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EC 200 Practice problems for MT3
MONOPOLYPractice Problems
Answer Key
1 True false or uncertain Explain your answer
a A decrease in the firmrsquos fixed cost will change its profits but will not influence the firmrsquos decision about how much good to produce
True A one-time change in the size of the fixed cost does not affect any part of the profit maximization condition (MR=MC) Therefore the optimal output will remain the sameOn the other hand Total Profit = TR ndash TC = P Q ndash TC An increase in fixed cost will increase total cost so the profit will decrease
b When the fixed cost of a firm increases the best thing the firm can do is to increase its price in order to compensate for the cost increase
False The change in the fixed cost doesnrsquot change our profit maximization point (we should keep producing and selling the same amount as before) So our price shouldnrsquot change as well because otherwise we wonrsquot be able to sell the same amount
2 If a profit-maximizing firm finds that at its current level of production MR gt MC it will a) earn greater profits than if MR = MC b) increase output c) decrease outputd) shut down
3 Suppose you have found out that the good your firm produces and sells has unit price elasticity of demand in a wide range of prices Given that can you increase your profits by changing the price of this good If yes explain carefully what that change should be If not explain why it is not possible
Profit = TR - TCSince the price elasticity of demand is equal to one total revenue will not change as a result of a change in price (and therefore quantity produced) However we can decrease our total cost by producing less (and therefore charging higher price according to the law of demand)So if we increase our price we can produce less Our TR will stay the same but TC will decrease As a result profit will increase
1
EC 200 Practice problems for MT3
4 Two tables below contain information about the total cost of the firm and the demand it is facing
Cost Data Demand DataOutput Total Cost $ Price $ Quantity
demanded100 1500 6 100200 1550 550 200300 1650 5 300400 1800 450 400500 2250 4 500
a Can you tell whether this firm operates in a perfectly competitive industry Explain your answerYes we can and no this market is not perfectly competitive In perfect competition the firm would be able to sell its entire output at the same price regardless of the number of units it produces (the demand curve is horizontal) In this case the demand curve is clearly downward sloping ndash in order to sell more the firm has to lower the price
b Create and fill marginal revenue and marginal cost columnsThe marginal cost is the difference between the two successive entries in the total cost column The marginal revenue is the difference between the two successive entries in the total revenue column We need to make one extra step and calculate total revenue which is equal to the product of quantity and price
Cost Data Demand DataOutput Total Cost $ MC $ Price $ Quantity
demandedTR $ MR $
100 1500 6 100 600 600200 1550 50 550 200 1100 500300 1650 100 5 300 1500 400400 1800 150 450 400 1800 300500 2250 450 4 500 2000 200
Find the output quantity that is optimal for the firm
Method 1 The MR-MC approach The last positive difference between MR and MC is at 400 units of outputMethod 2 The aggregate approach Since we now have both TR and TC we can just subtract TC from TR to determine the profit The only output quantity for which the profit does not come out negative is 400 units Hence this is the best output quantity
c State the size of economic profit the firm earns at this quantity of output
Profit = TR ndash TC = 1800 ndash 1800 = 0
d Can you tell whether the firm earns accounting profit Explain
Probably yes The economic profit takes into account the opportunity cost of running this business which has to be positive due to scarcity of resources If economic profit is zero this means the firm is earning normal accounting profit (does as well as the other firms of a similar size)
2
EC 200 Practice problems for MT3
Monopoly -- Practice Quiz
Multiple ChoiceIdentify the letter of the choice that best completes the statement or answers the question
A
1 Which of the following is trueA) Patents reduce a firms incentive to develop new productsB) Patents are given for new works of art or literatureC) Patents give a permanent exclusive right to produce a new goodD) Patents give a temporary exclusive right to produce a new goodE) Patents guarantee economic profits
ANSWER D
A
2 Patent laws promote technical progress in all of the following ways except one Which is the exceptionA) They allow other firms to copy successful products as soon as they are
marketedB) They prevent duplication of inventionsC) They provide a stimulus to innovationD) They provide the inventor with a temporary monopolyE) They increase a firms incentive to incur the up-front costs of
developing new products
ANSWER A
B
3 Which of the following could not bar entry into an industryA) economies of scaleB) diseconomies of scaleC) patentsD) licensesE) one firms control of essential resources
ANSWER B
C
4 For a nondiscriminating monopolist marginal revenue isA) equal to priceB) greater than priceC) less than priceD) represented by a horizontal curveE) equal to average revenue
ANSWER C
3
EC 200 Practice problems for MT3
C
5 For the nondiscriminating monopolistA) P = MR = ARB) P = MR gt ARC) P gt MR = ARD) P = MR lt ARE) P = AR gt MR
ANSWER E
B
6 A nondiscriminating monopolists demand curveA) is horizontal at the market priceB) lies above its marginal revenue curveC) is the same as its marginal cost curveD) indicates that the firm must raise price to sell additional unitsE) lies above the marginal cost curve at all levels of output
ANSWER B
B
7 A profit-maximizing monopoly will always produce at the minimum point of its average total cost (ATC) curveA) TrueB) False
ANSWER B
A
8 A monopolist maximizes profit at the quantity where the slope of its total revenue curve equals the slope of its total cost curveA) TrueB) False
ANSWER A
A
9 Which of the following is not true of monopolistsA) The entry of new firms is not a major concernB) Monopolists seek to maximize profitsC) Monopolists can charge any price they want and make a profitD) Monopolists can choose any point on the market demand curveE) Monopolists can raise price more than 10 percent
ANSWER C
A
10
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 profitA) Raise price and lower output
4
EC 200 Practice problems for MT3
B) Lower price and lower outputC) Raise price and raise outputD) Lower price and raise outputE) Lower output but leave price unchanged
ANSWER A
C
11
Consider Exhibit 0145 What is the profit-maximizing output for a monopolist that does not price discriminateA) 1 unitB) 2 unitsC) 3 unitsD) 4 unitsE) 5 units
ANSWER C
E
12
In the short run a monopolist will shut down whenA) average total cost is greater than price at all output levelsB) average variable cost is greater than average fixed cost at all output
levelsC) price is greater than average variable cost at all output levelsD) average fixed cost is greater than price at all output levelsE) average variable cost is greater than price at all output levels
ANSWER E
D
13
For a nondiscriminating monopolist which of the following statements is trueA) Unlike a firm in perfect competition a monopolist produces where
MR gt MCB) The monopolists marginal revenue curve is the same as its demand
curveC) The monopolist will always produce in the inelastic range of its
demand curveD) The monopolist does not have a supply curveE) The monopolist produces where MR lt MC
ANSWER D
5
EC 200 Practice problems for MT3
C
14
The profit-maximizing (or loss-minimizing) price the monopoly will charge in Exhibit 9-1 isA) irrelevant since the firm should shut downB) $11C) $16D) $18E) $22
ANSWER C
D
15
Which of the following would not bar entry into a marketA) control by a single firm of an essential resourceB) the necessity of taking risks when starting a firmC) patentsD) economies of scaleE) government regulations limiting the number of firms in an industry
ANSWER B
C
16
Firms can earn economic profits even in the long run ifA) they charge the highest price possibleB) there is a cost-reducing technological changeC) there are significant barriers to entryD) marginal revenue equals marginal costE) price is less than average variable cost at all rates of output
ANSWER C
1In the long run which of the following is not a problem for a monopolist earning
6
EC 200 Practice problems for MT3
A 7 economic profitA) other firms have an incentive to create substitutes for the monopolists
productB) technological change tends to break down barriers to entryC) patents expire licenses must be renewed and new sources of essential
resources may be discoveredD) government often decides to regulate monopoliesE) all profit will gradually be converted to consumer surplus
ANSWER E
C
18
In Exhibit 0150 the level of output that would achieve allocative efficiency isA) 700 unitsB) 810 unitsC) 884 unitsD) 976 unitsE) 1000 units
ANSWER C
C
19
Compared to the productive efficiency of a perfectly competitive firm a monopolist tends to beA) very efficient because it charges higher pricesB) more efficient because it produces greater outputC) inefficientD) equally efficient as it also produces where MR = MCE) very efficient because it conserves resources by producing less output
7
EC 200 Practice problems for MT3
ANSWER C
B
20
Total deadweight loss in society is reduced through rent seeking by monopolistsA) TrueB) False
ANSWER B
B
21
The US Postal Service has found its monopoly eroded over time becauseA) the demand for mail delivery has become more inelasticB) Congress has taken away their monopoly over first-class mailC) the US Postal Service cannot handle the volume of transactionsD) the price of stamps has increased relative to other substitutes such as
the telephoneE) of the decline in the use of fax machines
ANSWER D
D
22
Suppose that a price-discriminating monopolist divides its market into two segments In each market segment price is determined by finding the level of output where that marketsA) average revenue equals average total costB) average revenue equals average variable costC) marginal revenue equals average total costD) marginal revenue equals marginal costE) marginal cost equals average total cost
ANSWER D
8
EC 200 Practice problems for MT3
C
23
If the monopolist in Exhibit 0150 engages in perfect price discrimination price would beA) $120 for the 884th unitB) $212 on all unitsC) $120 on all unitsD) $136 on all unitsE) $104 on all units
ANSWER A
A
24
If the monopolist in Exhibit 0150 engages in perfect price discrimination price wouldA) vary between $212 and $120B) vary between $212 and $104C) be $136 on all unitsD) be $110 on all unitsE) be $104 on all units
ANSWER A
9
EC 200 Practice problems for MT3
E
25
In Exhibit 0153 which area represents the amount of consumer surplus received by consumers under perfect price discriminationA) area aB) area bC) area a + b + cD) area b + eE) there is no consumer surplus
ANSWER E
Multiple ChoiceIdentify the letter of the choice that best completes the statement or answers the question
A 1
Which of the following is trueA) Patents reduce a firms incentive to develop new productsB) Patents are given for new works of art or literatureC) Patents give a permanent exclusive right to produce a new goodD) Patents give a temporary exclusive right to produce a new goodE) Patents guarantee economic profits
ANSWER D
A 2
Patent laws promote technical progress in all of the following ways except one Which is the exceptionA) They allow other firms to copy successful products as soon as they are
marketedB) They prevent duplication of inventionsC) They provide a stimulus to innovationD) They provide the inventor with a temporary monopolyE) They increase a firms incentive to incur the up-front costs of
10
EC 200 Practice problems for MT3
developing new products
ANSWER A
B 3
Which of the following could not bar entry into an industryA) economies of scaleB) diseconomies of scaleC) patentsD) licensesE) one firms control of essential resources
ANSWER B
C 4
For a nondiscriminating monopolist marginal revenue isA) equal to priceB) greater than priceC) less than priceD) represented by a horizontal curveE) equal to average revenue
ANSWER C
C 5
For the nondiscriminating monopolistA) P = MR = ARB) P = MR gt ARC) P gt MR = ARD) P = MR lt ARE) P = AR gt MR
ANSWER E
B 6
A nondiscriminating monopolists demand curveA) is horizontal at the market priceB) lies above its marginal revenue curveC) is the same as its marginal cost curveD) indicates that the firm must raise price to sell additional unitsE) lies above the marginal cost curve at all levels of output
ANSWER B
11
EC 200 Practice problems for MT3
B 7
A profit-maximizing monopoly will always produce at the minimum point of its average total cost (ATC) curveA) TrueB) False
ANSWER B
A 8
A monopolist maximizes profit at the quantity where the slope of its total revenue curve equals the slope of its total cost curveA) TrueB) False
ANSWER A
A 9
Which of the following is not true of monopolistsA) The entry of new firms is not a major concernB) Monopolists seek to maximize profitsC) Monopolists can charge any price they want and make a profitD) Monopolists can choose any point on the market demand curveE) Monopolists can raise price more than 10 percent
ANSWER C
A 1
0
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 profitA) Raise price and lower outputB) Lower price and lower outputC) Raise price and raise outputD) Lower price and raise outputE) Lower output but leave price unchanged
ANSWER A
12
EC 200 Practice problems for MT3
C 1
1
Consider Exhibit 0145 What is the profit-maximizing output for a monopolist that does not price discriminateA) 1 unitB) 2 unitsC) 3 unitsD) 4 unitsE) 5 units
ANSWER C
E 1
2
In the short run a monopolist will shut down whenA) average total cost is greater than price at all output levelsB) average variable cost is greater than average fixed cost at all output
levelsC) price is greater than average variable cost at all output levelsD) average fixed cost is greater than price at all output levelsE) average variable cost is greater than price at all output levels
ANSWER E
D 1
3
For a nondiscriminating monopolist which of the following statements is trueA) Unlike a firm in perfect competition a monopolist produces where
MR gt MCB) The monopolists marginal revenue curve is the same as its demand
curveC) The monopolist will always produce in the inelastic range of its
demand curveD) The monopolist does not have a supply curveE) The monopolist produces where MR lt MC
ANSWER D
13
EC 200 Practice problems for MT3
C 1
4
The profit-maximizing (or loss-minimizing) price the monopoly will charge in Exhibit 9-1 isA) irrelevant since the firm should shut downB) $11C) $16D) $18E) $22
ANSWER C
D 1
5
Which of the following would not bar entry into a marketA) control by a single firm of an essential resourceB) the necessity of taking risks when starting a firmC) patentsD) economies of scaleE) government regulations limiting the number of firms in an industry
ANSWER B
C 1
6
Firms can earn economic profits even in the long run ifA) they charge the highest price possibleB) there is a cost-reducing technological changeC) there are significant barriers to entryD) marginal revenue equals marginal costE) price is less than average variable cost at all rates of output
ANSWER C
14
EC 200 Practice problems for MT3
A 1
7
In the long run which of the following is not a problem for a monopolist earning economic profitA) other firms have an incentive to create substitutes for the monopolists
productB) technological change tends to break down barriers to entryC) patents expire licenses must be renewed and new sources of essential
resources may be discoveredD) government often decides to regulate monopoliesE) all profit will gradually be converted to consumer surplus
ANSWER E
C 1
8
In Exhibit 0150 the level of output that would achieve allocative efficiency isA) 700 unitsB) 810 unitsC) 884 unitsD) 976 unitsE) 1000 units
ANSWER C
C 1
9
Compared to the productive efficiency of a perfectly competitive firm a monopolist tends to beA) very efficient because it charges higher prices
15
EC 200 Practice problems for MT3
B) more efficient because it produces greater outputC) inefficientD) equally efficient as it also produces where MR = MCE) very efficient because it conserves resources by producing less output
ANSWER C
B 2
0
Total deadweight loss in society is reduced through rent seeking by monopolistsA) TrueB) False
ANSWER B
B 2
1
The US Postal Service has found its monopoly eroded over time becauseA) the demand for mail delivery has become more inelasticB) Congress has taken away their monopoly over first-class mailC) the US Postal Service cannot handle the volume of transactionsD) the price of stamps has increased relative to other substitutes such as
the telephoneE) of the decline in the use of fax machines
ANSWER D
D 2
2
Suppose that a price-discriminating monopolist divides its market into two segments In each market segment price is determined by finding the level of output where that marketsA) average revenue equals average total costB) average revenue equals average variable costC) marginal revenue equals average total costD) marginal revenue equals marginal costE) marginal cost equals average total cost
ANSWER D
16
EC 200 Practice problems for MT3
C 2
3
If the monopolist in Exhibit 0150 engages in perfect price discrimination price would beA) $120 for the 884th unitB) $212 on all unitsC) $120 on all unitsD) $136 on all unitsE) $104 on all units
ANSWER A
A 2
4
If the monopolist in Exhibit 0150 engages in perfect price discrimination price wouldA) vary between $212 and $120B) vary between $212 and $104C) be $136 on all unitsD) be $110 on all unitsE) be $104 on all units
ANSWER A
17
EC 200 Practice problems for MT3
E 2
5
In Exhibit 0153 which area represents the amount of consumer surplus received by consumers under perfect price discriminationA) area aB) area bC) area a + b + cD) area b + eE) there is no consumer surplus
ANSWER E
18
EC 200 Practice problems for MT3
4 Two tables below contain information about the total cost of the firm and the demand it is facing
Cost Data Demand DataOutput Total Cost $ Price $ Quantity
demanded100 1500 6 100200 1550 550 200300 1650 5 300400 1800 450 400500 2250 4 500
a Can you tell whether this firm operates in a perfectly competitive industry Explain your answerYes we can and no this market is not perfectly competitive In perfect competition the firm would be able to sell its entire output at the same price regardless of the number of units it produces (the demand curve is horizontal) In this case the demand curve is clearly downward sloping ndash in order to sell more the firm has to lower the price
b Create and fill marginal revenue and marginal cost columnsThe marginal cost is the difference between the two successive entries in the total cost column The marginal revenue is the difference between the two successive entries in the total revenue column We need to make one extra step and calculate total revenue which is equal to the product of quantity and price
Cost Data Demand DataOutput Total Cost $ MC $ Price $ Quantity
demandedTR $ MR $
100 1500 6 100 600 600200 1550 50 550 200 1100 500300 1650 100 5 300 1500 400400 1800 150 450 400 1800 300500 2250 450 4 500 2000 200
Find the output quantity that is optimal for the firm
Method 1 The MR-MC approach The last positive difference between MR and MC is at 400 units of outputMethod 2 The aggregate approach Since we now have both TR and TC we can just subtract TC from TR to determine the profit The only output quantity for which the profit does not come out negative is 400 units Hence this is the best output quantity
c State the size of economic profit the firm earns at this quantity of output
Profit = TR ndash TC = 1800 ndash 1800 = 0
d Can you tell whether the firm earns accounting profit Explain
Probably yes The economic profit takes into account the opportunity cost of running this business which has to be positive due to scarcity of resources If economic profit is zero this means the firm is earning normal accounting profit (does as well as the other firms of a similar size)
2
EC 200 Practice problems for MT3
Monopoly -- Practice Quiz
Multiple ChoiceIdentify the letter of the choice that best completes the statement or answers the question
A
1 Which of the following is trueA) Patents reduce a firms incentive to develop new productsB) Patents are given for new works of art or literatureC) Patents give a permanent exclusive right to produce a new goodD) Patents give a temporary exclusive right to produce a new goodE) Patents guarantee economic profits
ANSWER D
A
2 Patent laws promote technical progress in all of the following ways except one Which is the exceptionA) They allow other firms to copy successful products as soon as they are
marketedB) They prevent duplication of inventionsC) They provide a stimulus to innovationD) They provide the inventor with a temporary monopolyE) They increase a firms incentive to incur the up-front costs of
developing new products
ANSWER A
B
3 Which of the following could not bar entry into an industryA) economies of scaleB) diseconomies of scaleC) patentsD) licensesE) one firms control of essential resources
ANSWER B
C
4 For a nondiscriminating monopolist marginal revenue isA) equal to priceB) greater than priceC) less than priceD) represented by a horizontal curveE) equal to average revenue
ANSWER C
3
EC 200 Practice problems for MT3
C
5 For the nondiscriminating monopolistA) P = MR = ARB) P = MR gt ARC) P gt MR = ARD) P = MR lt ARE) P = AR gt MR
ANSWER E
B
6 A nondiscriminating monopolists demand curveA) is horizontal at the market priceB) lies above its marginal revenue curveC) is the same as its marginal cost curveD) indicates that the firm must raise price to sell additional unitsE) lies above the marginal cost curve at all levels of output
ANSWER B
B
7 A profit-maximizing monopoly will always produce at the minimum point of its average total cost (ATC) curveA) TrueB) False
ANSWER B
A
8 A monopolist maximizes profit at the quantity where the slope of its total revenue curve equals the slope of its total cost curveA) TrueB) False
ANSWER A
A
9 Which of the following is not true of monopolistsA) The entry of new firms is not a major concernB) Monopolists seek to maximize profitsC) Monopolists can charge any price they want and make a profitD) Monopolists can choose any point on the market demand curveE) Monopolists can raise price more than 10 percent
ANSWER C
A
10
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 profitA) Raise price and lower output
4
EC 200 Practice problems for MT3
B) Lower price and lower outputC) Raise price and raise outputD) Lower price and raise outputE) Lower output but leave price unchanged
ANSWER A
C
11
Consider Exhibit 0145 What is the profit-maximizing output for a monopolist that does not price discriminateA) 1 unitB) 2 unitsC) 3 unitsD) 4 unitsE) 5 units
ANSWER C
E
12
In the short run a monopolist will shut down whenA) average total cost is greater than price at all output levelsB) average variable cost is greater than average fixed cost at all output
levelsC) price is greater than average variable cost at all output levelsD) average fixed cost is greater than price at all output levelsE) average variable cost is greater than price at all output levels
ANSWER E
D
13
For a nondiscriminating monopolist which of the following statements is trueA) Unlike a firm in perfect competition a monopolist produces where
MR gt MCB) The monopolists marginal revenue curve is the same as its demand
curveC) The monopolist will always produce in the inelastic range of its
demand curveD) The monopolist does not have a supply curveE) The monopolist produces where MR lt MC
ANSWER D
5
EC 200 Practice problems for MT3
C
14
The profit-maximizing (or loss-minimizing) price the monopoly will charge in Exhibit 9-1 isA) irrelevant since the firm should shut downB) $11C) $16D) $18E) $22
ANSWER C
D
15
Which of the following would not bar entry into a marketA) control by a single firm of an essential resourceB) the necessity of taking risks when starting a firmC) patentsD) economies of scaleE) government regulations limiting the number of firms in an industry
ANSWER B
C
16
Firms can earn economic profits even in the long run ifA) they charge the highest price possibleB) there is a cost-reducing technological changeC) there are significant barriers to entryD) marginal revenue equals marginal costE) price is less than average variable cost at all rates of output
ANSWER C
1In the long run which of the following is not a problem for a monopolist earning
6
EC 200 Practice problems for MT3
A 7 economic profitA) other firms have an incentive to create substitutes for the monopolists
productB) technological change tends to break down barriers to entryC) patents expire licenses must be renewed and new sources of essential
resources may be discoveredD) government often decides to regulate monopoliesE) all profit will gradually be converted to consumer surplus
ANSWER E
C
18
In Exhibit 0150 the level of output that would achieve allocative efficiency isA) 700 unitsB) 810 unitsC) 884 unitsD) 976 unitsE) 1000 units
ANSWER C
C
19
Compared to the productive efficiency of a perfectly competitive firm a monopolist tends to beA) very efficient because it charges higher pricesB) more efficient because it produces greater outputC) inefficientD) equally efficient as it also produces where MR = MCE) very efficient because it conserves resources by producing less output
7
EC 200 Practice problems for MT3
ANSWER C
B
20
Total deadweight loss in society is reduced through rent seeking by monopolistsA) TrueB) False
ANSWER B
B
21
The US Postal Service has found its monopoly eroded over time becauseA) the demand for mail delivery has become more inelasticB) Congress has taken away their monopoly over first-class mailC) the US Postal Service cannot handle the volume of transactionsD) the price of stamps has increased relative to other substitutes such as
the telephoneE) of the decline in the use of fax machines
ANSWER D
D
22
Suppose that a price-discriminating monopolist divides its market into two segments In each market segment price is determined by finding the level of output where that marketsA) average revenue equals average total costB) average revenue equals average variable costC) marginal revenue equals average total costD) marginal revenue equals marginal costE) marginal cost equals average total cost
ANSWER D
8
EC 200 Practice problems for MT3
C
23
If the monopolist in Exhibit 0150 engages in perfect price discrimination price would beA) $120 for the 884th unitB) $212 on all unitsC) $120 on all unitsD) $136 on all unitsE) $104 on all units
ANSWER A
A
24
If the monopolist in Exhibit 0150 engages in perfect price discrimination price wouldA) vary between $212 and $120B) vary between $212 and $104C) be $136 on all unitsD) be $110 on all unitsE) be $104 on all units
ANSWER A
9
EC 200 Practice problems for MT3
E
25
In Exhibit 0153 which area represents the amount of consumer surplus received by consumers under perfect price discriminationA) area aB) area bC) area a + b + cD) area b + eE) there is no consumer surplus
ANSWER E
Multiple ChoiceIdentify the letter of the choice that best completes the statement or answers the question
A 1
Which of the following is trueA) Patents reduce a firms incentive to develop new productsB) Patents are given for new works of art or literatureC) Patents give a permanent exclusive right to produce a new goodD) Patents give a temporary exclusive right to produce a new goodE) Patents guarantee economic profits
ANSWER D
A 2
Patent laws promote technical progress in all of the following ways except one Which is the exceptionA) They allow other firms to copy successful products as soon as they are
marketedB) They prevent duplication of inventionsC) They provide a stimulus to innovationD) They provide the inventor with a temporary monopolyE) They increase a firms incentive to incur the up-front costs of
10
EC 200 Practice problems for MT3
developing new products
ANSWER A
B 3
Which of the following could not bar entry into an industryA) economies of scaleB) diseconomies of scaleC) patentsD) licensesE) one firms control of essential resources
ANSWER B
C 4
For a nondiscriminating monopolist marginal revenue isA) equal to priceB) greater than priceC) less than priceD) represented by a horizontal curveE) equal to average revenue
ANSWER C
C 5
For the nondiscriminating monopolistA) P = MR = ARB) P = MR gt ARC) P gt MR = ARD) P = MR lt ARE) P = AR gt MR
ANSWER E
B 6
A nondiscriminating monopolists demand curveA) is horizontal at the market priceB) lies above its marginal revenue curveC) is the same as its marginal cost curveD) indicates that the firm must raise price to sell additional unitsE) lies above the marginal cost curve at all levels of output
ANSWER B
11
EC 200 Practice problems for MT3
B 7
A profit-maximizing monopoly will always produce at the minimum point of its average total cost (ATC) curveA) TrueB) False
ANSWER B
A 8
A monopolist maximizes profit at the quantity where the slope of its total revenue curve equals the slope of its total cost curveA) TrueB) False
ANSWER A
A 9
Which of the following is not true of monopolistsA) The entry of new firms is not a major concernB) Monopolists seek to maximize profitsC) Monopolists can charge any price they want and make a profitD) Monopolists can choose any point on the market demand curveE) Monopolists can raise price more than 10 percent
ANSWER C
A 1
0
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 profitA) Raise price and lower outputB) Lower price and lower outputC) Raise price and raise outputD) Lower price and raise outputE) Lower output but leave price unchanged
ANSWER A
12
EC 200 Practice problems for MT3
C 1
1
Consider Exhibit 0145 What is the profit-maximizing output for a monopolist that does not price discriminateA) 1 unitB) 2 unitsC) 3 unitsD) 4 unitsE) 5 units
ANSWER C
E 1
2
In the short run a monopolist will shut down whenA) average total cost is greater than price at all output levelsB) average variable cost is greater than average fixed cost at all output
levelsC) price is greater than average variable cost at all output levelsD) average fixed cost is greater than price at all output levelsE) average variable cost is greater than price at all output levels
ANSWER E
D 1
3
For a nondiscriminating monopolist which of the following statements is trueA) Unlike a firm in perfect competition a monopolist produces where
MR gt MCB) The monopolists marginal revenue curve is the same as its demand
curveC) The monopolist will always produce in the inelastic range of its
demand curveD) The monopolist does not have a supply curveE) The monopolist produces where MR lt MC
ANSWER D
13
EC 200 Practice problems for MT3
C 1
4
The profit-maximizing (or loss-minimizing) price the monopoly will charge in Exhibit 9-1 isA) irrelevant since the firm should shut downB) $11C) $16D) $18E) $22
ANSWER C
D 1
5
Which of the following would not bar entry into a marketA) control by a single firm of an essential resourceB) the necessity of taking risks when starting a firmC) patentsD) economies of scaleE) government regulations limiting the number of firms in an industry
ANSWER B
C 1
6
Firms can earn economic profits even in the long run ifA) they charge the highest price possibleB) there is a cost-reducing technological changeC) there are significant barriers to entryD) marginal revenue equals marginal costE) price is less than average variable cost at all rates of output
ANSWER C
14
EC 200 Practice problems for MT3
A 1
7
In the long run which of the following is not a problem for a monopolist earning economic profitA) other firms have an incentive to create substitutes for the monopolists
productB) technological change tends to break down barriers to entryC) patents expire licenses must be renewed and new sources of essential
resources may be discoveredD) government often decides to regulate monopoliesE) all profit will gradually be converted to consumer surplus
ANSWER E
C 1
8
In Exhibit 0150 the level of output that would achieve allocative efficiency isA) 700 unitsB) 810 unitsC) 884 unitsD) 976 unitsE) 1000 units
ANSWER C
C 1
9
Compared to the productive efficiency of a perfectly competitive firm a monopolist tends to beA) very efficient because it charges higher prices
15
EC 200 Practice problems for MT3
B) more efficient because it produces greater outputC) inefficientD) equally efficient as it also produces where MR = MCE) very efficient because it conserves resources by producing less output
ANSWER C
B 2
0
Total deadweight loss in society is reduced through rent seeking by monopolistsA) TrueB) False
ANSWER B
B 2
1
The US Postal Service has found its monopoly eroded over time becauseA) the demand for mail delivery has become more inelasticB) Congress has taken away their monopoly over first-class mailC) the US Postal Service cannot handle the volume of transactionsD) the price of stamps has increased relative to other substitutes such as
the telephoneE) of the decline in the use of fax machines
ANSWER D
D 2
2
Suppose that a price-discriminating monopolist divides its market into two segments In each market segment price is determined by finding the level of output where that marketsA) average revenue equals average total costB) average revenue equals average variable costC) marginal revenue equals average total costD) marginal revenue equals marginal costE) marginal cost equals average total cost
ANSWER D
16
EC 200 Practice problems for MT3
C 2
3
If the monopolist in Exhibit 0150 engages in perfect price discrimination price would beA) $120 for the 884th unitB) $212 on all unitsC) $120 on all unitsD) $136 on all unitsE) $104 on all units
ANSWER A
A 2
4
If the monopolist in Exhibit 0150 engages in perfect price discrimination price wouldA) vary between $212 and $120B) vary between $212 and $104C) be $136 on all unitsD) be $110 on all unitsE) be $104 on all units
ANSWER A
17
EC 200 Practice problems for MT3
E 2
5
In Exhibit 0153 which area represents the amount of consumer surplus received by consumers under perfect price discriminationA) area aB) area bC) area a + b + cD) area b + eE) there is no consumer surplus
ANSWER E
18
EC 200 Practice problems for MT3
Monopoly -- Practice Quiz
Multiple ChoiceIdentify the letter of the choice that best completes the statement or answers the question
A
1 Which of the following is trueA) Patents reduce a firms incentive to develop new productsB) Patents are given for new works of art or literatureC) Patents give a permanent exclusive right to produce a new goodD) Patents give a temporary exclusive right to produce a new goodE) Patents guarantee economic profits
ANSWER D
A
2 Patent laws promote technical progress in all of the following ways except one Which is the exceptionA) They allow other firms to copy successful products as soon as they are
marketedB) They prevent duplication of inventionsC) They provide a stimulus to innovationD) They provide the inventor with a temporary monopolyE) They increase a firms incentive to incur the up-front costs of
developing new products
ANSWER A
B
3 Which of the following could not bar entry into an industryA) economies of scaleB) diseconomies of scaleC) patentsD) licensesE) one firms control of essential resources
ANSWER B
C
4 For a nondiscriminating monopolist marginal revenue isA) equal to priceB) greater than priceC) less than priceD) represented by a horizontal curveE) equal to average revenue
ANSWER C
3
EC 200 Practice problems for MT3
C
5 For the nondiscriminating monopolistA) P = MR = ARB) P = MR gt ARC) P gt MR = ARD) P = MR lt ARE) P = AR gt MR
ANSWER E
B
6 A nondiscriminating monopolists demand curveA) is horizontal at the market priceB) lies above its marginal revenue curveC) is the same as its marginal cost curveD) indicates that the firm must raise price to sell additional unitsE) lies above the marginal cost curve at all levels of output
ANSWER B
B
7 A profit-maximizing monopoly will always produce at the minimum point of its average total cost (ATC) curveA) TrueB) False
ANSWER B
A
8 A monopolist maximizes profit at the quantity where the slope of its total revenue curve equals the slope of its total cost curveA) TrueB) False
ANSWER A
A
9 Which of the following is not true of monopolistsA) The entry of new firms is not a major concernB) Monopolists seek to maximize profitsC) Monopolists can charge any price they want and make a profitD) Monopolists can choose any point on the market demand curveE) Monopolists can raise price more than 10 percent
ANSWER C
A
10
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 profitA) Raise price and lower output
4
EC 200 Practice problems for MT3
B) Lower price and lower outputC) Raise price and raise outputD) Lower price and raise outputE) Lower output but leave price unchanged
ANSWER A
C
11
Consider Exhibit 0145 What is the profit-maximizing output for a monopolist that does not price discriminateA) 1 unitB) 2 unitsC) 3 unitsD) 4 unitsE) 5 units
ANSWER C
E
12
In the short run a monopolist will shut down whenA) average total cost is greater than price at all output levelsB) average variable cost is greater than average fixed cost at all output
levelsC) price is greater than average variable cost at all output levelsD) average fixed cost is greater than price at all output levelsE) average variable cost is greater than price at all output levels
ANSWER E
D
13
For a nondiscriminating monopolist which of the following statements is trueA) Unlike a firm in perfect competition a monopolist produces where
MR gt MCB) The monopolists marginal revenue curve is the same as its demand
curveC) The monopolist will always produce in the inelastic range of its
demand curveD) The monopolist does not have a supply curveE) The monopolist produces where MR lt MC
ANSWER D
5
EC 200 Practice problems for MT3
C
14
The profit-maximizing (or loss-minimizing) price the monopoly will charge in Exhibit 9-1 isA) irrelevant since the firm should shut downB) $11C) $16D) $18E) $22
ANSWER C
D
15
Which of the following would not bar entry into a marketA) control by a single firm of an essential resourceB) the necessity of taking risks when starting a firmC) patentsD) economies of scaleE) government regulations limiting the number of firms in an industry
ANSWER B
C
16
Firms can earn economic profits even in the long run ifA) they charge the highest price possibleB) there is a cost-reducing technological changeC) there are significant barriers to entryD) marginal revenue equals marginal costE) price is less than average variable cost at all rates of output
ANSWER C
1In the long run which of the following is not a problem for a monopolist earning
6
EC 200 Practice problems for MT3
A 7 economic profitA) other firms have an incentive to create substitutes for the monopolists
productB) technological change tends to break down barriers to entryC) patents expire licenses must be renewed and new sources of essential
resources may be discoveredD) government often decides to regulate monopoliesE) all profit will gradually be converted to consumer surplus
ANSWER E
C
18
In Exhibit 0150 the level of output that would achieve allocative efficiency isA) 700 unitsB) 810 unitsC) 884 unitsD) 976 unitsE) 1000 units
ANSWER C
C
19
Compared to the productive efficiency of a perfectly competitive firm a monopolist tends to beA) very efficient because it charges higher pricesB) more efficient because it produces greater outputC) inefficientD) equally efficient as it also produces where MR = MCE) very efficient because it conserves resources by producing less output
7
EC 200 Practice problems for MT3
ANSWER C
B
20
Total deadweight loss in society is reduced through rent seeking by monopolistsA) TrueB) False
ANSWER B
B
21
The US Postal Service has found its monopoly eroded over time becauseA) the demand for mail delivery has become more inelasticB) Congress has taken away their monopoly over first-class mailC) the US Postal Service cannot handle the volume of transactionsD) the price of stamps has increased relative to other substitutes such as
the telephoneE) of the decline in the use of fax machines
ANSWER D
D
22
Suppose that a price-discriminating monopolist divides its market into two segments In each market segment price is determined by finding the level of output where that marketsA) average revenue equals average total costB) average revenue equals average variable costC) marginal revenue equals average total costD) marginal revenue equals marginal costE) marginal cost equals average total cost
ANSWER D
8
EC 200 Practice problems for MT3
C
23
If the monopolist in Exhibit 0150 engages in perfect price discrimination price would beA) $120 for the 884th unitB) $212 on all unitsC) $120 on all unitsD) $136 on all unitsE) $104 on all units
ANSWER A
A
24
If the monopolist in Exhibit 0150 engages in perfect price discrimination price wouldA) vary between $212 and $120B) vary between $212 and $104C) be $136 on all unitsD) be $110 on all unitsE) be $104 on all units
ANSWER A
9
EC 200 Practice problems for MT3
E
25
In Exhibit 0153 which area represents the amount of consumer surplus received by consumers under perfect price discriminationA) area aB) area bC) area a + b + cD) area b + eE) there is no consumer surplus
ANSWER E
Multiple ChoiceIdentify the letter of the choice that best completes the statement or answers the question
A 1
Which of the following is trueA) Patents reduce a firms incentive to develop new productsB) Patents are given for new works of art or literatureC) Patents give a permanent exclusive right to produce a new goodD) Patents give a temporary exclusive right to produce a new goodE) Patents guarantee economic profits
ANSWER D
A 2
Patent laws promote technical progress in all of the following ways except one Which is the exceptionA) They allow other firms to copy successful products as soon as they are
marketedB) They prevent duplication of inventionsC) They provide a stimulus to innovationD) They provide the inventor with a temporary monopolyE) They increase a firms incentive to incur the up-front costs of
10
EC 200 Practice problems for MT3
developing new products
ANSWER A
B 3
Which of the following could not bar entry into an industryA) economies of scaleB) diseconomies of scaleC) patentsD) licensesE) one firms control of essential resources
ANSWER B
C 4
For a nondiscriminating monopolist marginal revenue isA) equal to priceB) greater than priceC) less than priceD) represented by a horizontal curveE) equal to average revenue
ANSWER C
C 5
For the nondiscriminating monopolistA) P = MR = ARB) P = MR gt ARC) P gt MR = ARD) P = MR lt ARE) P = AR gt MR
ANSWER E
B 6
A nondiscriminating monopolists demand curveA) is horizontal at the market priceB) lies above its marginal revenue curveC) is the same as its marginal cost curveD) indicates that the firm must raise price to sell additional unitsE) lies above the marginal cost curve at all levels of output
ANSWER B
11
EC 200 Practice problems for MT3
B 7
A profit-maximizing monopoly will always produce at the minimum point of its average total cost (ATC) curveA) TrueB) False
ANSWER B
A 8
A monopolist maximizes profit at the quantity where the slope of its total revenue curve equals the slope of its total cost curveA) TrueB) False
ANSWER A
A 9
Which of the following is not true of monopolistsA) The entry of new firms is not a major concernB) Monopolists seek to maximize profitsC) Monopolists can charge any price they want and make a profitD) Monopolists can choose any point on the market demand curveE) Monopolists can raise price more than 10 percent
ANSWER C
A 1
0
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 profitA) Raise price and lower outputB) Lower price and lower outputC) Raise price and raise outputD) Lower price and raise outputE) Lower output but leave price unchanged
ANSWER A
12
EC 200 Practice problems for MT3
C 1
1
Consider Exhibit 0145 What is the profit-maximizing output for a monopolist that does not price discriminateA) 1 unitB) 2 unitsC) 3 unitsD) 4 unitsE) 5 units
ANSWER C
E 1
2
In the short run a monopolist will shut down whenA) average total cost is greater than price at all output levelsB) average variable cost is greater than average fixed cost at all output
levelsC) price is greater than average variable cost at all output levelsD) average fixed cost is greater than price at all output levelsE) average variable cost is greater than price at all output levels
ANSWER E
D 1
3
For a nondiscriminating monopolist which of the following statements is trueA) Unlike a firm in perfect competition a monopolist produces where
MR gt MCB) The monopolists marginal revenue curve is the same as its demand
curveC) The monopolist will always produce in the inelastic range of its
demand curveD) The monopolist does not have a supply curveE) The monopolist produces where MR lt MC
ANSWER D
13
EC 200 Practice problems for MT3
C 1
4
The profit-maximizing (or loss-minimizing) price the monopoly will charge in Exhibit 9-1 isA) irrelevant since the firm should shut downB) $11C) $16D) $18E) $22
ANSWER C
D 1
5
Which of the following would not bar entry into a marketA) control by a single firm of an essential resourceB) the necessity of taking risks when starting a firmC) patentsD) economies of scaleE) government regulations limiting the number of firms in an industry
ANSWER B
C 1
6
Firms can earn economic profits even in the long run ifA) they charge the highest price possibleB) there is a cost-reducing technological changeC) there are significant barriers to entryD) marginal revenue equals marginal costE) price is less than average variable cost at all rates of output
ANSWER C
14
EC 200 Practice problems for MT3
A 1
7
In the long run which of the following is not a problem for a monopolist earning economic profitA) other firms have an incentive to create substitutes for the monopolists
productB) technological change tends to break down barriers to entryC) patents expire licenses must be renewed and new sources of essential
resources may be discoveredD) government often decides to regulate monopoliesE) all profit will gradually be converted to consumer surplus
ANSWER E
C 1
8
In Exhibit 0150 the level of output that would achieve allocative efficiency isA) 700 unitsB) 810 unitsC) 884 unitsD) 976 unitsE) 1000 units
ANSWER C
C 1
9
Compared to the productive efficiency of a perfectly competitive firm a monopolist tends to beA) very efficient because it charges higher prices
15
EC 200 Practice problems for MT3
B) more efficient because it produces greater outputC) inefficientD) equally efficient as it also produces where MR = MCE) very efficient because it conserves resources by producing less output
ANSWER C
B 2
0
Total deadweight loss in society is reduced through rent seeking by monopolistsA) TrueB) False
ANSWER B
B 2
1
The US Postal Service has found its monopoly eroded over time becauseA) the demand for mail delivery has become more inelasticB) Congress has taken away their monopoly over first-class mailC) the US Postal Service cannot handle the volume of transactionsD) the price of stamps has increased relative to other substitutes such as
the telephoneE) of the decline in the use of fax machines
ANSWER D
D 2
2
Suppose that a price-discriminating monopolist divides its market into two segments In each market segment price is determined by finding the level of output where that marketsA) average revenue equals average total costB) average revenue equals average variable costC) marginal revenue equals average total costD) marginal revenue equals marginal costE) marginal cost equals average total cost
ANSWER D
16
EC 200 Practice problems for MT3
C 2
3
If the monopolist in Exhibit 0150 engages in perfect price discrimination price would beA) $120 for the 884th unitB) $212 on all unitsC) $120 on all unitsD) $136 on all unitsE) $104 on all units
ANSWER A
A 2
4
If the monopolist in Exhibit 0150 engages in perfect price discrimination price wouldA) vary between $212 and $120B) vary between $212 and $104C) be $136 on all unitsD) be $110 on all unitsE) be $104 on all units
ANSWER A
17
EC 200 Practice problems for MT3
E 2
5
In Exhibit 0153 which area represents the amount of consumer surplus received by consumers under perfect price discriminationA) area aB) area bC) area a + b + cD) area b + eE) there is no consumer surplus
ANSWER E
18
EC 200 Practice problems for MT3
C
5 For the nondiscriminating monopolistA) P = MR = ARB) P = MR gt ARC) P gt MR = ARD) P = MR lt ARE) P = AR gt MR
ANSWER E
B
6 A nondiscriminating monopolists demand curveA) is horizontal at the market priceB) lies above its marginal revenue curveC) is the same as its marginal cost curveD) indicates that the firm must raise price to sell additional unitsE) lies above the marginal cost curve at all levels of output
ANSWER B
B
7 A profit-maximizing monopoly will always produce at the minimum point of its average total cost (ATC) curveA) TrueB) False
ANSWER B
A
8 A monopolist maximizes profit at the quantity where the slope of its total revenue curve equals the slope of its total cost curveA) TrueB) False
ANSWER A
A
9 Which of the following is not true of monopolistsA) The entry of new firms is not a major concernB) Monopolists seek to maximize profitsC) Monopolists can charge any price they want and make a profitD) Monopolists can choose any point on the market demand curveE) Monopolists can raise price more than 10 percent
ANSWER C
A
10
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 profitA) Raise price and lower output
4
EC 200 Practice problems for MT3
B) Lower price and lower outputC) Raise price and raise outputD) Lower price and raise outputE) Lower output but leave price unchanged
ANSWER A
C
11
Consider Exhibit 0145 What is the profit-maximizing output for a monopolist that does not price discriminateA) 1 unitB) 2 unitsC) 3 unitsD) 4 unitsE) 5 units
ANSWER C
E
12
In the short run a monopolist will shut down whenA) average total cost is greater than price at all output levelsB) average variable cost is greater than average fixed cost at all output
levelsC) price is greater than average variable cost at all output levelsD) average fixed cost is greater than price at all output levelsE) average variable cost is greater than price at all output levels
ANSWER E
D
13
For a nondiscriminating monopolist which of the following statements is trueA) Unlike a firm in perfect competition a monopolist produces where
MR gt MCB) The monopolists marginal revenue curve is the same as its demand
curveC) The monopolist will always produce in the inelastic range of its
demand curveD) The monopolist does not have a supply curveE) The monopolist produces where MR lt MC
ANSWER D
5
EC 200 Practice problems for MT3
C
14
The profit-maximizing (or loss-minimizing) price the monopoly will charge in Exhibit 9-1 isA) irrelevant since the firm should shut downB) $11C) $16D) $18E) $22
ANSWER C
D
15
Which of the following would not bar entry into a marketA) control by a single firm of an essential resourceB) the necessity of taking risks when starting a firmC) patentsD) economies of scaleE) government regulations limiting the number of firms in an industry
ANSWER B
C
16
Firms can earn economic profits even in the long run ifA) they charge the highest price possibleB) there is a cost-reducing technological changeC) there are significant barriers to entryD) marginal revenue equals marginal costE) price is less than average variable cost at all rates of output
ANSWER C
1In the long run which of the following is not a problem for a monopolist earning
6
EC 200 Practice problems for MT3
A 7 economic profitA) other firms have an incentive to create substitutes for the monopolists
productB) technological change tends to break down barriers to entryC) patents expire licenses must be renewed and new sources of essential
resources may be discoveredD) government often decides to regulate monopoliesE) all profit will gradually be converted to consumer surplus
ANSWER E
C
18
In Exhibit 0150 the level of output that would achieve allocative efficiency isA) 700 unitsB) 810 unitsC) 884 unitsD) 976 unitsE) 1000 units
ANSWER C
C
19
Compared to the productive efficiency of a perfectly competitive firm a monopolist tends to beA) very efficient because it charges higher pricesB) more efficient because it produces greater outputC) inefficientD) equally efficient as it also produces where MR = MCE) very efficient because it conserves resources by producing less output
7
EC 200 Practice problems for MT3
ANSWER C
B
20
Total deadweight loss in society is reduced through rent seeking by monopolistsA) TrueB) False
ANSWER B
B
21
The US Postal Service has found its monopoly eroded over time becauseA) the demand for mail delivery has become more inelasticB) Congress has taken away their monopoly over first-class mailC) the US Postal Service cannot handle the volume of transactionsD) the price of stamps has increased relative to other substitutes such as
the telephoneE) of the decline in the use of fax machines
ANSWER D
D
22
Suppose that a price-discriminating monopolist divides its market into two segments In each market segment price is determined by finding the level of output where that marketsA) average revenue equals average total costB) average revenue equals average variable costC) marginal revenue equals average total costD) marginal revenue equals marginal costE) marginal cost equals average total cost
ANSWER D
8
EC 200 Practice problems for MT3
C
23
If the monopolist in Exhibit 0150 engages in perfect price discrimination price would beA) $120 for the 884th unitB) $212 on all unitsC) $120 on all unitsD) $136 on all unitsE) $104 on all units
ANSWER A
A
24
If the monopolist in Exhibit 0150 engages in perfect price discrimination price wouldA) vary between $212 and $120B) vary between $212 and $104C) be $136 on all unitsD) be $110 on all unitsE) be $104 on all units
ANSWER A
9
EC 200 Practice problems for MT3
E
25
In Exhibit 0153 which area represents the amount of consumer surplus received by consumers under perfect price discriminationA) area aB) area bC) area a + b + cD) area b + eE) there is no consumer surplus
ANSWER E
Multiple ChoiceIdentify the letter of the choice that best completes the statement or answers the question
A 1
Which of the following is trueA) Patents reduce a firms incentive to develop new productsB) Patents are given for new works of art or literatureC) Patents give a permanent exclusive right to produce a new goodD) Patents give a temporary exclusive right to produce a new goodE) Patents guarantee economic profits
ANSWER D
A 2
Patent laws promote technical progress in all of the following ways except one Which is the exceptionA) They allow other firms to copy successful products as soon as they are
marketedB) They prevent duplication of inventionsC) They provide a stimulus to innovationD) They provide the inventor with a temporary monopolyE) They increase a firms incentive to incur the up-front costs of
10
EC 200 Practice problems for MT3
developing new products
ANSWER A
B 3
Which of the following could not bar entry into an industryA) economies of scaleB) diseconomies of scaleC) patentsD) licensesE) one firms control of essential resources
ANSWER B
C 4
For a nondiscriminating monopolist marginal revenue isA) equal to priceB) greater than priceC) less than priceD) represented by a horizontal curveE) equal to average revenue
ANSWER C
C 5
For the nondiscriminating monopolistA) P = MR = ARB) P = MR gt ARC) P gt MR = ARD) P = MR lt ARE) P = AR gt MR
ANSWER E
B 6
A nondiscriminating monopolists demand curveA) is horizontal at the market priceB) lies above its marginal revenue curveC) is the same as its marginal cost curveD) indicates that the firm must raise price to sell additional unitsE) lies above the marginal cost curve at all levels of output
ANSWER B
11
EC 200 Practice problems for MT3
B 7
A profit-maximizing monopoly will always produce at the minimum point of its average total cost (ATC) curveA) TrueB) False
ANSWER B
A 8
A monopolist maximizes profit at the quantity where the slope of its total revenue curve equals the slope of its total cost curveA) TrueB) False
ANSWER A
A 9
Which of the following is not true of monopolistsA) The entry of new firms is not a major concernB) Monopolists seek to maximize profitsC) Monopolists can charge any price they want and make a profitD) Monopolists can choose any point on the market demand curveE) Monopolists can raise price more than 10 percent
ANSWER C
A 1
0
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 profitA) Raise price and lower outputB) Lower price and lower outputC) Raise price and raise outputD) Lower price and raise outputE) Lower output but leave price unchanged
ANSWER A
12
EC 200 Practice problems for MT3
C 1
1
Consider Exhibit 0145 What is the profit-maximizing output for a monopolist that does not price discriminateA) 1 unitB) 2 unitsC) 3 unitsD) 4 unitsE) 5 units
ANSWER C
E 1
2
In the short run a monopolist will shut down whenA) average total cost is greater than price at all output levelsB) average variable cost is greater than average fixed cost at all output
levelsC) price is greater than average variable cost at all output levelsD) average fixed cost is greater than price at all output levelsE) average variable cost is greater than price at all output levels
ANSWER E
D 1
3
For a nondiscriminating monopolist which of the following statements is trueA) Unlike a firm in perfect competition a monopolist produces where
MR gt MCB) The monopolists marginal revenue curve is the same as its demand
curveC) The monopolist will always produce in the inelastic range of its
demand curveD) The monopolist does not have a supply curveE) The monopolist produces where MR lt MC
ANSWER D
13
EC 200 Practice problems for MT3
C 1
4
The profit-maximizing (or loss-minimizing) price the monopoly will charge in Exhibit 9-1 isA) irrelevant since the firm should shut downB) $11C) $16D) $18E) $22
ANSWER C
D 1
5
Which of the following would not bar entry into a marketA) control by a single firm of an essential resourceB) the necessity of taking risks when starting a firmC) patentsD) economies of scaleE) government regulations limiting the number of firms in an industry
ANSWER B
C 1
6
Firms can earn economic profits even in the long run ifA) they charge the highest price possibleB) there is a cost-reducing technological changeC) there are significant barriers to entryD) marginal revenue equals marginal costE) price is less than average variable cost at all rates of output
ANSWER C
14
EC 200 Practice problems for MT3
A 1
7
In the long run which of the following is not a problem for a monopolist earning economic profitA) other firms have an incentive to create substitutes for the monopolists
productB) technological change tends to break down barriers to entryC) patents expire licenses must be renewed and new sources of essential
resources may be discoveredD) government often decides to regulate monopoliesE) all profit will gradually be converted to consumer surplus
ANSWER E
C 1
8
In Exhibit 0150 the level of output that would achieve allocative efficiency isA) 700 unitsB) 810 unitsC) 884 unitsD) 976 unitsE) 1000 units
ANSWER C
C 1
9
Compared to the productive efficiency of a perfectly competitive firm a monopolist tends to beA) very efficient because it charges higher prices
15
EC 200 Practice problems for MT3
B) more efficient because it produces greater outputC) inefficientD) equally efficient as it also produces where MR = MCE) very efficient because it conserves resources by producing less output
ANSWER C
B 2
0
Total deadweight loss in society is reduced through rent seeking by monopolistsA) TrueB) False
ANSWER B
B 2
1
The US Postal Service has found its monopoly eroded over time becauseA) the demand for mail delivery has become more inelasticB) Congress has taken away their monopoly over first-class mailC) the US Postal Service cannot handle the volume of transactionsD) the price of stamps has increased relative to other substitutes such as
the telephoneE) of the decline in the use of fax machines
ANSWER D
D 2
2
Suppose that a price-discriminating monopolist divides its market into two segments In each market segment price is determined by finding the level of output where that marketsA) average revenue equals average total costB) average revenue equals average variable costC) marginal revenue equals average total costD) marginal revenue equals marginal costE) marginal cost equals average total cost
ANSWER D
16
EC 200 Practice problems for MT3
C 2
3
If the monopolist in Exhibit 0150 engages in perfect price discrimination price would beA) $120 for the 884th unitB) $212 on all unitsC) $120 on all unitsD) $136 on all unitsE) $104 on all units
ANSWER A
A 2
4
If the monopolist in Exhibit 0150 engages in perfect price discrimination price wouldA) vary between $212 and $120B) vary between $212 and $104C) be $136 on all unitsD) be $110 on all unitsE) be $104 on all units
ANSWER A
17
EC 200 Practice problems for MT3
E 2
5
In Exhibit 0153 which area represents the amount of consumer surplus received by consumers under perfect price discriminationA) area aB) area bC) area a + b + cD) area b + eE) there is no consumer surplus
ANSWER E
18
EC 200 Practice problems for MT3
B) Lower price and lower outputC) Raise price and raise outputD) Lower price and raise outputE) Lower output but leave price unchanged
ANSWER A
C
11
Consider Exhibit 0145 What is the profit-maximizing output for a monopolist that does not price discriminateA) 1 unitB) 2 unitsC) 3 unitsD) 4 unitsE) 5 units
ANSWER C
E
12
In the short run a monopolist will shut down whenA) average total cost is greater than price at all output levelsB) average variable cost is greater than average fixed cost at all output
levelsC) price is greater than average variable cost at all output levelsD) average fixed cost is greater than price at all output levelsE) average variable cost is greater than price at all output levels
ANSWER E
D
13
For a nondiscriminating monopolist which of the following statements is trueA) Unlike a firm in perfect competition a monopolist produces where
MR gt MCB) The monopolists marginal revenue curve is the same as its demand
curveC) The monopolist will always produce in the inelastic range of its
demand curveD) The monopolist does not have a supply curveE) The monopolist produces where MR lt MC
ANSWER D
5
EC 200 Practice problems for MT3
C
14
The profit-maximizing (or loss-minimizing) price the monopoly will charge in Exhibit 9-1 isA) irrelevant since the firm should shut downB) $11C) $16D) $18E) $22
ANSWER C
D
15
Which of the following would not bar entry into a marketA) control by a single firm of an essential resourceB) the necessity of taking risks when starting a firmC) patentsD) economies of scaleE) government regulations limiting the number of firms in an industry
ANSWER B
C
16
Firms can earn economic profits even in the long run ifA) they charge the highest price possibleB) there is a cost-reducing technological changeC) there are significant barriers to entryD) marginal revenue equals marginal costE) price is less than average variable cost at all rates of output
ANSWER C
1In the long run which of the following is not a problem for a monopolist earning
6
EC 200 Practice problems for MT3
A 7 economic profitA) other firms have an incentive to create substitutes for the monopolists
productB) technological change tends to break down barriers to entryC) patents expire licenses must be renewed and new sources of essential
resources may be discoveredD) government often decides to regulate monopoliesE) all profit will gradually be converted to consumer surplus
ANSWER E
C
18
In Exhibit 0150 the level of output that would achieve allocative efficiency isA) 700 unitsB) 810 unitsC) 884 unitsD) 976 unitsE) 1000 units
ANSWER C
C
19
Compared to the productive efficiency of a perfectly competitive firm a monopolist tends to beA) very efficient because it charges higher pricesB) more efficient because it produces greater outputC) inefficientD) equally efficient as it also produces where MR = MCE) very efficient because it conserves resources by producing less output
7
EC 200 Practice problems for MT3
ANSWER C
B
20
Total deadweight loss in society is reduced through rent seeking by monopolistsA) TrueB) False
ANSWER B
B
21
The US Postal Service has found its monopoly eroded over time becauseA) the demand for mail delivery has become more inelasticB) Congress has taken away their monopoly over first-class mailC) the US Postal Service cannot handle the volume of transactionsD) the price of stamps has increased relative to other substitutes such as
the telephoneE) of the decline in the use of fax machines
ANSWER D
D
22
Suppose that a price-discriminating monopolist divides its market into two segments In each market segment price is determined by finding the level of output where that marketsA) average revenue equals average total costB) average revenue equals average variable costC) marginal revenue equals average total costD) marginal revenue equals marginal costE) marginal cost equals average total cost
ANSWER D
8
EC 200 Practice problems for MT3
C
23
If the monopolist in Exhibit 0150 engages in perfect price discrimination price would beA) $120 for the 884th unitB) $212 on all unitsC) $120 on all unitsD) $136 on all unitsE) $104 on all units
ANSWER A
A
24
If the monopolist in Exhibit 0150 engages in perfect price discrimination price wouldA) vary between $212 and $120B) vary between $212 and $104C) be $136 on all unitsD) be $110 on all unitsE) be $104 on all units
ANSWER A
9
EC 200 Practice problems for MT3
E
25
In Exhibit 0153 which area represents the amount of consumer surplus received by consumers under perfect price discriminationA) area aB) area bC) area a + b + cD) area b + eE) there is no consumer surplus
ANSWER E
Multiple ChoiceIdentify the letter of the choice that best completes the statement or answers the question
A 1
Which of the following is trueA) Patents reduce a firms incentive to develop new productsB) Patents are given for new works of art or literatureC) Patents give a permanent exclusive right to produce a new goodD) Patents give a temporary exclusive right to produce a new goodE) Patents guarantee economic profits
ANSWER D
A 2
Patent laws promote technical progress in all of the following ways except one Which is the exceptionA) They allow other firms to copy successful products as soon as they are
marketedB) They prevent duplication of inventionsC) They provide a stimulus to innovationD) They provide the inventor with a temporary monopolyE) They increase a firms incentive to incur the up-front costs of
10
EC 200 Practice problems for MT3
developing new products
ANSWER A
B 3
Which of the following could not bar entry into an industryA) economies of scaleB) diseconomies of scaleC) patentsD) licensesE) one firms control of essential resources
ANSWER B
C 4
For a nondiscriminating monopolist marginal revenue isA) equal to priceB) greater than priceC) less than priceD) represented by a horizontal curveE) equal to average revenue
ANSWER C
C 5
For the nondiscriminating monopolistA) P = MR = ARB) P = MR gt ARC) P gt MR = ARD) P = MR lt ARE) P = AR gt MR
ANSWER E
B 6
A nondiscriminating monopolists demand curveA) is horizontal at the market priceB) lies above its marginal revenue curveC) is the same as its marginal cost curveD) indicates that the firm must raise price to sell additional unitsE) lies above the marginal cost curve at all levels of output
ANSWER B
11
EC 200 Practice problems for MT3
B 7
A profit-maximizing monopoly will always produce at the minimum point of its average total cost (ATC) curveA) TrueB) False
ANSWER B
A 8
A monopolist maximizes profit at the quantity where the slope of its total revenue curve equals the slope of its total cost curveA) TrueB) False
ANSWER A
A 9
Which of the following is not true of monopolistsA) The entry of new firms is not a major concernB) Monopolists seek to maximize profitsC) Monopolists can charge any price they want and make a profitD) Monopolists can choose any point on the market demand curveE) Monopolists can raise price more than 10 percent
ANSWER C
A 1
0
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 profitA) Raise price and lower outputB) Lower price and lower outputC) Raise price and raise outputD) Lower price and raise outputE) Lower output but leave price unchanged
ANSWER A
12
EC 200 Practice problems for MT3
C 1
1
Consider Exhibit 0145 What is the profit-maximizing output for a monopolist that does not price discriminateA) 1 unitB) 2 unitsC) 3 unitsD) 4 unitsE) 5 units
ANSWER C
E 1
2
In the short run a monopolist will shut down whenA) average total cost is greater than price at all output levelsB) average variable cost is greater than average fixed cost at all output
levelsC) price is greater than average variable cost at all output levelsD) average fixed cost is greater than price at all output levelsE) average variable cost is greater than price at all output levels
ANSWER E
D 1
3
For a nondiscriminating monopolist which of the following statements is trueA) Unlike a firm in perfect competition a monopolist produces where
MR gt MCB) The monopolists marginal revenue curve is the same as its demand
curveC) The monopolist will always produce in the inelastic range of its
demand curveD) The monopolist does not have a supply curveE) The monopolist produces where MR lt MC
ANSWER D
13
EC 200 Practice problems for MT3
C 1
4
The profit-maximizing (or loss-minimizing) price the monopoly will charge in Exhibit 9-1 isA) irrelevant since the firm should shut downB) $11C) $16D) $18E) $22
ANSWER C
D 1
5
Which of the following would not bar entry into a marketA) control by a single firm of an essential resourceB) the necessity of taking risks when starting a firmC) patentsD) economies of scaleE) government regulations limiting the number of firms in an industry
ANSWER B
C 1
6
Firms can earn economic profits even in the long run ifA) they charge the highest price possibleB) there is a cost-reducing technological changeC) there are significant barriers to entryD) marginal revenue equals marginal costE) price is less than average variable cost at all rates of output
ANSWER C
14
EC 200 Practice problems for MT3
A 1
7
In the long run which of the following is not a problem for a monopolist earning economic profitA) other firms have an incentive to create substitutes for the monopolists
productB) technological change tends to break down barriers to entryC) patents expire licenses must be renewed and new sources of essential
resources may be discoveredD) government often decides to regulate monopoliesE) all profit will gradually be converted to consumer surplus
ANSWER E
C 1
8
In Exhibit 0150 the level of output that would achieve allocative efficiency isA) 700 unitsB) 810 unitsC) 884 unitsD) 976 unitsE) 1000 units
ANSWER C
C 1
9
Compared to the productive efficiency of a perfectly competitive firm a monopolist tends to beA) very efficient because it charges higher prices
15
EC 200 Practice problems for MT3
B) more efficient because it produces greater outputC) inefficientD) equally efficient as it also produces where MR = MCE) very efficient because it conserves resources by producing less output
ANSWER C
B 2
0
Total deadweight loss in society is reduced through rent seeking by monopolistsA) TrueB) False
ANSWER B
B 2
1
The US Postal Service has found its monopoly eroded over time becauseA) the demand for mail delivery has become more inelasticB) Congress has taken away their monopoly over first-class mailC) the US Postal Service cannot handle the volume of transactionsD) the price of stamps has increased relative to other substitutes such as
the telephoneE) of the decline in the use of fax machines
ANSWER D
D 2
2
Suppose that a price-discriminating monopolist divides its market into two segments In each market segment price is determined by finding the level of output where that marketsA) average revenue equals average total costB) average revenue equals average variable costC) marginal revenue equals average total costD) marginal revenue equals marginal costE) marginal cost equals average total cost
ANSWER D
16
EC 200 Practice problems for MT3
C 2
3
If the monopolist in Exhibit 0150 engages in perfect price discrimination price would beA) $120 for the 884th unitB) $212 on all unitsC) $120 on all unitsD) $136 on all unitsE) $104 on all units
ANSWER A
A 2
4
If the monopolist in Exhibit 0150 engages in perfect price discrimination price wouldA) vary between $212 and $120B) vary between $212 and $104C) be $136 on all unitsD) be $110 on all unitsE) be $104 on all units
ANSWER A
17
EC 200 Practice problems for MT3
E 2
5
In Exhibit 0153 which area represents the amount of consumer surplus received by consumers under perfect price discriminationA) area aB) area bC) area a + b + cD) area b + eE) there is no consumer surplus
ANSWER E
18
EC 200 Practice problems for MT3
C
14
The profit-maximizing (or loss-minimizing) price the monopoly will charge in Exhibit 9-1 isA) irrelevant since the firm should shut downB) $11C) $16D) $18E) $22
ANSWER C
D
15
Which of the following would not bar entry into a marketA) control by a single firm of an essential resourceB) the necessity of taking risks when starting a firmC) patentsD) economies of scaleE) government regulations limiting the number of firms in an industry
ANSWER B
C
16
Firms can earn economic profits even in the long run ifA) they charge the highest price possibleB) there is a cost-reducing technological changeC) there are significant barriers to entryD) marginal revenue equals marginal costE) price is less than average variable cost at all rates of output
ANSWER C
1In the long run which of the following is not a problem for a monopolist earning
6
EC 200 Practice problems for MT3
A 7 economic profitA) other firms have an incentive to create substitutes for the monopolists
productB) technological change tends to break down barriers to entryC) patents expire licenses must be renewed and new sources of essential
resources may be discoveredD) government often decides to regulate monopoliesE) all profit will gradually be converted to consumer surplus
ANSWER E
C
18
In Exhibit 0150 the level of output that would achieve allocative efficiency isA) 700 unitsB) 810 unitsC) 884 unitsD) 976 unitsE) 1000 units
ANSWER C
C
19
Compared to the productive efficiency of a perfectly competitive firm a monopolist tends to beA) very efficient because it charges higher pricesB) more efficient because it produces greater outputC) inefficientD) equally efficient as it also produces where MR = MCE) very efficient because it conserves resources by producing less output
7
EC 200 Practice problems for MT3
ANSWER C
B
20
Total deadweight loss in society is reduced through rent seeking by monopolistsA) TrueB) False
ANSWER B
B
21
The US Postal Service has found its monopoly eroded over time becauseA) the demand for mail delivery has become more inelasticB) Congress has taken away their monopoly over first-class mailC) the US Postal Service cannot handle the volume of transactionsD) the price of stamps has increased relative to other substitutes such as
the telephoneE) of the decline in the use of fax machines
ANSWER D
D
22
Suppose that a price-discriminating monopolist divides its market into two segments In each market segment price is determined by finding the level of output where that marketsA) average revenue equals average total costB) average revenue equals average variable costC) marginal revenue equals average total costD) marginal revenue equals marginal costE) marginal cost equals average total cost
ANSWER D
8
EC 200 Practice problems for MT3
C
23
If the monopolist in Exhibit 0150 engages in perfect price discrimination price would beA) $120 for the 884th unitB) $212 on all unitsC) $120 on all unitsD) $136 on all unitsE) $104 on all units
ANSWER A
A
24
If the monopolist in Exhibit 0150 engages in perfect price discrimination price wouldA) vary between $212 and $120B) vary between $212 and $104C) be $136 on all unitsD) be $110 on all unitsE) be $104 on all units
ANSWER A
9
EC 200 Practice problems for MT3
E
25
In Exhibit 0153 which area represents the amount of consumer surplus received by consumers under perfect price discriminationA) area aB) area bC) area a + b + cD) area b + eE) there is no consumer surplus
ANSWER E
Multiple ChoiceIdentify the letter of the choice that best completes the statement or answers the question
A 1
Which of the following is trueA) Patents reduce a firms incentive to develop new productsB) Patents are given for new works of art or literatureC) Patents give a permanent exclusive right to produce a new goodD) Patents give a temporary exclusive right to produce a new goodE) Patents guarantee economic profits
ANSWER D
A 2
Patent laws promote technical progress in all of the following ways except one Which is the exceptionA) They allow other firms to copy successful products as soon as they are
marketedB) They prevent duplication of inventionsC) They provide a stimulus to innovationD) They provide the inventor with a temporary monopolyE) They increase a firms incentive to incur the up-front costs of
10
EC 200 Practice problems for MT3
developing new products
ANSWER A
B 3
Which of the following could not bar entry into an industryA) economies of scaleB) diseconomies of scaleC) patentsD) licensesE) one firms control of essential resources
ANSWER B
C 4
For a nondiscriminating monopolist marginal revenue isA) equal to priceB) greater than priceC) less than priceD) represented by a horizontal curveE) equal to average revenue
ANSWER C
C 5
For the nondiscriminating monopolistA) P = MR = ARB) P = MR gt ARC) P gt MR = ARD) P = MR lt ARE) P = AR gt MR
ANSWER E
B 6
A nondiscriminating monopolists demand curveA) is horizontal at the market priceB) lies above its marginal revenue curveC) is the same as its marginal cost curveD) indicates that the firm must raise price to sell additional unitsE) lies above the marginal cost curve at all levels of output
ANSWER B
11
EC 200 Practice problems for MT3
B 7
A profit-maximizing monopoly will always produce at the minimum point of its average total cost (ATC) curveA) TrueB) False
ANSWER B
A 8
A monopolist maximizes profit at the quantity where the slope of its total revenue curve equals the slope of its total cost curveA) TrueB) False
ANSWER A
A 9
Which of the following is not true of monopolistsA) The entry of new firms is not a major concernB) Monopolists seek to maximize profitsC) Monopolists can charge any price they want and make a profitD) Monopolists can choose any point on the market demand curveE) Monopolists can raise price more than 10 percent
ANSWER C
A 1
0
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 profitA) Raise price and lower outputB) Lower price and lower outputC) Raise price and raise outputD) Lower price and raise outputE) Lower output but leave price unchanged
ANSWER A
12
EC 200 Practice problems for MT3
C 1
1
Consider Exhibit 0145 What is the profit-maximizing output for a monopolist that does not price discriminateA) 1 unitB) 2 unitsC) 3 unitsD) 4 unitsE) 5 units
ANSWER C
E 1
2
In the short run a monopolist will shut down whenA) average total cost is greater than price at all output levelsB) average variable cost is greater than average fixed cost at all output
levelsC) price is greater than average variable cost at all output levelsD) average fixed cost is greater than price at all output levelsE) average variable cost is greater than price at all output levels
ANSWER E
D 1
3
For a nondiscriminating monopolist which of the following statements is trueA) Unlike a firm in perfect competition a monopolist produces where
MR gt MCB) The monopolists marginal revenue curve is the same as its demand
curveC) The monopolist will always produce in the inelastic range of its
demand curveD) The monopolist does not have a supply curveE) The monopolist produces where MR lt MC
ANSWER D
13
EC 200 Practice problems for MT3
C 1
4
The profit-maximizing (or loss-minimizing) price the monopoly will charge in Exhibit 9-1 isA) irrelevant since the firm should shut downB) $11C) $16D) $18E) $22
ANSWER C
D 1
5
Which of the following would not bar entry into a marketA) control by a single firm of an essential resourceB) the necessity of taking risks when starting a firmC) patentsD) economies of scaleE) government regulations limiting the number of firms in an industry
ANSWER B
C 1
6
Firms can earn economic profits even in the long run ifA) they charge the highest price possibleB) there is a cost-reducing technological changeC) there are significant barriers to entryD) marginal revenue equals marginal costE) price is less than average variable cost at all rates of output
ANSWER C
14
EC 200 Practice problems for MT3
A 1
7
In the long run which of the following is not a problem for a monopolist earning economic profitA) other firms have an incentive to create substitutes for the monopolists
productB) technological change tends to break down barriers to entryC) patents expire licenses must be renewed and new sources of essential
resources may be discoveredD) government often decides to regulate monopoliesE) all profit will gradually be converted to consumer surplus
ANSWER E
C 1
8
In Exhibit 0150 the level of output that would achieve allocative efficiency isA) 700 unitsB) 810 unitsC) 884 unitsD) 976 unitsE) 1000 units
ANSWER C
C 1
9
Compared to the productive efficiency of a perfectly competitive firm a monopolist tends to beA) very efficient because it charges higher prices
15
EC 200 Practice problems for MT3
B) more efficient because it produces greater outputC) inefficientD) equally efficient as it also produces where MR = MCE) very efficient because it conserves resources by producing less output
ANSWER C
B 2
0
Total deadweight loss in society is reduced through rent seeking by monopolistsA) TrueB) False
ANSWER B
B 2
1
The US Postal Service has found its monopoly eroded over time becauseA) the demand for mail delivery has become more inelasticB) Congress has taken away their monopoly over first-class mailC) the US Postal Service cannot handle the volume of transactionsD) the price of stamps has increased relative to other substitutes such as
the telephoneE) of the decline in the use of fax machines
ANSWER D
D 2
2
Suppose that a price-discriminating monopolist divides its market into two segments In each market segment price is determined by finding the level of output where that marketsA) average revenue equals average total costB) average revenue equals average variable costC) marginal revenue equals average total costD) marginal revenue equals marginal costE) marginal cost equals average total cost
ANSWER D
16
EC 200 Practice problems for MT3
C 2
3
If the monopolist in Exhibit 0150 engages in perfect price discrimination price would beA) $120 for the 884th unitB) $212 on all unitsC) $120 on all unitsD) $136 on all unitsE) $104 on all units
ANSWER A
A 2
4
If the monopolist in Exhibit 0150 engages in perfect price discrimination price wouldA) vary between $212 and $120B) vary between $212 and $104C) be $136 on all unitsD) be $110 on all unitsE) be $104 on all units
ANSWER A
17
EC 200 Practice problems for MT3
E 2
5
In Exhibit 0153 which area represents the amount of consumer surplus received by consumers under perfect price discriminationA) area aB) area bC) area a + b + cD) area b + eE) there is no consumer surplus
ANSWER E
18
EC 200 Practice problems for MT3
A 7 economic profitA) other firms have an incentive to create substitutes for the monopolists
productB) technological change tends to break down barriers to entryC) patents expire licenses must be renewed and new sources of essential
resources may be discoveredD) government often decides to regulate monopoliesE) all profit will gradually be converted to consumer surplus
ANSWER E
C
18
In Exhibit 0150 the level of output that would achieve allocative efficiency isA) 700 unitsB) 810 unitsC) 884 unitsD) 976 unitsE) 1000 units
ANSWER C
C
19
Compared to the productive efficiency of a perfectly competitive firm a monopolist tends to beA) very efficient because it charges higher pricesB) more efficient because it produces greater outputC) inefficientD) equally efficient as it also produces where MR = MCE) very efficient because it conserves resources by producing less output
7
EC 200 Practice problems for MT3
ANSWER C
B
20
Total deadweight loss in society is reduced through rent seeking by monopolistsA) TrueB) False
ANSWER B
B
21
The US Postal Service has found its monopoly eroded over time becauseA) the demand for mail delivery has become more inelasticB) Congress has taken away their monopoly over first-class mailC) the US Postal Service cannot handle the volume of transactionsD) the price of stamps has increased relative to other substitutes such as
the telephoneE) of the decline in the use of fax machines
ANSWER D
D
22
Suppose that a price-discriminating monopolist divides its market into two segments In each market segment price is determined by finding the level of output where that marketsA) average revenue equals average total costB) average revenue equals average variable costC) marginal revenue equals average total costD) marginal revenue equals marginal costE) marginal cost equals average total cost
ANSWER D
8
EC 200 Practice problems for MT3
C
23
If the monopolist in Exhibit 0150 engages in perfect price discrimination price would beA) $120 for the 884th unitB) $212 on all unitsC) $120 on all unitsD) $136 on all unitsE) $104 on all units
ANSWER A
A
24
If the monopolist in Exhibit 0150 engages in perfect price discrimination price wouldA) vary between $212 and $120B) vary between $212 and $104C) be $136 on all unitsD) be $110 on all unitsE) be $104 on all units
ANSWER A
9
EC 200 Practice problems for MT3
E
25
In Exhibit 0153 which area represents the amount of consumer surplus received by consumers under perfect price discriminationA) area aB) area bC) area a + b + cD) area b + eE) there is no consumer surplus
ANSWER E
Multiple ChoiceIdentify the letter of the choice that best completes the statement or answers the question
A 1
Which of the following is trueA) Patents reduce a firms incentive to develop new productsB) Patents are given for new works of art or literatureC) Patents give a permanent exclusive right to produce a new goodD) Patents give a temporary exclusive right to produce a new goodE) Patents guarantee economic profits
ANSWER D
A 2
Patent laws promote technical progress in all of the following ways except one Which is the exceptionA) They allow other firms to copy successful products as soon as they are
marketedB) They prevent duplication of inventionsC) They provide a stimulus to innovationD) They provide the inventor with a temporary monopolyE) They increase a firms incentive to incur the up-front costs of
10
EC 200 Practice problems for MT3
developing new products
ANSWER A
B 3
Which of the following could not bar entry into an industryA) economies of scaleB) diseconomies of scaleC) patentsD) licensesE) one firms control of essential resources
ANSWER B
C 4
For a nondiscriminating monopolist marginal revenue isA) equal to priceB) greater than priceC) less than priceD) represented by a horizontal curveE) equal to average revenue
ANSWER C
C 5
For the nondiscriminating monopolistA) P = MR = ARB) P = MR gt ARC) P gt MR = ARD) P = MR lt ARE) P = AR gt MR
ANSWER E
B 6
A nondiscriminating monopolists demand curveA) is horizontal at the market priceB) lies above its marginal revenue curveC) is the same as its marginal cost curveD) indicates that the firm must raise price to sell additional unitsE) lies above the marginal cost curve at all levels of output
ANSWER B
11
EC 200 Practice problems for MT3
B 7
A profit-maximizing monopoly will always produce at the minimum point of its average total cost (ATC) curveA) TrueB) False
ANSWER B
A 8
A monopolist maximizes profit at the quantity where the slope of its total revenue curve equals the slope of its total cost curveA) TrueB) False
ANSWER A
A 9
Which of the following is not true of monopolistsA) The entry of new firms is not a major concernB) Monopolists seek to maximize profitsC) Monopolists can charge any price they want and make a profitD) Monopolists can choose any point on the market demand curveE) Monopolists can raise price more than 10 percent
ANSWER C
A 1
0
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 profitA) Raise price and lower outputB) Lower price and lower outputC) Raise price and raise outputD) Lower price and raise outputE) Lower output but leave price unchanged
ANSWER A
12
EC 200 Practice problems for MT3
C 1
1
Consider Exhibit 0145 What is the profit-maximizing output for a monopolist that does not price discriminateA) 1 unitB) 2 unitsC) 3 unitsD) 4 unitsE) 5 units
ANSWER C
E 1
2
In the short run a monopolist will shut down whenA) average total cost is greater than price at all output levelsB) average variable cost is greater than average fixed cost at all output
levelsC) price is greater than average variable cost at all output levelsD) average fixed cost is greater than price at all output levelsE) average variable cost is greater than price at all output levels
ANSWER E
D 1
3
For a nondiscriminating monopolist which of the following statements is trueA) Unlike a firm in perfect competition a monopolist produces where
MR gt MCB) The monopolists marginal revenue curve is the same as its demand
curveC) The monopolist will always produce in the inelastic range of its
demand curveD) The monopolist does not have a supply curveE) The monopolist produces where MR lt MC
ANSWER D
13
EC 200 Practice problems for MT3
C 1
4
The profit-maximizing (or loss-minimizing) price the monopoly will charge in Exhibit 9-1 isA) irrelevant since the firm should shut downB) $11C) $16D) $18E) $22
ANSWER C
D 1
5
Which of the following would not bar entry into a marketA) control by a single firm of an essential resourceB) the necessity of taking risks when starting a firmC) patentsD) economies of scaleE) government regulations limiting the number of firms in an industry
ANSWER B
C 1
6
Firms can earn economic profits even in the long run ifA) they charge the highest price possibleB) there is a cost-reducing technological changeC) there are significant barriers to entryD) marginal revenue equals marginal costE) price is less than average variable cost at all rates of output
ANSWER C
14
EC 200 Practice problems for MT3
A 1
7
In the long run which of the following is not a problem for a monopolist earning economic profitA) other firms have an incentive to create substitutes for the monopolists
productB) technological change tends to break down barriers to entryC) patents expire licenses must be renewed and new sources of essential
resources may be discoveredD) government often decides to regulate monopoliesE) all profit will gradually be converted to consumer surplus
ANSWER E
C 1
8
In Exhibit 0150 the level of output that would achieve allocative efficiency isA) 700 unitsB) 810 unitsC) 884 unitsD) 976 unitsE) 1000 units
ANSWER C
C 1
9
Compared to the productive efficiency of a perfectly competitive firm a monopolist tends to beA) very efficient because it charges higher prices
15
EC 200 Practice problems for MT3
B) more efficient because it produces greater outputC) inefficientD) equally efficient as it also produces where MR = MCE) very efficient because it conserves resources by producing less output
ANSWER C
B 2
0
Total deadweight loss in society is reduced through rent seeking by monopolistsA) TrueB) False
ANSWER B
B 2
1
The US Postal Service has found its monopoly eroded over time becauseA) the demand for mail delivery has become more inelasticB) Congress has taken away their monopoly over first-class mailC) the US Postal Service cannot handle the volume of transactionsD) the price of stamps has increased relative to other substitutes such as
the telephoneE) of the decline in the use of fax machines
ANSWER D
D 2
2
Suppose that a price-discriminating monopolist divides its market into two segments In each market segment price is determined by finding the level of output where that marketsA) average revenue equals average total costB) average revenue equals average variable costC) marginal revenue equals average total costD) marginal revenue equals marginal costE) marginal cost equals average total cost
ANSWER D
16
EC 200 Practice problems for MT3
C 2
3
If the monopolist in Exhibit 0150 engages in perfect price discrimination price would beA) $120 for the 884th unitB) $212 on all unitsC) $120 on all unitsD) $136 on all unitsE) $104 on all units
ANSWER A
A 2
4
If the monopolist in Exhibit 0150 engages in perfect price discrimination price wouldA) vary between $212 and $120B) vary between $212 and $104C) be $136 on all unitsD) be $110 on all unitsE) be $104 on all units
ANSWER A
17
EC 200 Practice problems for MT3
E 2
5
In Exhibit 0153 which area represents the amount of consumer surplus received by consumers under perfect price discriminationA) area aB) area bC) area a + b + cD) area b + eE) there is no consumer surplus
ANSWER E
18
EC 200 Practice problems for MT3
ANSWER C
B
20
Total deadweight loss in society is reduced through rent seeking by monopolistsA) TrueB) False
ANSWER B
B
21
The US Postal Service has found its monopoly eroded over time becauseA) the demand for mail delivery has become more inelasticB) Congress has taken away their monopoly over first-class mailC) the US Postal Service cannot handle the volume of transactionsD) the price of stamps has increased relative to other substitutes such as
the telephoneE) of the decline in the use of fax machines
ANSWER D
D
22
Suppose that a price-discriminating monopolist divides its market into two segments In each market segment price is determined by finding the level of output where that marketsA) average revenue equals average total costB) average revenue equals average variable costC) marginal revenue equals average total costD) marginal revenue equals marginal costE) marginal cost equals average total cost
ANSWER D
8
EC 200 Practice problems for MT3
C
23
If the monopolist in Exhibit 0150 engages in perfect price discrimination price would beA) $120 for the 884th unitB) $212 on all unitsC) $120 on all unitsD) $136 on all unitsE) $104 on all units
ANSWER A
A
24
If the monopolist in Exhibit 0150 engages in perfect price discrimination price wouldA) vary between $212 and $120B) vary between $212 and $104C) be $136 on all unitsD) be $110 on all unitsE) be $104 on all units
ANSWER A
9
EC 200 Practice problems for MT3
E
25
In Exhibit 0153 which area represents the amount of consumer surplus received by consumers under perfect price discriminationA) area aB) area bC) area a + b + cD) area b + eE) there is no consumer surplus
ANSWER E
Multiple ChoiceIdentify the letter of the choice that best completes the statement or answers the question
A 1
Which of the following is trueA) Patents reduce a firms incentive to develop new productsB) Patents are given for new works of art or literatureC) Patents give a permanent exclusive right to produce a new goodD) Patents give a temporary exclusive right to produce a new goodE) Patents guarantee economic profits
ANSWER D
A 2
Patent laws promote technical progress in all of the following ways except one Which is the exceptionA) They allow other firms to copy successful products as soon as they are
marketedB) They prevent duplication of inventionsC) They provide a stimulus to innovationD) They provide the inventor with a temporary monopolyE) They increase a firms incentive to incur the up-front costs of
10
EC 200 Practice problems for MT3
developing new products
ANSWER A
B 3
Which of the following could not bar entry into an industryA) economies of scaleB) diseconomies of scaleC) patentsD) licensesE) one firms control of essential resources
ANSWER B
C 4
For a nondiscriminating monopolist marginal revenue isA) equal to priceB) greater than priceC) less than priceD) represented by a horizontal curveE) equal to average revenue
ANSWER C
C 5
For the nondiscriminating monopolistA) P = MR = ARB) P = MR gt ARC) P gt MR = ARD) P = MR lt ARE) P = AR gt MR
ANSWER E
B 6
A nondiscriminating monopolists demand curveA) is horizontal at the market priceB) lies above its marginal revenue curveC) is the same as its marginal cost curveD) indicates that the firm must raise price to sell additional unitsE) lies above the marginal cost curve at all levels of output
ANSWER B
11
EC 200 Practice problems for MT3
B 7
A profit-maximizing monopoly will always produce at the minimum point of its average total cost (ATC) curveA) TrueB) False
ANSWER B
A 8
A monopolist maximizes profit at the quantity where the slope of its total revenue curve equals the slope of its total cost curveA) TrueB) False
ANSWER A
A 9
Which of the following is not true of monopolistsA) The entry of new firms is not a major concernB) Monopolists seek to maximize profitsC) Monopolists can charge any price they want and make a profitD) Monopolists can choose any point on the market demand curveE) Monopolists can raise price more than 10 percent
ANSWER C
A 1
0
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 profitA) Raise price and lower outputB) Lower price and lower outputC) Raise price and raise outputD) Lower price and raise outputE) Lower output but leave price unchanged
ANSWER A
12
EC 200 Practice problems for MT3
C 1
1
Consider Exhibit 0145 What is the profit-maximizing output for a monopolist that does not price discriminateA) 1 unitB) 2 unitsC) 3 unitsD) 4 unitsE) 5 units
ANSWER C
E 1
2
In the short run a monopolist will shut down whenA) average total cost is greater than price at all output levelsB) average variable cost is greater than average fixed cost at all output
levelsC) price is greater than average variable cost at all output levelsD) average fixed cost is greater than price at all output levelsE) average variable cost is greater than price at all output levels
ANSWER E
D 1
3
For a nondiscriminating monopolist which of the following statements is trueA) Unlike a firm in perfect competition a monopolist produces where
MR gt MCB) The monopolists marginal revenue curve is the same as its demand
curveC) The monopolist will always produce in the inelastic range of its
demand curveD) The monopolist does not have a supply curveE) The monopolist produces where MR lt MC
ANSWER D
13
EC 200 Practice problems for MT3
C 1
4
The profit-maximizing (or loss-minimizing) price the monopoly will charge in Exhibit 9-1 isA) irrelevant since the firm should shut downB) $11C) $16D) $18E) $22
ANSWER C
D 1
5
Which of the following would not bar entry into a marketA) control by a single firm of an essential resourceB) the necessity of taking risks when starting a firmC) patentsD) economies of scaleE) government regulations limiting the number of firms in an industry
ANSWER B
C 1
6
Firms can earn economic profits even in the long run ifA) they charge the highest price possibleB) there is a cost-reducing technological changeC) there are significant barriers to entryD) marginal revenue equals marginal costE) price is less than average variable cost at all rates of output
ANSWER C
14
EC 200 Practice problems for MT3
A 1
7
In the long run which of the following is not a problem for a monopolist earning economic profitA) other firms have an incentive to create substitutes for the monopolists
productB) technological change tends to break down barriers to entryC) patents expire licenses must be renewed and new sources of essential
resources may be discoveredD) government often decides to regulate monopoliesE) all profit will gradually be converted to consumer surplus
ANSWER E
C 1
8
In Exhibit 0150 the level of output that would achieve allocative efficiency isA) 700 unitsB) 810 unitsC) 884 unitsD) 976 unitsE) 1000 units
ANSWER C
C 1
9
Compared to the productive efficiency of a perfectly competitive firm a monopolist tends to beA) very efficient because it charges higher prices
15
EC 200 Practice problems for MT3
B) more efficient because it produces greater outputC) inefficientD) equally efficient as it also produces where MR = MCE) very efficient because it conserves resources by producing less output
ANSWER C
B 2
0
Total deadweight loss in society is reduced through rent seeking by monopolistsA) TrueB) False
ANSWER B
B 2
1
The US Postal Service has found its monopoly eroded over time becauseA) the demand for mail delivery has become more inelasticB) Congress has taken away their monopoly over first-class mailC) the US Postal Service cannot handle the volume of transactionsD) the price of stamps has increased relative to other substitutes such as
the telephoneE) of the decline in the use of fax machines
ANSWER D
D 2
2
Suppose that a price-discriminating monopolist divides its market into two segments In each market segment price is determined by finding the level of output where that marketsA) average revenue equals average total costB) average revenue equals average variable costC) marginal revenue equals average total costD) marginal revenue equals marginal costE) marginal cost equals average total cost
ANSWER D
16
EC 200 Practice problems for MT3
C 2
3
If the monopolist in Exhibit 0150 engages in perfect price discrimination price would beA) $120 for the 884th unitB) $212 on all unitsC) $120 on all unitsD) $136 on all unitsE) $104 on all units
ANSWER A
A 2
4
If the monopolist in Exhibit 0150 engages in perfect price discrimination price wouldA) vary between $212 and $120B) vary between $212 and $104C) be $136 on all unitsD) be $110 on all unitsE) be $104 on all units
ANSWER A
17
EC 200 Practice problems for MT3
E 2
5
In Exhibit 0153 which area represents the amount of consumer surplus received by consumers under perfect price discriminationA) area aB) area bC) area a + b + cD) area b + eE) there is no consumer surplus
ANSWER E
18
EC 200 Practice problems for MT3
C
23
If the monopolist in Exhibit 0150 engages in perfect price discrimination price would beA) $120 for the 884th unitB) $212 on all unitsC) $120 on all unitsD) $136 on all unitsE) $104 on all units
ANSWER A
A
24
If the monopolist in Exhibit 0150 engages in perfect price discrimination price wouldA) vary between $212 and $120B) vary between $212 and $104C) be $136 on all unitsD) be $110 on all unitsE) be $104 on all units
ANSWER A
9
EC 200 Practice problems for MT3
E
25
In Exhibit 0153 which area represents the amount of consumer surplus received by consumers under perfect price discriminationA) area aB) area bC) area a + b + cD) area b + eE) there is no consumer surplus
ANSWER E
Multiple ChoiceIdentify the letter of the choice that best completes the statement or answers the question
A 1
Which of the following is trueA) Patents reduce a firms incentive to develop new productsB) Patents are given for new works of art or literatureC) Patents give a permanent exclusive right to produce a new goodD) Patents give a temporary exclusive right to produce a new goodE) Patents guarantee economic profits
ANSWER D
A 2
Patent laws promote technical progress in all of the following ways except one Which is the exceptionA) They allow other firms to copy successful products as soon as they are
marketedB) They prevent duplication of inventionsC) They provide a stimulus to innovationD) They provide the inventor with a temporary monopolyE) They increase a firms incentive to incur the up-front costs of
10
EC 200 Practice problems for MT3
developing new products
ANSWER A
B 3
Which of the following could not bar entry into an industryA) economies of scaleB) diseconomies of scaleC) patentsD) licensesE) one firms control of essential resources
ANSWER B
C 4
For a nondiscriminating monopolist marginal revenue isA) equal to priceB) greater than priceC) less than priceD) represented by a horizontal curveE) equal to average revenue
ANSWER C
C 5
For the nondiscriminating monopolistA) P = MR = ARB) P = MR gt ARC) P gt MR = ARD) P = MR lt ARE) P = AR gt MR
ANSWER E
B 6
A nondiscriminating monopolists demand curveA) is horizontal at the market priceB) lies above its marginal revenue curveC) is the same as its marginal cost curveD) indicates that the firm must raise price to sell additional unitsE) lies above the marginal cost curve at all levels of output
ANSWER B
11
EC 200 Practice problems for MT3
B 7
A profit-maximizing monopoly will always produce at the minimum point of its average total cost (ATC) curveA) TrueB) False
ANSWER B
A 8
A monopolist maximizes profit at the quantity where the slope of its total revenue curve equals the slope of its total cost curveA) TrueB) False
ANSWER A
A 9
Which of the following is not true of monopolistsA) The entry of new firms is not a major concernB) Monopolists seek to maximize profitsC) Monopolists can charge any price they want and make a profitD) Monopolists can choose any point on the market demand curveE) Monopolists can raise price more than 10 percent
ANSWER C
A 1
0
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 profitA) Raise price and lower outputB) Lower price and lower outputC) Raise price and raise outputD) Lower price and raise outputE) Lower output but leave price unchanged
ANSWER A
12
EC 200 Practice problems for MT3
C 1
1
Consider Exhibit 0145 What is the profit-maximizing output for a monopolist that does not price discriminateA) 1 unitB) 2 unitsC) 3 unitsD) 4 unitsE) 5 units
ANSWER C
E 1
2
In the short run a monopolist will shut down whenA) average total cost is greater than price at all output levelsB) average variable cost is greater than average fixed cost at all output
levelsC) price is greater than average variable cost at all output levelsD) average fixed cost is greater than price at all output levelsE) average variable cost is greater than price at all output levels
ANSWER E
D 1
3
For a nondiscriminating monopolist which of the following statements is trueA) Unlike a firm in perfect competition a monopolist produces where
MR gt MCB) The monopolists marginal revenue curve is the same as its demand
curveC) The monopolist will always produce in the inelastic range of its
demand curveD) The monopolist does not have a supply curveE) The monopolist produces where MR lt MC
ANSWER D
13
EC 200 Practice problems for MT3
C 1
4
The profit-maximizing (or loss-minimizing) price the monopoly will charge in Exhibit 9-1 isA) irrelevant since the firm should shut downB) $11C) $16D) $18E) $22
ANSWER C
D 1
5
Which of the following would not bar entry into a marketA) control by a single firm of an essential resourceB) the necessity of taking risks when starting a firmC) patentsD) economies of scaleE) government regulations limiting the number of firms in an industry
ANSWER B
C 1
6
Firms can earn economic profits even in the long run ifA) they charge the highest price possibleB) there is a cost-reducing technological changeC) there are significant barriers to entryD) marginal revenue equals marginal costE) price is less than average variable cost at all rates of output
ANSWER C
14
EC 200 Practice problems for MT3
A 1
7
In the long run which of the following is not a problem for a monopolist earning economic profitA) other firms have an incentive to create substitutes for the monopolists
productB) technological change tends to break down barriers to entryC) patents expire licenses must be renewed and new sources of essential
resources may be discoveredD) government often decides to regulate monopoliesE) all profit will gradually be converted to consumer surplus
ANSWER E
C 1
8
In Exhibit 0150 the level of output that would achieve allocative efficiency isA) 700 unitsB) 810 unitsC) 884 unitsD) 976 unitsE) 1000 units
ANSWER C
C 1
9
Compared to the productive efficiency of a perfectly competitive firm a monopolist tends to beA) very efficient because it charges higher prices
15
EC 200 Practice problems for MT3
B) more efficient because it produces greater outputC) inefficientD) equally efficient as it also produces where MR = MCE) very efficient because it conserves resources by producing less output
ANSWER C
B 2
0
Total deadweight loss in society is reduced through rent seeking by monopolistsA) TrueB) False
ANSWER B
B 2
1
The US Postal Service has found its monopoly eroded over time becauseA) the demand for mail delivery has become more inelasticB) Congress has taken away their monopoly over first-class mailC) the US Postal Service cannot handle the volume of transactionsD) the price of stamps has increased relative to other substitutes such as
the telephoneE) of the decline in the use of fax machines
ANSWER D
D 2
2
Suppose that a price-discriminating monopolist divides its market into two segments In each market segment price is determined by finding the level of output where that marketsA) average revenue equals average total costB) average revenue equals average variable costC) marginal revenue equals average total costD) marginal revenue equals marginal costE) marginal cost equals average total cost
ANSWER D
16
EC 200 Practice problems for MT3
C 2
3
If the monopolist in Exhibit 0150 engages in perfect price discrimination price would beA) $120 for the 884th unitB) $212 on all unitsC) $120 on all unitsD) $136 on all unitsE) $104 on all units
ANSWER A
A 2
4
If the monopolist in Exhibit 0150 engages in perfect price discrimination price wouldA) vary between $212 and $120B) vary between $212 and $104C) be $136 on all unitsD) be $110 on all unitsE) be $104 on all units
ANSWER A
17
EC 200 Practice problems for MT3
E 2
5
In Exhibit 0153 which area represents the amount of consumer surplus received by consumers under perfect price discriminationA) area aB) area bC) area a + b + cD) area b + eE) there is no consumer surplus
ANSWER E
18
EC 200 Practice problems for MT3
E
25
In Exhibit 0153 which area represents the amount of consumer surplus received by consumers under perfect price discriminationA) area aB) area bC) area a + b + cD) area b + eE) there is no consumer surplus
ANSWER E
Multiple ChoiceIdentify the letter of the choice that best completes the statement or answers the question
A 1
Which of the following is trueA) Patents reduce a firms incentive to develop new productsB) Patents are given for new works of art or literatureC) Patents give a permanent exclusive right to produce a new goodD) Patents give a temporary exclusive right to produce a new goodE) Patents guarantee economic profits
ANSWER D
A 2
Patent laws promote technical progress in all of the following ways except one Which is the exceptionA) They allow other firms to copy successful products as soon as they are
marketedB) They prevent duplication of inventionsC) They provide a stimulus to innovationD) They provide the inventor with a temporary monopolyE) They increase a firms incentive to incur the up-front costs of
10
EC 200 Practice problems for MT3
developing new products
ANSWER A
B 3
Which of the following could not bar entry into an industryA) economies of scaleB) diseconomies of scaleC) patentsD) licensesE) one firms control of essential resources
ANSWER B
C 4
For a nondiscriminating monopolist marginal revenue isA) equal to priceB) greater than priceC) less than priceD) represented by a horizontal curveE) equal to average revenue
ANSWER C
C 5
For the nondiscriminating monopolistA) P = MR = ARB) P = MR gt ARC) P gt MR = ARD) P = MR lt ARE) P = AR gt MR
ANSWER E
B 6
A nondiscriminating monopolists demand curveA) is horizontal at the market priceB) lies above its marginal revenue curveC) is the same as its marginal cost curveD) indicates that the firm must raise price to sell additional unitsE) lies above the marginal cost curve at all levels of output
ANSWER B
11
EC 200 Practice problems for MT3
B 7
A profit-maximizing monopoly will always produce at the minimum point of its average total cost (ATC) curveA) TrueB) False
ANSWER B
A 8
A monopolist maximizes profit at the quantity where the slope of its total revenue curve equals the slope of its total cost curveA) TrueB) False
ANSWER A
A 9
Which of the following is not true of monopolistsA) The entry of new firms is not a major concernB) Monopolists seek to maximize profitsC) Monopolists can charge any price they want and make a profitD) Monopolists can choose any point on the market demand curveE) Monopolists can raise price more than 10 percent
ANSWER C
A 1
0
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 profitA) Raise price and lower outputB) Lower price and lower outputC) Raise price and raise outputD) Lower price and raise outputE) Lower output but leave price unchanged
ANSWER A
12
EC 200 Practice problems for MT3
C 1
1
Consider Exhibit 0145 What is the profit-maximizing output for a monopolist that does not price discriminateA) 1 unitB) 2 unitsC) 3 unitsD) 4 unitsE) 5 units
ANSWER C
E 1
2
In the short run a monopolist will shut down whenA) average total cost is greater than price at all output levelsB) average variable cost is greater than average fixed cost at all output
levelsC) price is greater than average variable cost at all output levelsD) average fixed cost is greater than price at all output levelsE) average variable cost is greater than price at all output levels
ANSWER E
D 1
3
For a nondiscriminating monopolist which of the following statements is trueA) Unlike a firm in perfect competition a monopolist produces where
MR gt MCB) The monopolists marginal revenue curve is the same as its demand
curveC) The monopolist will always produce in the inelastic range of its
demand curveD) The monopolist does not have a supply curveE) The monopolist produces where MR lt MC
ANSWER D
13
EC 200 Practice problems for MT3
C 1
4
The profit-maximizing (or loss-minimizing) price the monopoly will charge in Exhibit 9-1 isA) irrelevant since the firm should shut downB) $11C) $16D) $18E) $22
ANSWER C
D 1
5
Which of the following would not bar entry into a marketA) control by a single firm of an essential resourceB) the necessity of taking risks when starting a firmC) patentsD) economies of scaleE) government regulations limiting the number of firms in an industry
ANSWER B
C 1
6
Firms can earn economic profits even in the long run ifA) they charge the highest price possibleB) there is a cost-reducing technological changeC) there are significant barriers to entryD) marginal revenue equals marginal costE) price is less than average variable cost at all rates of output
ANSWER C
14
EC 200 Practice problems for MT3
A 1
7
In the long run which of the following is not a problem for a monopolist earning economic profitA) other firms have an incentive to create substitutes for the monopolists
productB) technological change tends to break down barriers to entryC) patents expire licenses must be renewed and new sources of essential
resources may be discoveredD) government often decides to regulate monopoliesE) all profit will gradually be converted to consumer surplus
ANSWER E
C 1
8
In Exhibit 0150 the level of output that would achieve allocative efficiency isA) 700 unitsB) 810 unitsC) 884 unitsD) 976 unitsE) 1000 units
ANSWER C
C 1
9
Compared to the productive efficiency of a perfectly competitive firm a monopolist tends to beA) very efficient because it charges higher prices
15
EC 200 Practice problems for MT3
B) more efficient because it produces greater outputC) inefficientD) equally efficient as it also produces where MR = MCE) very efficient because it conserves resources by producing less output
ANSWER C
B 2
0
Total deadweight loss in society is reduced through rent seeking by monopolistsA) TrueB) False
ANSWER B
B 2
1
The US Postal Service has found its monopoly eroded over time becauseA) the demand for mail delivery has become more inelasticB) Congress has taken away their monopoly over first-class mailC) the US Postal Service cannot handle the volume of transactionsD) the price of stamps has increased relative to other substitutes such as
the telephoneE) of the decline in the use of fax machines
ANSWER D
D 2
2
Suppose that a price-discriminating monopolist divides its market into two segments In each market segment price is determined by finding the level of output where that marketsA) average revenue equals average total costB) average revenue equals average variable costC) marginal revenue equals average total costD) marginal revenue equals marginal costE) marginal cost equals average total cost
ANSWER D
16
EC 200 Practice problems for MT3
C 2
3
If the monopolist in Exhibit 0150 engages in perfect price discrimination price would beA) $120 for the 884th unitB) $212 on all unitsC) $120 on all unitsD) $136 on all unitsE) $104 on all units
ANSWER A
A 2
4
If the monopolist in Exhibit 0150 engages in perfect price discrimination price wouldA) vary between $212 and $120B) vary between $212 and $104C) be $136 on all unitsD) be $110 on all unitsE) be $104 on all units
ANSWER A
17
EC 200 Practice problems for MT3
E 2
5
In Exhibit 0153 which area represents the amount of consumer surplus received by consumers under perfect price discriminationA) area aB) area bC) area a + b + cD) area b + eE) there is no consumer surplus
ANSWER E
18
EC 200 Practice problems for MT3
developing new products
ANSWER A
B 3
Which of the following could not bar entry into an industryA) economies of scaleB) diseconomies of scaleC) patentsD) licensesE) one firms control of essential resources
ANSWER B
C 4
For a nondiscriminating monopolist marginal revenue isA) equal to priceB) greater than priceC) less than priceD) represented by a horizontal curveE) equal to average revenue
ANSWER C
C 5
For the nondiscriminating monopolistA) P = MR = ARB) P = MR gt ARC) P gt MR = ARD) P = MR lt ARE) P = AR gt MR
ANSWER E
B 6
A nondiscriminating monopolists demand curveA) is horizontal at the market priceB) lies above its marginal revenue curveC) is the same as its marginal cost curveD) indicates that the firm must raise price to sell additional unitsE) lies above the marginal cost curve at all levels of output
ANSWER B
11
EC 200 Practice problems for MT3
B 7
A profit-maximizing monopoly will always produce at the minimum point of its average total cost (ATC) curveA) TrueB) False
ANSWER B
A 8
A monopolist maximizes profit at the quantity where the slope of its total revenue curve equals the slope of its total cost curveA) TrueB) False
ANSWER A
A 9
Which of the following is not true of monopolistsA) The entry of new firms is not a major concernB) Monopolists seek to maximize profitsC) Monopolists can charge any price they want and make a profitD) Monopolists can choose any point on the market demand curveE) Monopolists can raise price more than 10 percent
ANSWER C
A 1
0
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 profitA) Raise price and lower outputB) Lower price and lower outputC) Raise price and raise outputD) Lower price and raise outputE) Lower output but leave price unchanged
ANSWER A
12
EC 200 Practice problems for MT3
C 1
1
Consider Exhibit 0145 What is the profit-maximizing output for a monopolist that does not price discriminateA) 1 unitB) 2 unitsC) 3 unitsD) 4 unitsE) 5 units
ANSWER C
E 1
2
In the short run a monopolist will shut down whenA) average total cost is greater than price at all output levelsB) average variable cost is greater than average fixed cost at all output
levelsC) price is greater than average variable cost at all output levelsD) average fixed cost is greater than price at all output levelsE) average variable cost is greater than price at all output levels
ANSWER E
D 1
3
For a nondiscriminating monopolist which of the following statements is trueA) Unlike a firm in perfect competition a monopolist produces where
MR gt MCB) The monopolists marginal revenue curve is the same as its demand
curveC) The monopolist will always produce in the inelastic range of its
demand curveD) The monopolist does not have a supply curveE) The monopolist produces where MR lt MC
ANSWER D
13
EC 200 Practice problems for MT3
C 1
4
The profit-maximizing (or loss-minimizing) price the monopoly will charge in Exhibit 9-1 isA) irrelevant since the firm should shut downB) $11C) $16D) $18E) $22
ANSWER C
D 1
5
Which of the following would not bar entry into a marketA) control by a single firm of an essential resourceB) the necessity of taking risks when starting a firmC) patentsD) economies of scaleE) government regulations limiting the number of firms in an industry
ANSWER B
C 1
6
Firms can earn economic profits even in the long run ifA) they charge the highest price possibleB) there is a cost-reducing technological changeC) there are significant barriers to entryD) marginal revenue equals marginal costE) price is less than average variable cost at all rates of output
ANSWER C
14
EC 200 Practice problems for MT3
A 1
7
In the long run which of the following is not a problem for a monopolist earning economic profitA) other firms have an incentive to create substitutes for the monopolists
productB) technological change tends to break down barriers to entryC) patents expire licenses must be renewed and new sources of essential
resources may be discoveredD) government often decides to regulate monopoliesE) all profit will gradually be converted to consumer surplus
ANSWER E
C 1
8
In Exhibit 0150 the level of output that would achieve allocative efficiency isA) 700 unitsB) 810 unitsC) 884 unitsD) 976 unitsE) 1000 units
ANSWER C
C 1
9
Compared to the productive efficiency of a perfectly competitive firm a monopolist tends to beA) very efficient because it charges higher prices
15
EC 200 Practice problems for MT3
B) more efficient because it produces greater outputC) inefficientD) equally efficient as it also produces where MR = MCE) very efficient because it conserves resources by producing less output
ANSWER C
B 2
0
Total deadweight loss in society is reduced through rent seeking by monopolistsA) TrueB) False
ANSWER B
B 2
1
The US Postal Service has found its monopoly eroded over time becauseA) the demand for mail delivery has become more inelasticB) Congress has taken away their monopoly over first-class mailC) the US Postal Service cannot handle the volume of transactionsD) the price of stamps has increased relative to other substitutes such as
the telephoneE) of the decline in the use of fax machines
ANSWER D
D 2
2
Suppose that a price-discriminating monopolist divides its market into two segments In each market segment price is determined by finding the level of output where that marketsA) average revenue equals average total costB) average revenue equals average variable costC) marginal revenue equals average total costD) marginal revenue equals marginal costE) marginal cost equals average total cost
ANSWER D
16
EC 200 Practice problems for MT3
C 2
3
If the monopolist in Exhibit 0150 engages in perfect price discrimination price would beA) $120 for the 884th unitB) $212 on all unitsC) $120 on all unitsD) $136 on all unitsE) $104 on all units
ANSWER A
A 2
4
If the monopolist in Exhibit 0150 engages in perfect price discrimination price wouldA) vary between $212 and $120B) vary between $212 and $104C) be $136 on all unitsD) be $110 on all unitsE) be $104 on all units
ANSWER A
17
EC 200 Practice problems for MT3
E 2
5
In Exhibit 0153 which area represents the amount of consumer surplus received by consumers under perfect price discriminationA) area aB) area bC) area a + b + cD) area b + eE) there is no consumer surplus
ANSWER E
18
EC 200 Practice problems for MT3
B 7
A profit-maximizing monopoly will always produce at the minimum point of its average total cost (ATC) curveA) TrueB) False
ANSWER B
A 8
A monopolist maximizes profit at the quantity where the slope of its total revenue curve equals the slope of its total cost curveA) TrueB) False
ANSWER A
A 9
Which of the following is not true of monopolistsA) The entry of new firms is not a major concernB) Monopolists seek to maximize profitsC) Monopolists can charge any price they want and make a profitD) Monopolists can choose any point on the market demand curveE) Monopolists can raise price more than 10 percent
ANSWER C
A 1
0
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 profitA) Raise price and lower outputB) Lower price and lower outputC) Raise price and raise outputD) Lower price and raise outputE) Lower output but leave price unchanged
ANSWER A
12
EC 200 Practice problems for MT3
C 1
1
Consider Exhibit 0145 What is the profit-maximizing output for a monopolist that does not price discriminateA) 1 unitB) 2 unitsC) 3 unitsD) 4 unitsE) 5 units
ANSWER C
E 1
2
In the short run a monopolist will shut down whenA) average total cost is greater than price at all output levelsB) average variable cost is greater than average fixed cost at all output
levelsC) price is greater than average variable cost at all output levelsD) average fixed cost is greater than price at all output levelsE) average variable cost is greater than price at all output levels
ANSWER E
D 1
3
For a nondiscriminating monopolist which of the following statements is trueA) Unlike a firm in perfect competition a monopolist produces where
MR gt MCB) The monopolists marginal revenue curve is the same as its demand
curveC) The monopolist will always produce in the inelastic range of its
demand curveD) The monopolist does not have a supply curveE) The monopolist produces where MR lt MC
ANSWER D
13
EC 200 Practice problems for MT3
C 1
4
The profit-maximizing (or loss-minimizing) price the monopoly will charge in Exhibit 9-1 isA) irrelevant since the firm should shut downB) $11C) $16D) $18E) $22
ANSWER C
D 1
5
Which of the following would not bar entry into a marketA) control by a single firm of an essential resourceB) the necessity of taking risks when starting a firmC) patentsD) economies of scaleE) government regulations limiting the number of firms in an industry
ANSWER B
C 1
6
Firms can earn economic profits even in the long run ifA) they charge the highest price possibleB) there is a cost-reducing technological changeC) there are significant barriers to entryD) marginal revenue equals marginal costE) price is less than average variable cost at all rates of output
ANSWER C
14
EC 200 Practice problems for MT3
A 1
7
In the long run which of the following is not a problem for a monopolist earning economic profitA) other firms have an incentive to create substitutes for the monopolists
productB) technological change tends to break down barriers to entryC) patents expire licenses must be renewed and new sources of essential
resources may be discoveredD) government often decides to regulate monopoliesE) all profit will gradually be converted to consumer surplus
ANSWER E
C 1
8
In Exhibit 0150 the level of output that would achieve allocative efficiency isA) 700 unitsB) 810 unitsC) 884 unitsD) 976 unitsE) 1000 units
ANSWER C
C 1
9
Compared to the productive efficiency of a perfectly competitive firm a monopolist tends to beA) very efficient because it charges higher prices
15
EC 200 Practice problems for MT3
B) more efficient because it produces greater outputC) inefficientD) equally efficient as it also produces where MR = MCE) very efficient because it conserves resources by producing less output
ANSWER C
B 2
0
Total deadweight loss in society is reduced through rent seeking by monopolistsA) TrueB) False
ANSWER B
B 2
1
The US Postal Service has found its monopoly eroded over time becauseA) the demand for mail delivery has become more inelasticB) Congress has taken away their monopoly over first-class mailC) the US Postal Service cannot handle the volume of transactionsD) the price of stamps has increased relative to other substitutes such as
the telephoneE) of the decline in the use of fax machines
ANSWER D
D 2
2
Suppose that a price-discriminating monopolist divides its market into two segments In each market segment price is determined by finding the level of output where that marketsA) average revenue equals average total costB) average revenue equals average variable costC) marginal revenue equals average total costD) marginal revenue equals marginal costE) marginal cost equals average total cost
ANSWER D
16
EC 200 Practice problems for MT3
C 2
3
If the monopolist in Exhibit 0150 engages in perfect price discrimination price would beA) $120 for the 884th unitB) $212 on all unitsC) $120 on all unitsD) $136 on all unitsE) $104 on all units
ANSWER A
A 2
4
If the monopolist in Exhibit 0150 engages in perfect price discrimination price wouldA) vary between $212 and $120B) vary between $212 and $104C) be $136 on all unitsD) be $110 on all unitsE) be $104 on all units
ANSWER A
17
EC 200 Practice problems for MT3
E 2
5
In Exhibit 0153 which area represents the amount of consumer surplus received by consumers under perfect price discriminationA) area aB) area bC) area a + b + cD) area b + eE) there is no consumer surplus
ANSWER E
18
EC 200 Practice problems for MT3
C 1
1
Consider Exhibit 0145 What is the profit-maximizing output for a monopolist that does not price discriminateA) 1 unitB) 2 unitsC) 3 unitsD) 4 unitsE) 5 units
ANSWER C
E 1
2
In the short run a monopolist will shut down whenA) average total cost is greater than price at all output levelsB) average variable cost is greater than average fixed cost at all output
levelsC) price is greater than average variable cost at all output levelsD) average fixed cost is greater than price at all output levelsE) average variable cost is greater than price at all output levels
ANSWER E
D 1
3
For a nondiscriminating monopolist which of the following statements is trueA) Unlike a firm in perfect competition a monopolist produces where
MR gt MCB) The monopolists marginal revenue curve is the same as its demand
curveC) The monopolist will always produce in the inelastic range of its
demand curveD) The monopolist does not have a supply curveE) The monopolist produces where MR lt MC
ANSWER D
13
EC 200 Practice problems for MT3
C 1
4
The profit-maximizing (or loss-minimizing) price the monopoly will charge in Exhibit 9-1 isA) irrelevant since the firm should shut downB) $11C) $16D) $18E) $22
ANSWER C
D 1
5
Which of the following would not bar entry into a marketA) control by a single firm of an essential resourceB) the necessity of taking risks when starting a firmC) patentsD) economies of scaleE) government regulations limiting the number of firms in an industry
ANSWER B
C 1
6
Firms can earn economic profits even in the long run ifA) they charge the highest price possibleB) there is a cost-reducing technological changeC) there are significant barriers to entryD) marginal revenue equals marginal costE) price is less than average variable cost at all rates of output
ANSWER C
14
EC 200 Practice problems for MT3
A 1
7
In the long run which of the following is not a problem for a monopolist earning economic profitA) other firms have an incentive to create substitutes for the monopolists
productB) technological change tends to break down barriers to entryC) patents expire licenses must be renewed and new sources of essential
resources may be discoveredD) government often decides to regulate monopoliesE) all profit will gradually be converted to consumer surplus
ANSWER E
C 1
8
In Exhibit 0150 the level of output that would achieve allocative efficiency isA) 700 unitsB) 810 unitsC) 884 unitsD) 976 unitsE) 1000 units
ANSWER C
C 1
9
Compared to the productive efficiency of a perfectly competitive firm a monopolist tends to beA) very efficient because it charges higher prices
15
EC 200 Practice problems for MT3
B) more efficient because it produces greater outputC) inefficientD) equally efficient as it also produces where MR = MCE) very efficient because it conserves resources by producing less output
ANSWER C
B 2
0
Total deadweight loss in society is reduced through rent seeking by monopolistsA) TrueB) False
ANSWER B
B 2
1
The US Postal Service has found its monopoly eroded over time becauseA) the demand for mail delivery has become more inelasticB) Congress has taken away their monopoly over first-class mailC) the US Postal Service cannot handle the volume of transactionsD) the price of stamps has increased relative to other substitutes such as
the telephoneE) of the decline in the use of fax machines
ANSWER D
D 2
2
Suppose that a price-discriminating monopolist divides its market into two segments In each market segment price is determined by finding the level of output where that marketsA) average revenue equals average total costB) average revenue equals average variable costC) marginal revenue equals average total costD) marginal revenue equals marginal costE) marginal cost equals average total cost
ANSWER D
16
EC 200 Practice problems for MT3
C 2
3
If the monopolist in Exhibit 0150 engages in perfect price discrimination price would beA) $120 for the 884th unitB) $212 on all unitsC) $120 on all unitsD) $136 on all unitsE) $104 on all units
ANSWER A
A 2
4
If the monopolist in Exhibit 0150 engages in perfect price discrimination price wouldA) vary between $212 and $120B) vary between $212 and $104C) be $136 on all unitsD) be $110 on all unitsE) be $104 on all units
ANSWER A
17
EC 200 Practice problems for MT3
E 2
5
In Exhibit 0153 which area represents the amount of consumer surplus received by consumers under perfect price discriminationA) area aB) area bC) area a + b + cD) area b + eE) there is no consumer surplus
ANSWER E
18
EC 200 Practice problems for MT3
C 1
4
The profit-maximizing (or loss-minimizing) price the monopoly will charge in Exhibit 9-1 isA) irrelevant since the firm should shut downB) $11C) $16D) $18E) $22
ANSWER C
D 1
5
Which of the following would not bar entry into a marketA) control by a single firm of an essential resourceB) the necessity of taking risks when starting a firmC) patentsD) economies of scaleE) government regulations limiting the number of firms in an industry
ANSWER B
C 1
6
Firms can earn economic profits even in the long run ifA) they charge the highest price possibleB) there is a cost-reducing technological changeC) there are significant barriers to entryD) marginal revenue equals marginal costE) price is less than average variable cost at all rates of output
ANSWER C
14
EC 200 Practice problems for MT3
A 1
7
In the long run which of the following is not a problem for a monopolist earning economic profitA) other firms have an incentive to create substitutes for the monopolists
productB) technological change tends to break down barriers to entryC) patents expire licenses must be renewed and new sources of essential
resources may be discoveredD) government often decides to regulate monopoliesE) all profit will gradually be converted to consumer surplus
ANSWER E
C 1
8
In Exhibit 0150 the level of output that would achieve allocative efficiency isA) 700 unitsB) 810 unitsC) 884 unitsD) 976 unitsE) 1000 units
ANSWER C
C 1
9
Compared to the productive efficiency of a perfectly competitive firm a monopolist tends to beA) very efficient because it charges higher prices
15
EC 200 Practice problems for MT3
B) more efficient because it produces greater outputC) inefficientD) equally efficient as it also produces where MR = MCE) very efficient because it conserves resources by producing less output
ANSWER C
B 2
0
Total deadweight loss in society is reduced through rent seeking by monopolistsA) TrueB) False
ANSWER B
B 2
1
The US Postal Service has found its monopoly eroded over time becauseA) the demand for mail delivery has become more inelasticB) Congress has taken away their monopoly over first-class mailC) the US Postal Service cannot handle the volume of transactionsD) the price of stamps has increased relative to other substitutes such as
the telephoneE) of the decline in the use of fax machines
ANSWER D
D 2
2
Suppose that a price-discriminating monopolist divides its market into two segments In each market segment price is determined by finding the level of output where that marketsA) average revenue equals average total costB) average revenue equals average variable costC) marginal revenue equals average total costD) marginal revenue equals marginal costE) marginal cost equals average total cost
ANSWER D
16
EC 200 Practice problems for MT3
C 2
3
If the monopolist in Exhibit 0150 engages in perfect price discrimination price would beA) $120 for the 884th unitB) $212 on all unitsC) $120 on all unitsD) $136 on all unitsE) $104 on all units
ANSWER A
A 2
4
If the monopolist in Exhibit 0150 engages in perfect price discrimination price wouldA) vary between $212 and $120B) vary between $212 and $104C) be $136 on all unitsD) be $110 on all unitsE) be $104 on all units
ANSWER A
17
EC 200 Practice problems for MT3
E 2
5
In Exhibit 0153 which area represents the amount of consumer surplus received by consumers under perfect price discriminationA) area aB) area bC) area a + b + cD) area b + eE) there is no consumer surplus
ANSWER E
18
EC 200 Practice problems for MT3
A 1
7
In the long run which of the following is not a problem for a monopolist earning economic profitA) other firms have an incentive to create substitutes for the monopolists
productB) technological change tends to break down barriers to entryC) patents expire licenses must be renewed and new sources of essential
resources may be discoveredD) government often decides to regulate monopoliesE) all profit will gradually be converted to consumer surplus
ANSWER E
C 1
8
In Exhibit 0150 the level of output that would achieve allocative efficiency isA) 700 unitsB) 810 unitsC) 884 unitsD) 976 unitsE) 1000 units
ANSWER C
C 1
9
Compared to the productive efficiency of a perfectly competitive firm a monopolist tends to beA) very efficient because it charges higher prices
15
EC 200 Practice problems for MT3
B) more efficient because it produces greater outputC) inefficientD) equally efficient as it also produces where MR = MCE) very efficient because it conserves resources by producing less output
ANSWER C
B 2
0
Total deadweight loss in society is reduced through rent seeking by monopolistsA) TrueB) False
ANSWER B
B 2
1
The US Postal Service has found its monopoly eroded over time becauseA) the demand for mail delivery has become more inelasticB) Congress has taken away their monopoly over first-class mailC) the US Postal Service cannot handle the volume of transactionsD) the price of stamps has increased relative to other substitutes such as
the telephoneE) of the decline in the use of fax machines
ANSWER D
D 2
2
Suppose that a price-discriminating monopolist divides its market into two segments In each market segment price is determined by finding the level of output where that marketsA) average revenue equals average total costB) average revenue equals average variable costC) marginal revenue equals average total costD) marginal revenue equals marginal costE) marginal cost equals average total cost
ANSWER D
16
EC 200 Practice problems for MT3
C 2
3
If the monopolist in Exhibit 0150 engages in perfect price discrimination price would beA) $120 for the 884th unitB) $212 on all unitsC) $120 on all unitsD) $136 on all unitsE) $104 on all units
ANSWER A
A 2
4
If the monopolist in Exhibit 0150 engages in perfect price discrimination price wouldA) vary between $212 and $120B) vary between $212 and $104C) be $136 on all unitsD) be $110 on all unitsE) be $104 on all units
ANSWER A
17
EC 200 Practice problems for MT3
E 2
5
In Exhibit 0153 which area represents the amount of consumer surplus received by consumers under perfect price discriminationA) area aB) area bC) area a + b + cD) area b + eE) there is no consumer surplus
ANSWER E
18
EC 200 Practice problems for MT3
B) more efficient because it produces greater outputC) inefficientD) equally efficient as it also produces where MR = MCE) very efficient because it conserves resources by producing less output
ANSWER C
B 2
0
Total deadweight loss in society is reduced through rent seeking by monopolistsA) TrueB) False
ANSWER B
B 2
1
The US Postal Service has found its monopoly eroded over time becauseA) the demand for mail delivery has become more inelasticB) Congress has taken away their monopoly over first-class mailC) the US Postal Service cannot handle the volume of transactionsD) the price of stamps has increased relative to other substitutes such as
the telephoneE) of the decline in the use of fax machines
ANSWER D
D 2
2
Suppose that a price-discriminating monopolist divides its market into two segments In each market segment price is determined by finding the level of output where that marketsA) average revenue equals average total costB) average revenue equals average variable costC) marginal revenue equals average total costD) marginal revenue equals marginal costE) marginal cost equals average total cost
ANSWER D
16
EC 200 Practice problems for MT3
C 2
3
If the monopolist in Exhibit 0150 engages in perfect price discrimination price would beA) $120 for the 884th unitB) $212 on all unitsC) $120 on all unitsD) $136 on all unitsE) $104 on all units
ANSWER A
A 2
4
If the monopolist in Exhibit 0150 engages in perfect price discrimination price wouldA) vary between $212 and $120B) vary between $212 and $104C) be $136 on all unitsD) be $110 on all unitsE) be $104 on all units
ANSWER A
17
EC 200 Practice problems for MT3
E 2
5
In Exhibit 0153 which area represents the amount of consumer surplus received by consumers under perfect price discriminationA) area aB) area bC) area a + b + cD) area b + eE) there is no consumer surplus
ANSWER E
18
EC 200 Practice problems for MT3
C 2
3
If the monopolist in Exhibit 0150 engages in perfect price discrimination price would beA) $120 for the 884th unitB) $212 on all unitsC) $120 on all unitsD) $136 on all unitsE) $104 on all units
ANSWER A
A 2
4
If the monopolist in Exhibit 0150 engages in perfect price discrimination price wouldA) vary between $212 and $120B) vary between $212 and $104C) be $136 on all unitsD) be $110 on all unitsE) be $104 on all units
ANSWER A
17
EC 200 Practice problems for MT3
E 2
5
In Exhibit 0153 which area represents the amount of consumer surplus received by consumers under perfect price discriminationA) area aB) area bC) area a + b + cD) area b + eE) there is no consumer surplus
ANSWER E
18
EC 200 Practice problems for MT3
E 2
5
In Exhibit 0153 which area represents the amount of consumer surplus received by consumers under perfect price discriminationA) area aB) area bC) area a + b + cD) area b + eE) there is no consumer surplus
ANSWER E
18
