Question 1

Figure: The Monopolist
   (Figure: The Monopolist) Look at the figure The Monopolist.If this monopolist attempts to profit-maximize, it will produce: 
A.Q₁ units and sell them at P₁.
B.Q₂ units and sell them at P₄.
C.Q₂ units and sell them at P₂.
D.Q₃ units and sell them at P₃.

Accepted Answer

The answer of Figure: The Monopolist
   (Figure: The...

Question 2

Control of a scarce resource or input, economies of scale, technological superiority, and government-created barriers are forms of:
A.market structure.
B.pricing behavior.
C.barriers to entry.
D.public policy.

Accepted Answer

The answer of Control of a scarce resource or input,...

Question 3

A natural monopoly exists when:
A.a few firms collude to make one large firm.
B.economies of scale provide large cost advantages to having one firm produce the industry's output.
C.firms naturally maximize profit regardless of market structure.
D.firms enter the industry as a result of profit incentives.

Accepted Answer

A natural monopoly occurs when economies of scale are so large that they provide a significant cost advantage to a single firm producing the entire output of the industry, making it difficult for other firms to enter and compete. This can result in high barriers to entry and limited competition.

Question 4

Which of the following statements regarding entry barriers is correct?
A.Entry barriers exist in all market structures.
B.Entry barriers exist in perfect competition and monopolistically competitive markets.
C.Entry barriers do not exist in any market structures; otherwise nothing would be produced.
D.Entry barriers exist in monopoly and oligopoly markets.

Accepted Answer

The answer of Which of the following statements regarding entry...

Question 5

If large fixed costs result in ATC falling as output increases, this industry is referred to as a:

Accepted Answer

A natural monopoly is an industry in which large fixed costs result in ATC falling as output increases. This is because the fixed costs are spread over a larger number of units of output, resulting in a lower ATC.

Question 6

Suppose the government is considering the regulation of a monopolist.An economist argues that the price should be regulated to maximize total welfare.The monopolist argues that the price should be regulated so that it can just cover all of its opportunity costs.Are they basically arguing the same point? How do they differ?

Accepted Answer

The answer of Suppose the government is considering the regulation...

Question 7

For a monopolist, the market demand curve:
A.is also the demand for the monopolist's product.
B.is equal to the monopolist's MR curve.
C.must be horizontal.
D.is not important, since the monopolist is the only producer.

Accepted Answer

The market demand curve represents the demand for the monopolist's product because the monopolist is the only producer in the market. The monopolist sets the price based on the market demand curve, which shows the quantity of the product that consumers are willing and able to buy at different prices. Therefore, the monopolist's demand curve is the same as the market demand curve.

Question 8

A monopolistically competitive industry is made up of:

Accepted Answer

A monopolistically competitive industry is characterized by many firms producing a differentiated product. Each firm has a certain degree of market power, as they can charge slightly different prices based on their product differentiation, but they are still price-sensitive and must take into account the actions of their competitors.

Question 9

Suppose a perfectly competitive industry is suddenly transformed into a monopoly industry.What will happen to price, output, consumer and producer surplus, and deadweight loss?

Accepted Answer

The answer of Suppose a perfectly competitive industry is suddenly...

Question 10

(Table: Demand for Economics Tutoring) Look at the table Demand for Economics Tutoring.Suppose Eric is the only economics tutor in town and therefore holds a monopoly on the sale of economics tutoring.The table shows the demand schedule for his services.Eric can offer additional hours of tutoring at a constant marginal cost of $2 per hour, and he has no fixed costs.a) If Eric acts as a monopolist, how many hours will he offer and what price will he charge?
b) Calculate Eric's monopoly profit.

Accepted Answer

The answer of (Table: Demand for Economics Tutoring) Look at...

Question 11

Goods that are subject to network externalities tend to be ones:
A.for which the value of the good to an individual is lower when more people use it.
B.that are land-intensive.
C.for which the value of the good to an individual is higher when more people use it.
D.for which one person owning the good enhances its value because it's the only one.

Accepted Answer

Goods that are subject to network externalities are ones where the value of the good to an individual increases as more people use it. This is because the utility or benefit of the good is tied to the size of the network of users. Examples of goods subject to network externalities include telephones, social networking sites, and fax machines. A is incorrect because the value of the good increases with more users. B is incorrect because land-intensive goods rely on the availability of physical space rather than network effects. D is incorrect because network externalities require a network of users, so a good that is owned by only one person would not exhibit network effects.

Question 12

For a monopolist with a downward-sloping demand curve, the quantity effect dominates the price effect at:
A.lower levels of production.
B.all levels of production.
C.higher levels of production.
D.only at those levels at which elasticity is unit-elastic.

Accepted Answer

The answer of For a monopolist with a downward-sloping demand...

Question 13

At the profit-maximizing level of production, a perfectly competitive industry will produce an
________ level of production, and a monopolist produces an level of production.
A.efficient; efficient
B.inefficient; efficient
C.inefficient; inefficient
efficient; inefficient

Accepted Answer

The answer of At the profit-maximizing level of production, a...

Question 14

Explain why the marginal revenue curve lies below the monopolist's demand curve.

Accepted Answer

The answer of Explain why the marginal revenue curve lies...

Question 15

Years ago, Callaway Golf patented its signature Big Bertha line of drivers.Today the company spends a lot of money prosecuting individuals that try to sell "knock-off" Big Bertha drivers to the public.What is the purpose of the patent, and why do companies like Callaway Golf fight those that try to imitate their products?

Accepted Answer

The answer of Years ago, Callaway Golf patented its signature...

Question 16

When a firm finds that its ATC of production decreases as it increases production, this firm is said to be experiencing:
A.profit maximization.
B.economic profit.
C.economies of scale.
D.a barrier to entry.

Accepted Answer

Economies of scale occur when a firm's average total cost of production decreases as it increases production. This is because the firm is able to spread its fixed costs over a larger output, leading to lower costs per unit. This can lead to higher profits for the firm and can also act as a barrier to entry for new firms trying to enter the market. However, this does not necessarily mean that the firm is maximizing profits or earning economic profits.

Question 17

It is often said that the monopolist will never set the price in the inelastic range of the demand curve.Why?

Accepted Answer

The answer of It is often said that the monopolist...

Question 18

(Table: Demand for Economics Tutoring) Look at the table Demand for Economics Tutoring.Suppose Eric is the only economics tutor in town and therefore holds a monopoly on the sale of economics tutoring.The table shows the demand schedule for his services.Eric can offer additional hours of tutoring at a constant marginal cost of $2 per hour, and he has no fixed costs.Suppose Eric can perfectly price-discriminate by charging his customers exactly their willingness to pay.How many hours will he offer, and how much profit will he earn by price- discriminating?

Accepted Answer

The answer of (Table: Demand for Economics Tutoring) Look at...

Question 19

Why is the demand curve for a monopolist downward sloping, while the demand curve for the perfectly competitive firm is horizontal?

Accepted Answer

The answer of Why is the demand curve for a...

Question 20

Temporary monopolies via the provision of sole ownership rights to profit from the production, use, or sale of a good are provided by:
A.patents and copyrights.
B.natural monopolies.
C.profit-maximizing behavior.
D.network externalities.

Accepted Answer

Patents and copyrights provide temporary monopolies by granting exclusive rights to produce, use or sell a specific product or technology for a certain period of time. This is done to incentivize innovation and protect intellectual property. Natural monopolies arise when economies of scale are so large that one company can provide the entire market demand at a lower cost than multiple firms. Profit-maximizing behavior and network externalities do not necessarily involve the provision of sole ownership rights.

Quiz 13: Monopoly

Figure: The Monopolist (Figure: The Monopolist) Look at the figure The Monopolist.If this monopolist attempts to profit-maximize, it will produce: A.Q₁ units and sell them at P₁. B.Q₂ units and sell them at P₄. C.Q₂ units and sell them at P₂. D.Q₃ units and sell them at P₃.

Control of a scarce resource or input, economies of scale, technological superiority, and government-created barriers are forms of: A.market structure. B.pricing behavior. C.barriers to entry. D.public policy.

If large fixed costs result in ATC falling as output increases, this industry is referred to as a:

For a monopolist, the market demand curve: A.is also the demand for the monopolist's product. B.is equal to the monopolist's MR curve. C.must be horizontal. D.is not important, since the monopolist is the only producer.

A monopolistically competitive industry is made up of:

Suppose a perfectly competitive industry is suddenly transformed into a monopoly industry.What will happen to price, output, consumer and producer surplus, and deadweight loss?

For a monopolist with a downward-sloping demand curve, the quantity effect dominates the price effect at: A.lower levels of production. B.all levels of production. C.higher levels of production. D.only at those levels at which elasticity is unit-elastic.

At the profit-maximizing level of production, a perfectly competitive industry will produce an ________ level of production, and a monopolist produces an level of production. A.efficient; efficient B.inefficient; efficient C.inefficient; inefficient efficient; inefficient

Explain why the marginal revenue curve lies below the monopolist's demand curve.

When a firm finds that its ATC of production decreases as it increases production, this firm is said to be experiencing: A.profit maximization. B.economic profit. C.economies of scale. D.a barrier to entry.

It is often said that the monopolist will never set the price in the inelastic range of the demand curve.Why?

Why is the demand curve for a monopolist downward sloping, while the demand curve for the perfectly competitive firm is horizontal?

Temporary monopolies via the provision of sole ownership rights to profit from the production, use, or sale of a good are provided by: A.patents and copyrights. B.natural monopolies. C.profit-maximizing behavior. D.network externalities.