Question 1

Refer to the information provided in Figure 13.5 below to answer the questions that follow.  Figure 13.5
-Refer to Figure 13.5. The profit-maximizing level of output for this monopolist is ________ units of output.
A) 20
B) 22
C) 24
D) 26

Accepted Answer

The answer of Refer to the information provided in Figure...

Question 2

The Rare Bird Company has a monopoly in the sale of macaws in Iowa. When the Rare Bird Company sells three macaws, its marginal revenue is $30. When the Rare Bird Company sells four macaws, its marginal revenue will be
A) less than $30.
B) greater than $30.
C) equal to $30.
D) greater than $30 if demand is elastic and less than $30 if demand is inelastic.

Accepted Answer

In a monopolistic market, the marginal revenue decreases as the quantity sold increases because the monopolist must lower the price to sell additional units.

Question 3

Ameritech® has a monopoly over local telephone service. If Ameritech® is producing where marginal revenue is less than marginal cost, the firm
A) could increase profits by reducing output.
B) could increase profits by increasing output.
C) is maximizing profits.
D) must be earning a zero profit.

Accepted Answer

When marginal revenue is less than marginal cost, the firm is not maximizing profits. In a monopoly, the profit maximizing level of output is where marginal revenue equals marginal cost. If Ameritech® is producing where marginal revenue is less than marginal cost, it is overproducing and should reduce output to increase profits.

Question 4

The XYZ Computer Company has a monopoly over the production of a specialized color printer. The XYZ Computer Company will find it profitable to increase the production of specialized color printers as long as marginal cost
A) is less than marginal revenue.
B) equals marginal revenue.
C) is greater than marginal revenue.
D) is positive.

Accepted Answer

A monopolist will always maximize profits by producing where marginal cost is equal to marginal revenue. However, when marginal cost is greater than marginal revenue, the monopolist will be making a loss. Therefore, the monopolist will continue to increase production as long as marginal cost is less than marginal revenue to maximize profits.

Question 5

Because of a patent, Alcoa is the only manufacturer of soda cans with a stay-put tab. Alcoa can earn a profit on the sale of soda cans with stay-put tabs
A) in the short run but not in the long run because new firms will enter the industry in the long run.
B) only in the long run because government regulations prevent monopolists from earning profits in the short run.
C) in the long run but not the short run because the monopolist will face competition in the short run.
D) in the long run because entry into the industry by new firms is blocked until the patent expires.

Accepted Answer

Alcoa can earn a profit on the sale of soda cans with stay-put tabs in the long run because entry into the industry by new firms is blocked until the patent expires. Once the patent expires, other firms can enter the industry and compete, which will reduce Alcoa's market power and profits.

Question 6

If a monopolist earns positive economic profits in the long run,
A) new firms will enter the market.
B) the monopolist expands production.
C) the industry supply curve shifts to the right.
D) the monopolist will not change its behavior.

Accepted Answer

Monopolists, by definition, face no competition due to barriers to entry in their market, which prevents new firms from entering. Therefore, even if the monopolist earns positive economic profits in the long run, it doesn't lead to new firms entering the market, nor does it necessarily mean the monopolist will expand production or that there is an industry supply curve to shift (as the monopolist is the sole supplier).

Question 7

A monopolist is currently maximizing profits. In addition, if P > ATC > MC, then the monopolist
A) just breaks even.
B) earns positive economic profits.
C) is covering total variable costs but not total fixed costs.
D) is covering total fixed costs but not total variable costs.

Accepted Answer

If P > ATC > MC, it means that the monopolist is earning profits. The fact that the monopolist is already maximizing profits indicates that they are producing at the point where MR = MC, which also coincides with the point where P = MC. Therefore, if P > ATC, the monopolist is earning positive economic profits.

Question 8

A monopolist will not produce
A) a positive level of output when its marginal revenue is declining.
B) a positive level of output when its price is less than average total cost but greater than average variable cost.
C) in the inelastic portion of its demand curve, where marginal revenue is negative.
D) in the perfectly competitive level of output when it engages in perfect price discrimination.

Accepted Answer

If a monopolist operates in the inelastic portion of its demand curve, where marginal revenue is negative, it will not produce any output, as it would result in reducing its total revenue. Producing more output at this point would lead to a higher cost than the gain in revenue. Therefore, the correct answer is C. The other options may lead to different outcomes, but they do not necessarily imply that the monopolist will not produce any output.

Question 9

A monopolist's supply of a good is
A) dependent on the monopolist's demand curve and its marginal cost curve.
B) given by the portion of the monopolist's marginal cost curve that lies above the average variable cost curve.
C) independent of the monopolist's demand curve.
D) given by the portion of the monopolist's average variable cost curve that lies above the marginal cost curve.

Accepted Answer

A monopolist's supply is determined by where the marginal cost curve intersects the demand curve, indicating the profit-maximizing quantity. The monopolist adjusts output to equate marginal cost with marginal revenue, which is derived from the demand curve.

Question 10

A monopolist suffers a loss if its ________ schedule is everywhere above its ________ schedule.
A) ATC; MC
B) MC; AVC
C) ATC; Demand
D) Demand; ATC

Accepted Answer

A monopolist suffers a loss if its Average Total Cost (ATC) schedule is everywhere above its Demand schedule, meaning it cannot cover its total costs at any quantity sold.

Question 11

A profit-maximizing monopolist will produce the level of output where
A) marginal revenue is zero.
B) marginal cost is minimized.
C) price equals marginal cost.
D) marginal revenue equals marginal cost.

Accepted Answer

A profit-maximizing monopolist will produce at the level of output where marginal revenue equals marginal cost, because at that level of output, the firm is earning the highest possible profit. If the firm produces at a lower output, it can increase its profit by producing more, as its marginal revenue exceeds its marginal cost. If the firm produces at a higher output, its marginal cost exceeds its marginal revenue, lowering its profit. Therefore, the profit-maximizing monopolist produces at the level of output where marginal revenue equals marginal cost.

Question 12

In the short run, when a monopolist incurs a loss, it will
A) always shut down.
B) always produce where marginal cost equals marginal revenue.
C) produce as long as total revenue is sufficient to cover variable costs.
D) produce as long as total revenue is sufficient to cover fixed costs.

Accepted Answer

In the short run, a monopolist may incur losses if the price it charges is less than its average variable cost. However, the monopolist will continue to produce as long as its total revenue is sufficient to at least cover its variable costs. This is because if it shuts down, it will still have to pay its fixed costs, which will increase its losses even further. Therefore, Option C is the best choice.

Question 13

Refer to the information provided in Figure 13.5 below to answer the questions that follow.  Figure 13.5
-Refer to Figure 13.5. If this firm is producing the profit-maximizing quantity and selling it at the profit-maximizing price, the firm's profit will be
A) $0.
B) $88.
C) $154.
D) $242.

Accepted Answer

The firm is producing at the profit-maximizing quantity, where marginal cost equals marginal revenue. The profit-maximizing price is the price at which the quantity demanded equals the profit-maximizing quantity. At this point, the firm's profit is equal to the difference between total revenue and total cost, which is $154.

Question 14

The XYZ Computer Company has a monopoly over the production of a specialized color printer. The XYZ Computer Company will find it profitable to reduce output as long as marginal revenue
A) is greater than marginal cost.
B) equals marginal cost.
C) is less than marginal cost.
D) is positive.

Accepted Answer

For a monopolistic market, profit maximization occurs where marginal revenue equals marginal cost. However, in this case, the question is asking about the company's decision to reduce output, which means they are already producing above the profit-maximizing level. To maximize profits, the company should reduce output until marginal revenue equals marginal cost. Therefore, the company will find it profitable to reduce output as long as marginal revenue is less than marginal cost. Choice C is the correct answer.

Question 15

When the addition to a monopolist's total profit is negative from selling another unit, then it follows that
A) MR > ATC.
B) MR = MC.
C) MR > MC.
D) MR < MC.

Accepted Answer

When the addition to a monopolist's total profit is negative from selling another unit, it means that the marginal revenue (MR) from selling that unit is less than the marginal cost (MC) of producing it. Therefore, the correct answer is D) MR < MC.

Question 16

Refer to the information provided in Figure 13.5 below to answer the questions that follow.  Figure 13.5
-Refer to Figure 13.5. The profit-maximizing price for this firm is
A) $5.
B) $7.
C) $9.
D) $11.

Accepted Answer

The answer of Refer to the information provided in Figure...

Question 17

In the long run, a monopoly
A) will always earn zero economic profits.
B) may earn positive economic profits due to entry barriers.
C) will never exit the industry.
D) will yield an efficient outcome.

Accepted Answer

A monopoly may earn positive economic profits in the long run due to the presence of entry barriers. These barriers can prevent new firms from entering and competing with the monopolist, allowing it to maintain its market power and earn profits. However, it is important to note that these profits may be reduced if the monopolist is subject to government regulation or if new technologies or substitutes are developed that weaken its market power over time.

Question 18

Suppose we know that a monopolist is maximizing its profits. Which of the following is a correct inference? The monopolist has
A) maximized its total revenue.
B) set price equal to its average cost.
C) maximized the difference between marginal revenue and marginal cost.
D) equated marginal revenue and marginal cost.

Accepted Answer

When a monopolist is maximizing its profits, it is producing at a level where marginal revenue is equal to marginal cost. Therefore, the correct inference is that the monopolist has equated marginal revenue and marginal cost. Option A is incorrect as total revenue could be maximized at a lower output level. Option B is incorrect as the monopolist may be generating economic profits, meaning price is greater than average cost. Option C is incorrect as it may not be the case that the difference between marginal revenue and marginal cost is maximized.

Question 19

A monopolist sets both price and quantity simultaneously, and the amount of output that it supplies depends
A) only on the marginal cost curve.
B) only on the demand curve.
C) on both its marginal cost curve and the demand curve that it faces.
D) on both its average cost curve and the demand curve that it faces.

Accepted Answer

A monopolist will choose the level of output where marginal cost equals marginal revenue to maximize profits. Therefore, the amount of output produced will depend on both the marginal cost curve and the demand curve that the monopolist faces. The monopolist will use both curves to determine the price and quantity that will maximize profits.

Question 20

For a monopolist, if total revenue increases as output decreases, then marginal revenue is
A) equal to price.
B) zero.
C) positive.
D) negative.

Accepted Answer

This scenario indicates that the demand for the product is relatively inelastic, and the monopolist has market power to increase the price. As the monopolist decreases output, the price increases, and this leads to a decrease in total revenue, implying that marginal revenue is negative.

Quiz 13: Monopoly and Antitrust Policy

Refer to the information provided in Figure 13.5 below to answer the questions that follow. Figure 13.5 -Refer to Figure 13.5. The profit-maximizing level of output for this monopolist is ________ units of output.

The Rare Bird Company has a monopoly in the sale of macaws in Iowa. When the Rare Bird Company sells three macaws, its marginal revenue is $30. When the Rare Bird Company sells four macaws, its marginal revenue will be

Ameritech® has a monopoly over local telephone service. If Ameritech® is producing where marginal revenue is less than marginal cost, the firm

The XYZ Computer Company has a monopoly over the production of a specialized color printer. The XYZ Computer Company will find it profitable to increase the production of specialized color printers as long as marginal cost

Because of a patent, Alcoa is the only manufacturer of soda cans with a stay-put tab. Alcoa can earn a profit on the sale of soda cans with stay-put tabs

If a monopolist earns positive economic profits in the long run,

A monopolist is currently maximizing profits. In addition, if P > ATC > MC, then the monopolist

A monopolist will not produce

A monopolist's supply of a good is

A monopolist suffers a loss if its schedule is everywhere above its schedule.

A profit-maximizing monopolist will produce the level of output where

In the short run, when a monopolist incurs a loss, it will

Refer to the information provided in Figure 13.5 below to answer the questions that follow. Figure 13.5 -Refer to Figure 13.5. If this firm is producing the profit-maximizing quantity and selling it at the profit-maximizing price, the firm's profit will be

The XYZ Computer Company has a monopoly over the production of a specialized color printer. The XYZ Computer Company will find it profitable to reduce output as long as marginal revenue

When the addition to a monopolist's total profit is negative from selling another unit, then it follows that

Refer to the information provided in Figure 13.5 below to answer the questions that follow. Figure 13.5 -Refer to Figure 13.5. The profit-maximizing price for this firm is

In the long run, a monopoly

Suppose we know that a monopolist is maximizing its profits. Which of the following is a correct inference? The monopolist has

A monopolist sets both price and quantity simultaneously, and the amount of output that it supplies depends

For a monopolist, if total revenue increases as output decreases, then marginal revenue is