Question 1

When the monopolist chooses its quantity supplied, it will:
A)set the price equal to marginal cost.
B)set the price higher than what consumers are willing to pay for that quantity.
C)set the price equal to the amount consumers are willing to pay for that quantity.
D)set the price lower than the demand curve to create a perceived shortage.

Accepted Answer

A monopolist sets the price based on the demand curve for the quantity it chooses to supply, which means it sets the price equal to the amount consumers are willing to pay for that quantity.

Question 2

The table shown represents the revenues faced by a monopolist.

What is the firm's marginal revenue for the third unit?
A)$100
B)$800
C)$600
D)$500

Accepted Answer

The answer of The table shown represents the revenues faced...

Question 3

At the price a monopolist sets, it will sell:
A)as much as it wants.
B)as much as consumers are willing to buy.
C)more than a firm in a perfectly competitive market would sell.
D)less than the quantity demanded to encourage scarcity.

Accepted Answer

A monopolist sets the price based on the demand curve for its product, meaning it can only sell as much as consumers are willing to buy at that price. Unlike in perfect competition, a monopolist has market power to set prices but is still constrained by consumer demand.

Question 4

A monopoly:
A)is constrained because its decisions cannot affect the market price.
B)is constrained by demand.
C)faces a horizontal demand curve.
D)is constantly threatened by the entry of new firms.

Accepted Answer

A monopoly is constrained by demand because it can only sell more by lowering its price, and its decisions directly affect the market price due to its unique position. Unlike competitive firms, a monopoly faces a downward-sloping demand curve, not a horizontal one, indicating its power to set prices. While entry barriers protect monopolies, they are not "constantly" threatened by new entrants due to these barriers.

Question 5

If the monopolist charges a high price:it will always earn more profits than if it had set a lower price.the quantity sold will be less than if it had set a lower price.it can keep other firms from entering the market.
A)III only
B)I and II only
C)II only
D)I and III only

Accepted Answer

The quantity sold will indeed be less than if it had set a lower price due to the inverse relationship between price and quantity demanded in most markets. Charging a high price does not guarantee higher profits due to potential decreases in quantity sold, and it may not effectively prevent other firms from entering the market if those firms can offer competitive prices or better value.

Question 6

The monopolist is always constrained by:
A)the amount consumers are willing to buy at any given price.
B)high fixed costs.
C)barriers to entry.
D)government regulation.

Accepted Answer

A monopolist's output and pricing decisions are primarily constrained by the demand curve, which reflects the amount consumers are willing to buy at any given price. Choices B, C, and D can affect a monopolist but are not constraints they are always subject to.

Question 7

The monopolist faces a:
A)perfectly elastic demand curve.
B)downward sloping demand curve.
C)perfectly inelastic demand curve.
D)perfectly elastic supply curve.

Accepted Answer

A monopolist faces a downward sloping demand curve because they have market power that allows them to set prices above marginal cost, unlike in perfect competition where the demand curve is perfectly elastic due to the presence of many sellers offering identical products.

Question 8

Government regulations:
A)always seek to increase competition.
B)sometimes protect monopoly power in certain industries.
C)never protect monopoly rights.
D)usually are ineffective.

Accepted Answer

Government regulations sometimes protect monopoly power in certain industries for reasons such as ensuring safety, maintaining standards, or because the nature of the industry makes competition impractical (e.g., utilities).

Question 9

Consider a market in which one firm controls 80 percent of the market. Suppose a new firm tries to enter the market, and the firm with market power responds by temporarily cutting its prices to very low levels. This practice is known as:
A)predatory pricing.
B)monopoly pricing.
C)aggressive pricing.
D)All of these are exemplified by this practice.

Accepted Answer

Predatory pricing is a strategy where a dominant firm sets prices at a very low level with the intention of driving competitors out of the market or deterring new entrants. This is exactly what is described in the scenario.

Question 10

One way a government might protect monopoly rights is by:
A)granting a patent.
B)heavily taxing alcohol and cigarettes.
C)running unsubsidized state-owned enterprises that compete with private firms.
D)All of these are ways a government protects monopoly rights.

Accepted Answer

Granting a patent is a direct way governments protect monopoly rights by giving a company or individual exclusive rights to produce, use, and sell an invention for a certain period of time, effectively creating a legal monopoly.

Question 11

A market in which a single firm can produce, at a lower cost than multiple firms, the entire quantity of output demanded is called: A)diseconomies of scale. B)government intervention. C)a natural monopoly. D)price gouging.

Accepted Answer

A natural monopoly occurs when a single firm can supply the entire market more efficiently than multiple firms, leading to lower costs for production and distribution. This is often due to high fixed costs and significant economies of scale.

Question 12

Protecting intellectual property rights:
A)always benefits society.
B)never benefits society.
C)rarely affects society overall.
D)may or may not benefit society overall.

Accepted Answer

Protecting intellectual property rights can have varied effects on society. It can encourage innovation by rewarding creators for their work, but it can also limit access to information and stifle further innovation if overly restrictive. The impact depends on how these rights are balanced with public interests.

Question 13

Predatory pricing is:
A)temporarily slashing prices below cost to force competitors out of the market.
B)an aggressive business move to maintain market power.
C)used to discourage competitors.
D)All of these are true.

Accepted Answer

Predatory pricing encompasses all of these aspects: it involves temporarily reducing prices below cost to eliminate competition, is an aggressive strategy to maintain or increase market power, and is used as a tactic to discourage new or existing competitors from entering or staying in the market.

Question 14

All of the following are reasons a government might choose to protect monopoly rights in an industry except:
A)to act in the public's interest.
B)to benefit insiders.
C)to encourage innovation.
D)to increase consumer surplus beyond what is achieved through competition.

Accepted Answer

Protecting monopoly rights typically decreases consumer surplus because monopolies can set higher prices due to lack of competition, contrary to increasing it.

Question 15

The most a monopolist can sell at any given price is:
A)the amount that the monopolist alone can supply.
B)the amount consumers are willing to buy at that price.
C)constrained by the availability of inputs.
D)less than it could sell in a perfectly competitive market.

Accepted Answer

The most a monopolist can sell at any given price is determined by the quantity that consumers are willing to buy at that price, reflecting the demand side of the market.

Question 16

The government protects intellectual property rights because they:
A)incentivize companies to decrease production.
B)encourage research and development.
C)increase total surplus for society.
D)benefit only producers in a society.

Accepted Answer

Intellectual property rights encourage research and development by providing creators with exclusive rights to their inventions or works, thus motivating them to innovate.

Question 17

Which of the following is not one way a government might protect monopoly rights?
A)Protecting intellectual property rights
B)Subsidizing a state-owned entity
C)Making it illegal to enter an industry
D)Heavy taxation of potential competitors

Accepted Answer

Heavy taxation of potential competitors does not protect monopoly rights but rather discourages competition. Protecting intellectual property, subsidizing state-owned entities, and making it illegal to enter certain industries are all methods that can protect or create monopolies by limiting competition.

Question 18

One way DeBeers managed to maintain control over the diamond industry was to:
A)continue to be the sole diamond producer by buying all existing diamonds.
B)create the illusion of no close substitutes through marketing.
C)punish consumers who sought to store their wealth in diamonds.
D)All of these statements are true.

Accepted Answer

DeBeers managed to maintain control over the diamond industry by creating the illusion of scarcity and the idea that there were no close substitutes for diamonds, particularly through their marketing campaigns, such as "A Diamond is Forever." This helped sustain high demand and prices for diamonds.

Question 19

When the government protects intellectual property rights, it:
A)can reduce total surplus for society.
B)never increases total surplus for society.
C)does not affect total surplus for society.
D)always increases total surplus for society.

Accepted Answer

Protecting intellectual property rights can reduce total surplus for society because it grants monopolies to creators, which can lead to higher prices and reduced access to those goods or services, thus potentially reducing total surplus.

Question 20

Natural monopolies are the natural result of:
A)competition in markets where economies of scale exist over the relevant range of output.
B)geographical happenstance.
C)fierce competition from firms in a market.
D)government regulations intended to encourage competition.

Accepted Answer

Natural monopolies occur in markets where economies of scale exist over the relevant range of output, meaning that a single firm can produce the total output at a lower cost per unit than could multiple firms. This makes it inefficient for multiple firms to operate, leading to a monopoly situation naturally.

Quiz 14: Monopoly

When the monopolist chooses its quantity supplied, it will:

The table shown represents the revenues faced by a monopolist. What is the firm's marginal revenue for the third unit?

At the price a monopolist sets, it will sell:

A monopoly:

If the monopolist charges a high price:it will always earn more profits than if it had set a lower price.the quantity sold will be less than if it had set a lower price.it can keep other firms from entering the market.

The monopolist is always constrained by:

The monopolist faces a:

Government regulations:

Consider a market in which one firm controls 80 percent of the market. Suppose a new firm tries to enter the market, and the firm with market power responds by temporarily cutting its prices to very low levels. This practice is known as:

One way a government might protect monopoly rights is by:

A market in which a single firm can produce, at a lower cost than multiple firms, the entire quantity of output demanded is called:

Protecting intellectual property rights:

Predatory pricing is:

All of the following are reasons a government might choose to protect monopoly rights in an industry except:

The most a monopolist can sell at any given price is:

The government protects intellectual property rights because they:

Which of the following is not one way a government might protect monopoly rights?

One way DeBeers managed to maintain control over the diamond industry was to:

When the government protects intellectual property rights, it:

Natural monopolies are the natural result of: