantity of 20 units, the monopolist's total revenue is $200 (20 units x $10 per unit), and its total cost is $120 (20 units x $6 per unit). Therefore, the monopolist's total profit is $80 ($200 - $120).

Question 10

The perfectly competitive firm produces the quantity of output at which __________, and the single-price monopolist produces the quantity of output at which __________. The perfectly price-discriminating monopolist is like the __________ in this regard.
A)P = MC; P > MC; single-price monopolist
B)P > MC; P = MC; perfectly competitive firm
C)P = MC; P > MC; perfectly competitive firm
D)P > MC; P = MC; single-price monopolist

Accepted Answer

In a perfectly competitive market, firms produce where price (P) equals marginal cost (MC) to maximize profit. A single-price monopolist sets output where marginal revenue equals marginal cost (MR=MC), but sells at a price (P) greater than MC. A perfectly price-discriminating monopolist effectively operates like a perfectly competitive firm in that it captures all consumer surplus by charging each consumer their maximum willingness to pay, effectively equating price and marginal cost for every unit sold.

Question 11

"Rent-seeking" refers to
A)trying to pay the lowest rent possible for an apartment or house.
B)trying to lower rent that is paid on a factory in order to lower fixed costs.
C)the actions of individuals who spend resources to influence public policy in the hope of transferring income to themselves from others.
D)the fact that the deadweight loss triangle is a genuine cost of monopoly.
E)none of the above

Accepted Answer

Rent-seeking involves spending resources to influence public policy or economic conditions to redistribute income or wealth to oneself without creating new wealth, which aligns with choice C's description of actions aimed at transferring income from others to oneself through policy influence.

Question 12

Which of the following statements is true?
A)The motivation for rent seeking is not the same as the motivation for profit seeking.
B)Economic rent is a payment in excess of opportunity cost.
C)The deadweight loss triangle is not considered the graphic representation of one of the costs of monopoly; instead, it is one of the costs of not having a monopoly.
D)Rent seeking is almost always an irrational activity as far as the rent seekers are concerned.
E)a and d

Accepted Answer

Economic rent is indeed a payment in excess of opportunity cost, as it represents earnings above the minimum required to keep a factor in its current use.

Question 13

Which of the following is not a condition of price discrimination?
A)The seller must be a price searcher.
B)The seller must be able to distinguish among customers who would be willing to pay different prices.
C)The possibility of arbitrage must not exist.
D)The seller must have zero fixed costs.
E)The seller must exercise some control over price.

Accepted Answer

Price discrimination involves charging different prices to different consumers for the same product, not the seller having zero fixed costs. Fixed costs are unrelated to the ability to price discriminate.

Question 14

Exhibit 23-10 -Refer to Exhibit 23-10. The profit-maximizing single-price monopolist will produce which quantity of output? A)Q₂ B)Q₁ C)Q₃ D)Q₄ E)none of the above

Accepted Answer

A profit-maximizing single-price monopolist will produce the quantity of output where marginal cost (MC) equals marginal revenue (MR), which is typically represented by Q₁ in economic models.

Question 15

Exhibit 23-9
 
-Refer to Exhibit 23-9. A single-price monopolist earns a total profit of __________ when it produces the profit maximizing level of output.
A)$120
B)$110
C)$180
D)$80
E)$49

Accepted Answer

The answer of Exhibit 23-9
 
-Refer to Exhibit 23-9. A...

Question 16

Rent-seeking is said to be socially wasteful because
A)the rent seekers compete too fiercely with each other.
B)resources that are used to seek rents don't end up helping anyone in society.
C)the rent seekers usually end up spending too much to get what they want.
D)resources that are used to seek rents can't be used to produce goods and services.
E)none of the above

Accepted Answer

Rent-seeking is socially wasteful because it diverts resources away from productive activities that could create goods and services, instead using them to gain economic rents without contributing to overall societal welfare.

Question 17

Exhibit 23-9
 
-Refer to Exhibit 23-9. The reason we know the firm represented in the exhibit is a price searcher and not a price taker is because
A)its total costs rise as more output is produced and sold.
B)it has to lower price to sell additional units of its good.
C)marginal revenue is not constant for all given levels of output.
D)at some levels of output it earns negative profit.
E)b and c

Accepted Answer

A price searcher faces a downward-sloping demand curve, meaning they must lower the price to sell additional units (choice B), and their marginal revenue changes with different levels of output (choice C), distinguishing them from price takers who face a horizontal demand curve at the market price.

Question 18

Exhibit 23-9
 
-Refer to Exhibit 23-9. Total fixed costs are equal to.
A)$0.
B)$10.
C)$25.
D)$59.
E)There is not enough information to answer the question.

Accepted Answer

Without Exhibit 23-9, it's impossible to determine the total fixed costs, as the necessary information is not provided.

Question 19

Buying low and selling high is often referred to as
A)price discrimination.
B)rent-seeking.
C)arbitrage.
D)scarcity.
E)capitalization.

Accepted Answer

Arbitrage is the practice of taking advantage of a price difference between two or more markets, striking a combination of matching deals that capitalize upon the imbalance, the profit being the difference between the market prices. Buying low and selling high in different markets to exploit price differences is a classic example of arbitrage.

Question 20

Exhibit 23-10
 
-Refer to Exhibit 23-10. The profit-maximizing single-price monopolist earns profits equal to what area?
A)ABGH
B)HGCD
C)DCE
D)ABCD
E)GFC

Accepted Answer

The answer of Exhibit 23-10
 
-Refer to Exhibit 23-10. The...

Quiz 23: Monopoly

A single-price monopolist with the same demand and cost conditions as a perfectly price-discriminating monopolist produces output than the perfectly price-discriminating monopolist and resource-allocative efficient.

For the perfectly price-discriminating monopolist, its curve is the same as its curve.

Exhibit 23-9 -Refer to Exhibit 23-9. Assuming that the firm is maximizing profits, the marginal cost of the last unit produced equals

When a monopolist can perfectly price discriminate, it follows that

Which of the following statements is false?

Exhibit 23-9 -Refer to Exhibit 23-9. Assuming that the firm is maximizing profits, the marginal revenue of the last unit produced equals

Which of the following is descriptive of rent-seeking?

Exhibit 23-9 -Refer to Exhibit 23-9. A single-price monopolist that seeks to maximize profits will sell units and charge a per-unit price of .

Exhibit 23-9 -Refer to Exhibit 23-9. A single-price monopolist earns a total profit of __________ when it produces and sells 20 units of its good.

The perfectly competitive firm produces the quantity of output at which , and the single-price monopolist produces the quantity of output at which . The perfectly price-discriminating monopolist is like the __ in this regard.

"Rent-seeking" refers to

Which of the following statements is true?

Which of the following is not a condition of price discrimination?

Exhibit 23-10 -Refer to Exhibit 23-10. The profit-maximizing single-price monopolist will produce which quantity of output?

Exhibit 23-9 -Refer to Exhibit 23-9. A single-price monopolist earns a total profit of __________ when it produces the profit maximizing level of output.

Rent-seeking is said to be socially wasteful because

Exhibit 23-9 -Refer to Exhibit 23-9. The reason we know the firm represented in the exhibit is a price searcher and not a price taker is because

Exhibit 23-9 -Refer to Exhibit 23-9. Total fixed costs are equal to.

Buying low and selling high is often referred to as

Exhibit 23-10 -Refer to Exhibit 23-10. The profit-maximizing single-price monopolist earns profits equal to what area?