Question 1

This graph shows the cost and revenue curves faced by a monopoly.  According to the graph,if the perfectly competitive outcome and monopoly outcome are compared,we can see that the:

Accepted Answer

A)   monopoly creates deadweight loss.
B)   perfectly competitive firm would lose money in this industry.
C)   perfectly competitive firm would produce Q1 units.
D)   monopolist would charge P3 and the perfectly competitive firm would charge P1.E) B) and C)
F) A) and D)

Question 2

A natural monopolist that sets prices equal to marginal cost will:

Accepted Answer

A)   set a price greater than average total costs.
B)   be inefficient.
C)   incur losses.
D)   earn zero accounting profits.E) All of the above
F) A) and C)

Question 3

One barrier to entry into a monopoly market is:

Accepted Answer

A)   the ownership of a key resource or input.
B)   too many competitors already in the market.
C)   high input costs.
D)   few buyers.E) A) and B)
F) A) and C)

Question 4

When a government splits a natural monopoly vertically,it is breaking the company up:

Accepted Answer

A)   along its stages of production.
B)   into smaller companies providing the same goods.
C)   in order to maximize its profits.
D)   in order to capture all efficiencies possible.E) B) and D)
F) A) and D)

Question 5

DeBeers was able to profit the most from the diamond market by selling a:

Accepted Answer

A)   lot of diamonds at low prices.
B)   few diamonds at high prices.
C)   lot of diamonds at high prices.
D)   few diamonds at low prices.E) None of the above
F) A) and B)

Question 6

In theory,placing a price control on a natural monopoly should:

Accepted Answer

A)   have the same outcome as public ownership.
B)   create negative economic profits for the company.
C)   reduce deadweight loss to zero.
D)   be easy for government to figure out because of easily accessible information.E) None of the above
F) All of the above

Question 7

This graph shows the cost and revenue curves faced by a monopoly.  According to the graph shown,if this were a perfectly competitive market,the outcome in the short run would be:

Accepted Answer

A)   Q1, P1.
B)   Q1, P3.
C)   Q2, P2.
D)   The graph is of a monopoly, and therefore there is no way to determine a perfectly competitive outcome.E) A) and D)
F) B) and C)

Question 8

The advantages of maintaining monopolies:

Accepted Answer

A)   always outweighs the total welfare costs due to lost surplus.
B)   sometimes outweighs the total welfare costs due to lost surplus.
C)   never outweighs the total welfare costs due to lost surplus.
D)   is a normative argument that has no right answer.E) A) and B)
F) A) and C)

Question 9

In practice,placing a price control on a natural monopoly:

Accepted Answer

A)   is easy and commonly practiced.
B)   is difficult because of lack of information.
C)   always creates the same outcome as public ownership of the industry.
D)   is never a good idea.E) A) and B)
F) C) and D)

Question 10

The loss of the profit motive by a publicly-owned natural monopoly causes which of the following to happen?

Accepted Answer

A)   Increased pressure from the public to turn a profit
B)   Increased pressure from the public to cut costs
C)   Decreased incentive to improve efficiency
D)   Increased motivation to cut costsE) A) and B)
F) None of the above

Question 11

Natural monopolies:

Accepted Answer

A)   are the only monopolies that are efficient.
B)   can capture the lowest production costs possible for the industry.
C)   are always protected by government policy.
D)   generally earn zero accounting profits due to regulations.E) All of the above
F) A) and D)

Question 12

The existence of a monopoly:

Accepted Answer

A)   creates market inefficiencies.
B)   causes consumers to get less at a higher price.
C)   causes a reduction in total surplus.
D)   All of these statements are true.E) A) and C)
F) A) and B)

Question 13

The monopolist's outcome happens at a:

Accepted Answer

A)   lower price than the perfectly competitive one.
B)   higher price than the perfectly competitive one.
C)   higher quantity than the perfectly competitive one.
D)   equal quantity that is equal to a perfectly competitive one.E) A) and B)
F) All of the above

Question 14

The monopolist's cost curves differ from those of a perfectly competitive firm in that the:

Accepted Answer

A)   marginal cost curve is downward sloping instead of flat.
B)   average total cost curve is not necessarily minimized where it crosses marginal cost.
C)   average variable cost in no longer equal to marginal cost.
D)   The cost curves are the same for a firm regardless of market structure.E) A) and B)
F) C) and D)

Question 15

Some economists argue the best response to a monopoly is to:

Accepted Answer

A)   do whatever the public demands.
B)   do nothing at all.
C)   never publicly own enterprises because it raises taxes.
D)   None of the statements is true.E) A) and C)
F) C) and D)

Question 16

In the real world:

Accepted Answer

A)   businesses can easily identify different groups' willingness to pay, so price discrimination is prevalent in every market.
B)   price discrimination is practiced less today than it was in the mid-1900s.
C)   perfect price discrimination is impossible.
D)   price discrimination has only been observed where monopolies are present.E) A) and D)
F) C) and D)

Question 17

The regulation of natural monopolies is common in which of the following industries?

Accepted Answer

A)   Electricity
B)   Oil
C)   Tobacco
D)   AlcoholE) None of the above
F) A) and B)

Question 18

A government-owned monopoly is more likely to:

Accepted Answer

A)   provide a greater quantity of output than a private one.
B)   provide output at a lower price than a private one.
C)   serve public interest than maximize profit.
D)   All of these statements are true.E) A) and D)
F) A) and B)

Question 19

With a monopolist's outcome,producer surplus is:

Accepted Answer

A)   higher than that of a competitive market.
B)   lower than that of a competitive market.
C)   the same as that of a competitive market.
D)   Any of these is possible.E) B) and D)
F) A) and D)

Question 20

The monopolist chooses to produce:

Accepted Answer

A)   where marginal cost equals marginal revenue.
B)   at a higher quantity than the perfectly competitive firm.
C)   at an efficient outcome.
D)   at a cost that is equal to a competitive one.E) A) and D)
F) B) and C)

Exam 14: Monopoly

The advantages of maintaining monopolies:

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The existence of a monopoly:

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This graph shows the cost and revenue curves faced by a monopoly. According to the graph,if the perfectly competitive outcome and monopoly outcome are compared,we can see that the:

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The monopolist's cost curves differ from those of a perfectly competitive firm in that the:

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DeBeers was able to profit the most from the diamond market by selling a:

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The loss of the profit motive by a publicly-owned natural monopoly causes which of the following to happen?

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This graph shows the cost and revenue curves faced by a monopoly. According to the graph shown,if this were a perfectly competitive market,the outcome in the short run would be:

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In practice,placing a price control on a natural monopoly:

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When a government splits a natural monopoly vertically,it is breaking the company up:

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Natural monopolies:

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A government-owned monopoly is more likely to:

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The regulation of natural monopolies is common in which of the following industries?

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The monopolist chooses to produce:

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One barrier to entry into a monopoly market is:

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With a monopolist's outcome,producer surplus is:

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Some economists argue the best response to a monopoly is to:

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In theory,placing a price control on a natural monopoly should:

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In the real world:

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A natural monopolist that sets prices equal to marginal cost will:

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The monopolist's outcome happens at a:

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