Name: 
 

Quiz #9: PRACTICE - micro Monopoly


Multiple Choice
Identify the choice that best completes the statement or answers the question.
 

 1. 
Which is a likely result of monopoly?
a.
a wide variety of substitute products from which consumers can choose
b.
numerous entrepreneurs, attracted by the profits, entering the industry
c.
greater efficiency than in competition due to eliminating duplication of effort
d.
a higher price than would exist in a competitive industry
e.
improved consumer surplus and consumer gains from trade
 

 2. 
A monopolist is
a.
one of a large number of small firms producing a homogeneous good
b.
one of a small number of large firms producing a differentiated good
c.
a single seller of a product with many close substitutes
d.
one of a small number of large firms producing a homogeneous good
e.
a single seller of a product with no close substitutes
 

 3. 
Which of following is true of monopoly and not of perfect competition?
a.
Profit is maximized where marginal cost equals marginal revenue
b.
The industry demand curve is also the firm's demand curve
c.
Economic profits cannot be earned in the long-run
d.
No barriers exist which keep new competitors out of the industry.
e.
the firm has no control over the market price
 

 4. 
For a monopolist, if marginal revenue is $40, total revenue is
a.
increasing
b.
decreasing
c.
zero
d.
$40
e.
negative
 

 5. 
Maximizing total revenue is the same as maximizing profit.
a.
True
b.
False
 

 6. 
Which of the following is true of marginal revenue for a monopolist that charges a single price?
a.
P = MR because there are no close substitutes for the monopolist's product.
b.
P > MR because the monopolist must decrease price on all units sold in order to sell an additional unit.
c.
P < MR because the monopolist must decrease price on all units sold in order to sell an additional unit.
d.
AR = MR because there are no close substitutes for the monopolist's product.
e.
P = MR only at the profit-maximizing quantity.
 

 7. 
As a nondiscriminating (single-price) monopolist increases the quantity of output produced, what happens to price (P) and marginal revenue (MR)?
a.
both P and MR remain constant
b.
P is constant, but MR decreases
c.
P decreases, but MR is constant
d.
both P and MR decrease, but P falls faster than MR
e.
both P and MR decrease, but MR falls faster than P
 
 
nar001-1.jpg
 

 8. 
What is the revenue-maximizing output for the monopolist represented in Exhibit 0147, assuming it does not price discriminate?
a.
0 units
b.
2 units
c.
3 units
d.
4 units
e.
5 units
 

 9. 
Which of the following is not true of monopolists?
a.
The entry of new firms is not a major concern.
b.
Monopolists seek to maximize profits.
c.
Monopolists can charge any price they want and make a profit.
d.
Monopolists can choose any point on the market demand curve.
 
 
nar002-1.jpg
 

 10. 
The firm in Exhibit 0140, which charges the same price to all customers, will produce where
a.
MR = 0
b.
MR = MC
c.
MC < MR
d.
MC = ATC
e.
P = MC
 

 11. 
The profit-maximizing output for the firm in Exhibit 0140, which charges the same price to all customers, is
a.
100
b.
200
c.
150
d.
117
e.
50
 

 12. 
At the profit-maximizing quantity, the price and average total cost for the firm in Exhibit 0140, which charges the same price to all customers, are
a.
$24 and $20
b.
$24 and $22
c.
$22 and $20
d.
$22 and $22
e.
$24 and $14
 
 
nar003-1.jpg
 

 13. 
The total revenue for the nondiscriminating monopolist at its profit-maximizing quantity in Exhibit 0142 is
a.
$16,200
b.
$36,000
c.
$39,600
d.
$30,800
e.
$31,000
 

 14. 
The total cost for the nondiscriminating monopolist at its profit-maximizing quantity in Exhibit 0142
a.
is $16,500
b.
is $24,200
c.
is $16,200
d.
is $19,800
e.
cannot be determined, as no fixed costs are given
 

 15. 
The nondiscriminating monopolist at its profit-maximizing quantity in Exhibit 0142 is making a profit of
a.
$6,200
b.
$13,320
c.
$11,000
d.
$15,200
e.
$0
 

 16. 
A monopolist earning short-run economic profit determines that at its present level of output, marginal revenue is $23 and marginal cost is $30. Which of the following should the firm do to increase profit?
a.
Raise price and lower output.
b.
Lower price and lower output.
c.
Raise price and raise output.
d.
Lower price and raise output.
e.
Lower output but leave price unchanged.
 
 
nar004-1.jpg
 

 17. 
What is the maximum profit the monopolist in Exhibit 0143 can earn?
a.
-$5
b.
$40.80
c.
$43.60
d.
$44.20
e.
$42.60
 
 
nar005-1.jpg
 

 18. 
Consider Exhibit 0145. What is the profit-maximizing output for a monopolist that does not price discriminate?
a.
1 unit
b.
2 units
c.
3 units
d.
4 units
e.
5 units
 

 19. 
Eli Whitney III receives a patent for the rayon gin, a product for which there are no close substitutes. Eli will maximize profits when
a.
MR is maximized
b.
MR = MC
c.
MR > MC
d.
MR < MC
e.
P = MR > MC
 
 
nar006-1.jpg
 

 20. 
In the short run, the monopolist depicted in Exhibit 0151 should
a.
shut down because P < AVC at some output levels
b.
shut down because P < ATC at all output levels
c.
continue producing because P > AVC at some output levels
d.
continue producing because P > ATC at all output levels
e.
continue producing because monopolists never shut down
 

 21. 
In the market structure of monopoly, new firms
a.
cannot profitably enter the industry, even in the long run
b.
may freely enter and leave the industry in both the short run and the long run
c.
may freely enter and leave the industry in the long run only
d.
may freely enter and leave the industry in the short run only
e.
have no incentive to enter the industry, even if economic profits are present
 

 22. 
Which of the following could not bar entry into an industry?
a.
economies of scale
b.
diseconomies of scale
c.
patents
d.
licenses
e.
one firm's control of essential resources
 

 23. 
Anything that prevents new firms from competing on an equal basis with existing firms in an industry is called a barrier to entry.
a.
True
b.
False
 

 24. 
A U.S. Federal law prohibits anybody from offering “first-class mail delivery service” except the U.S. Postal Service.  This is an example of what?
a.
monopoly because of control of essential resources
b.
monopoly due to economies of scale
c.
monopoly because of government-imposed barriers to entry
d.
production efficiency by preventing duplication of effort
e.
a monopoly created by control over key patents
 

 25. 
Jewelers are willing to hold large inventories of diamonds
a.
because the demand for diamonds is large and growing
b.
because that minimizes the fixed cost of producing diamond jewelry
c.
because, given De Beers' control of the market, they are confident that the price of diamonds will not plummet rapidly
d.
because, given De Beers' control of the market, they are confident that the price of diamonds will rise rapidly
e.
because that is what their customers expect them to do
 

 26. 
One likely result of monopoly power is
a.
a wide variety of substitute products from which consumers can choose
b.
an elimination of barriers to industry entry
c.
a decline in government regulation
d.
a higher price than would exist in a competitive industry
e.
an improvement in allocative efficiency
 

 27. 
Suppose that the demand for my new book, Spatulas From Around the World, is such that the demand curve lies everywhere below the average variable cost of producing it. To maximize profits or minimize losses, I should
a.
raise price
b.
lower price to increase demand
c.
shut down the presses printing my book
d.
lower price until demand is inelastic
e.
charge the highest price I can
 

 28. 
Compared to the productive efficiency of a perfectly competitive firm, a monopolist tends to be
a.
very efficient because it charges higher prices
b.
more efficient because it produces greater output
c.
inefficient
d.
equally efficient, as it also produces where MR = MC
e.
very efficient because it conserves resources by producing less output
 

 29. 
A profit-maximizing monopolist produces an output level that is allocatively inefficient because
a.
price is greater than marginal cost
b.
price is less than marginal cost
c.
marginal revenue is greater than marginal cost
d.
marginal revenue is less than marginal cost
e.
consumers wish to purchase all that is produced
 

 30. 
Compared to a perfectly competitive market, a monopoly tends to produce
a.
more output
b.
the same amount of output
c.
less output
 

 31. 
Compared to a perfectly competitive market, a monopoly tends to produce and
a.
charge a higher price
b.
charge a lower price
c.
charge the same price
 



 
Check Your Work     Start Over