Part A: Market Power

1) Unregulated monopolies
A) take the market price as given.
B) cannot incorporate.
C) cannot change the market quantity.
D) can influence the market quantity and price.
Answer:

2) The following are key features of a monopoly EXCEPT

A) the monopoly is protected by a barrier to entry.
B) no close substitutes exist for the good or service.
C) the monopoly has a strong influence over the price of the good or service.
D) the monopoly has severe diseconomies of scale.
Answer:

3) Which of the following statements about a monopoly is FALSE?

A) Monopolies have no barriers to entry or exit.
B) The good produced by a monopoly has no close substitutes.
C) A monopoly is the only producer of the good.
D) None of the above; that is, all of the above answers are true statements about a monopoly.
Answer:

4) Which of the following is LEAST likely to be a monopoly?

A) the holder of a public franchise
B) a pharmaceutical company with a patent on a drug
C) a store in a large shopping mall
D) the owner of an occupational license
Answer:

5) A public franchise is
A) an exclusive right granted to a firm to supply a good or service.
B) a government issued license required to practice a profession.
C) an exclusive right granted to an inventor of a product.
D) a unique source of raw materials.
Answer:

6) Public franchises create monopolies by restricting

A) demand.
B) prices.
C) entry.
D) profit.
Answer:
7) A patent grants
A) a guarantee of quality to consumers.
B) the right to practice a profession.
C) an exclusive right to an inventor of a product.
D) control over a unique source or supply of raw materials.
Answer:

8) Patents create monopolies by restricting

A) demand.
B) prices.
C) entry.
D) profit.
Answer:

9) Patents are ________ barriers to entry and public franchises are ________ barriers to entry.
A) legal; legal
B) legal; natural
C) natural; legal
D) natural; natural
Answer:

10) An industry in which one firm can supply the entire market at a lower price than can two or
more firms is called a
A) legal monopoly.
B) natural monopoly.
C) single-price monopoly.
D) price-discriminating monopoly.
Answer:

11) Which of the following is true of a natural monopoly?

A) Its long-run average cost curve slopes upward as it intersects the demand curve.
B) Economies of scale exist to only a very low level of output.
C) The firm can supply the entire market at a lower cost than could two or more firms.
D) The firm is not protected by any barrier to entry.
Answer:

12) A market in which competition and entry are restricted by the granting of a public franchise,
government license, patent, or copyright is called a
A) legal monopoly.
B) natural monopoly.
C) single-price monopoly.
D) price-discriminating monopoly.
Answer:
13) A single-price monopoly charges the same price
A) even if the demand curve shifts.
B) even if its cost curves shift.
C) to all customers.
D) at all times and that price equals the firmʹs marginal revenue.
Answer:

14) All of the following are examples of price discrimination EXCEPT

A) buy-one-get-one-free offers.
B) ʺearly bird specialsʺ at a restaurant.
C) lower ticket prices for matinee performances.
D) ʺbuy now, pay laterʺ payment options.
Answer:

15) Given the market demand and cost data in the above figure, the existence of two firms equal
sized firms producing a total of 8 million cubic feet of natural gas means that the long -run
average cost of producing natural gas is
A) 10 cents per cubic foot.
B) 20 cents per cubic foot.
C) 30 cents per cubic foot.
D) 40 cents per cubic foot.
Answer:
16) Given the market demand and cost data in the above figure, the existence of a monopoly firm
producing 8 million cubic feet of natural gas makes it possible to produce natural gas at a
long-run average cost of
A) 10 cents per cubic foot.
B) 20 cents per cubic foot.
C) 30 cents per cubic foot.
D) 40 cents per cubic foot.
Answer:

17) A single-price monopoly

A) charges all consumers the lowest price that they want to pay for each unit purchased.
B) produces less output than it would if it could price discriminate.
C) eliminates all the consumer surplus.
D) creates a smaller deadweight loss than it would if it could price discriminate.
Answer:

18) A monopoly has two key features, which are ________.

A) barriers to entry and no close substitutes
B) franchises and barriers to entry
C) barriers to entry and close substitutes
D) close substitutes and no barriers to entry
Answer:

19) When natural or legal forces work to protect a firm from potential competitors, the market is
said to have ________.
A) non-competitive supply
B) non-competitive entry
C) barriers to entry
D) restricted competition
Answer:

20) Granting a public franchise ________.

A) creates a legal monopoly
B) stimulates competition in the arts
C) creates a natural monopoly
D) reduces prices
Answer:

21) The existence of economies of scale creates ________.

A) a natural monopoly
B) a government monopoly
C) a legal monopoly
D) a market in which many firms make identical products
Answer:
22) When Dominant Pizza is willing to sell a pizza to a student who lives on-campus at a lower
price than it is willing to sell the identical pizza to a student who lives a block away from the
campus, the pizza firm is ________.
A) practicing price discrimination
B) unfair
C) incurring a loss on on-campus sales
D) eliminating all competition
Answer:

23) A monopoly that sells every unit of its output at the same price is a ________.
A) unit-price monopoly
B) legal monopoly
C) natural monopoly
D) single-price monopoly
Answer:

24) A copyright creates a monopoly by restricting ________.

A) the prices that can be charged
B) demand for the product
C) entry into the market
D) the number of creators and inventors
Answer:

25) A patent creates a monopoly by restricting ________.

A) demand for the product
B) the number of complements for the product
C) the amount of advertising that can be undertaken
D) entry into the market
Answer:

26) Which of the following firms is most likely to be a monopoly?

A) local restaurant
B) local distributor of water
C) local book store
D) clothing store
Answer:

27) When the demand for a good or service limits the quantity that can be sold to an amount of
output at which the firm experiences economies of scale, the ________.
A) firm is a single-price monopoly
B) good that the industry produces has close substitutes
C) firm is a natural monopoly
D) firms are protected from competition by a legal barrier
Answer:
28) Firms that can price discriminate between customers do so to ________.
A) increase consumer surplus
B) increase employment
C) increase their profit
D) decrease the quantity they produce
Answer:

29) If the wage rate that a monopoly has to pay for labor services decreases, then its marginal cost
curve ________.
A) and the demand curve shift rightward
B) and the marginal revenue and average total cost curves shift rightward
C) shifts rightward and so does the marginal revenue curve
D) shifts rightward and the marginal revenue curve does not change
Answer:

Part B: A Single-Price Monopolyʹs Output and Price Decision

1) Total revenue equals
A) marginal revenue multiplied by quantity sold.
B) price multiplied by quantity sold.
C) total cost minus profit.
D) the area between the demand curve and the marginal revenue curve.
Answer:

2) For a monopoly, the industry demand curve is the firmʹs

A) supply curve.
B) marginal revenue curve.
C) demand curve.
D) profit function.
Answer:

3) Monopolists
A) maximize revenue, not profits.
B) have no short-run fixed costs.
C) face downward sloping demand curves.
D) are price takers.
Answer:

4) The marginal revenue curve for a single-price monopoly

A) lies below its demand curve.
B) coincides with its demand curve.
C) lies above its demand curve.
D) is horizontal.
Answer:
5) For a single-price monopoly, marginal revenue is ________ when demand is elastic and is
________ when demand is inelastic.
A) negative; negative
B) negative; positive
C) positive; negative
D) positive; positive
Answer:

6) If the price elasticity of demand is greater than 1, a monopolyʹs

A) total revenue increases when the firm lowers its price.
B) total revenue decreases when the firm lowers its price.
C) marginal revenue is negative.
D) marginal revenue is zero.
Answer:

7) If the price elasticity of demand is less than 1, a monopolyʹs

A) total revenue increases when the firm lowers its price.
B) total revenue decreases when the firm lowers its price.
C) marginal revenue is undefined.
D) marginal revenue is zero.
Answer:

8) If the demand for its product is elastic, a monopolyʹs

A) total revenue is unchanged when the firm lowers its price.
B) total revenue decreases when the firm lowers its price.
C) marginal revenue is positive.
D) marginal revenue is zero.
Answer:

9) If the demand for its product is inelastic, a monopolyʹs

A) total revenue increases when the firm lowers its price.
B) total revenue is unchanged when the firm lowers its price.
C) marginal revenue is negative.
D) marginal revenue is equal to zero.
Answer:

10) A monopoly firm expands its output and lowers its price. The firm finds that its total revenue
falls. Hence, the firm is producing in the
A) elastic range of its demand curve.
B) inelastic range of its demand curve.
C) elastic range of its supply curve.
D) inelastic range of its supply curve.
Answer:
11) The figure above shows a monopoly firmʹs demand curve. If the price and quantity of haircuts
move from point t to point r, the monopolyʹs
A) total revenue will rise.
B) total revenue will fall.
C) total revenue will remain the same.
D) marginal revenue will decrease.
Answer:

12) The figure above shows a monopoly firmʹs demand curve. If the price and quantity of haircuts
move from point t to point u, the monopolyʹs
A) total revenue will rise.
B) total revenue will fall.
C) total revenue will remain the same.
D) marginal revenue will increase.
Answer:

13) The figure above shows a monopoly firmʹs demand curve. At point t
A) demand is elastic.
B) demand is unit elastic.
C) demand is inelastic.
D) total revenue is at a minimum.
Answer:
14) The figure above shows a monopoly firmʹs demand curve. The monopolyʹs total revenue is at its
maximum when the firm produces at point
A) x.
B) r.
C) t.
D) u.
Answer:

15) The figure above shows a monopoly firmʹs demand curve. The monopolyʹs total revenue is zero
at point
A) x. B) r.
C) t. D) u.
Answer:

16) The figure above shows a monopoly firmʹs demand curve. At point u in the figure, the demand
facing the monopoly is
A) elastic.
B) unit elastic.
C) inelastic.
D) less than the supply.
Answer:

17) An unregulated monopoly will

A) flood the market with goods to deter entry.
B) produce only where marginal revenue is zero.
C) produce in the inelastic range of its demand curve.
D) produce in the elastic range of its demand curve.
Answer:

18) An unregulated monopoly finds that its marginal cost exceeds its marginal revenue. In order to
increase its profit, the firm will
A) raise its price and decrease its output.
B) lower its price and increase its output.
C) raise its price and increase its output.
D) continue to produce this level of output because any change will lower its profit.
Answer:

19) To its maximize profit, the monopolist produces on the ________ portion of its demand where
________.
A) elastic; P = MC
B) elastic; MR = MC
C) inelastic; P = MC
D) inelastic; MR = MC
Answer:
20) A single-price monopoly will set its price according to which of the following rules?
A) P = MR and MR equals MC
B) P equals MC where the MC curve crosses the demand curve
C) P equals MR where the MR curve crosses the demand curve
D) None of the above answers is correct.
Answer:

21) A single-price monopolist will find when it produces its profit-maximizing amount of output
that
A) price exceeds marginal revenue.
B) price exceeds marginal cost.
C) marginal revenue equals marginal cost.
D) All of the above occur at the profit-maximizing output level.
Answer:

22) Using the data in the above table for a single-price monopolist, how many units of output will
be produced?
A) 0 units
B) 4 units
C) 5 units
D) 6 units
Answer:

23) Using the data in the above table for a single-price monopolist, how much total economic profit
does the monopolist earn?
A) $9
B) $23
C) $13
D) $72
Answer:
24) If the single-price monopolist whose cost and demand data are in the above table were forced
to produce 5 units of output, what would be the monopolistʹs economic profit?
A) $11
B) $3
C) $75
D) $15
Answer:

25) Monopolies can earn an economic profit in the long run because of
A) rent seeking by competitors.
B) the elastic demand for the monopolyʹs product.
C) the cost-savings gained by the monopoly.
D) barriers to enter the monopolyʹs market.
Answer:

26) In the long-run, a single-price monopolist will

A) not be able to continue to earn economic profits and will earn a normal profit.
B) be able to continue to earn economic profits as long as the market remains a monopoly.
C) end up being regulated by the government because it is making short-run economic
profits.
D) Both answers A and C are correct.
Answer:

27) Deeʹs TV Repair is the only TV repair shop in a small town. Dee is a single-price monopolist.
Based on the demand and cost information in the table above, what quantity of TV repairs
should Dee undertake?
A) 0 per week
B) 10 per week
C) 20 per week
D) 30 per week
Answer:
28) Deeʹs TV Repair is the only TV repair shop in a small town. Dee is a single-price monopolist.
Based on the demand and cost information in the table above, what is the amount of economic
profit earned or loss incurred at the quantity of TV repairs that profits are maximized or losses
minimized?
A) -$400
B) $800
C) -$100
D) $200
Answer:

29) The figure above shows a monopolyʹs total revenue and total cost curves. The monopolyʹs
economic profit is positive if it produces between
A) 0 and 5 units.
B) 0 and 15 units.
C) 0 and 20 units.
D) 5 and 20 units.
Answer:

30) The figure above shows a monopolyʹs total revenue and total cost curves. The monopolyʹs
economic profit is zero if it produces
A) 0 units of output.
B) 5 or 20 units of output.
C) 15 units of output.
D) none of the above
Answer:
31) The figure above shows a monopolyʹs total revenue and total cost curves. The monopolyʹs
economic profit is maximized when it produces
A) 0 units of output.
B) 5 units of output.
C) 15 units of output.
D) 20 units of output.
Answer:

32) The figure above shows a monopolyʹs total revenue and total cost curves. The monopolyʹs
marginal revenue equals its marginal cost when it produces
A) 0 units of output.
B) 5 units of output.
C) 15 units of output.
D) 20 units of output.
Answer:

33) To maximize its profit, the monopoly with the TR and TC curves shown in the figure above will
produce
A) 0 units of output.
B) 5 units of output.
C) 15 units of output.
D) 20 units of output.
Answer:
34) For the unregulated, single-price monopoly shown in the figure above, when its profit is
maximized, output will be
A) 4 units per year and the price will be $6.
B) 4 units per year and the price will be $4.
C) 6 units per year and the price will be $4.
D) None of the above answers is correct.
Answer:

35) The unregulated, single-price monopoly shown in the figure above will produce where its
demand
A) equals its MC curve.
B) equals its ATC curve.
C) is inelastic.
D) is elastic.
Answer:

36) The unregulated, single-price monopoly shown in the figure above has a total economic profit
of
A) $24.
B) $16.
C) $8.
D) $4.
Answer:
37) The unregulated, single-price monopoly shown in the figure above will sell
A) less than 30 tickets.
B) 30 tickets.
C) 50 tickets.
D) 100 tickets.
Answer:

38) An unregulated, single-price monopoly is shown in the figure above. If fixed cost is $20, the
monopolyʹs total costs when it is maximizing its profit will be
A) $30.
B) $40.
C) $80
D) $140.
Answer:

39) An unregulated, single-price monopoly is shown in the figure above. If fixed cost is $20, the
monopolyʹs total economic profit when it is maximizing its profit will be
A) negative.
B) $0.
C) $25.
D) $50.
Answer:

40) The monopoly illustrated in the figure above is unregulated and charges a single price. The
deadweight loss created by the monopoly is
A) $0.
B) $22.50.
C) $45.00.
D) $90.00.
Answer:
41) Unregulated monopolies can often earn an economic profit in the long run because
A) they receive government subsidies.
B) they have high costs.
C) barriers to entry prevent competing firms from entering the market.
D) the risks of running a monopoly are high.
Answer:

42) The above figure shows the demand and cost curves for a monopolist. What is the maximum
economic profit this firm can earn?
A) zero
B) $400
C) $100
D) $200
Answer:

43) In a small town, Marilynʹs Christmas Tree Lot has a monopoly on sales of Christmas trees. In
order to increase her sales from 100 trees to 101 trees, she must drop the price of all of her trees
from $20 to $19. What is the marginal revenue?
A) $2000.
B) $20.
C) $19.
D) negative $81.
Answer:
44) If a monopoly is producing an amount of output level at which marginal revenue exceeds
marginal cost, in order to increase its profit the monopoly will ________ its price and ________
its output.
A) raise; decrease
B) lower; increase
C) lower; decrease
D) raise; increase
Answer:

45) The table above gives the demand schedule for water bottled by Wandaʹs Healthy Waters. If
Wandaʹs is a monopoly and maximizes its profit, what is the range of possible prices at Wandaʹs
will sell water?
A) at exactly $8 a bottle
B) some price below $8 a bottle
C) some price over $8 a bottle
D) at only $16 a bottle
Answer:
46) La Bella Pizza is the only pizza place on Pepper Island. The figure above shows La Bella Pizzaʹs
demand curve, marginal revenue curve, and marginal cost curve. At La Bella Pizzaʹs
profit-maximizing output, its annual total revenue is
A) $168,000.
B) $312,000.
C) $336,000.
D) $624,000.
Answer:

47) Sueʹs Surfboards is the sole renter of surfboards on Big Wave Island. Sues demand and marginal
revenue curves are illustrated in the figure above. Sueʹs Surfboards currently rents 15 surfboards
an hour. Sueʹs total revenue from the 15 surfboards is
A) $300.
B) $225.
C) $150.
D) $10.
Answer:

48) Sueʹs Surfboards is the sole renter of surfboards on Big Wave Island. Sueʹs demand and
marginal revenue curves are illustrated in the figure above. The change in the total revenue
from renting the 15th surfboard is
A) $20.
B) $15.
C) $10.
D) $0.
Answer:

49) The figure above shows the demand and marginal revenue curves facing Sueʹs Surfboards, the
sole renter of surfboards on Big Wave Island. If Sue is renting 25 surfboards an hour so that the
marginal revenue is negative, then Sueʹs Surfboards
A) can increase its profit by increasing the number of rentals.
B) must face an inelastic demand for surfboard rentals.
C) must face a unit elastic demand for surfboard rentals.
D) must face an elastic demand for surfboard rentals.
Answer:

50) Bobʹs Books is the only bookstore in town. The figure above shows the demand curve for books
and Bobʹs Booksʹ marginal revenue curve and marginal cost curve. Bobʹs Books maximizes its
profit and sets the price of a book equal to ________ and has total annual revenue of ________.
A) $40; $40,000.
B) $30; $60,000.
C) $20, $60,000.
D) $10; $40,000.
Answer:
51) A single-price monopolist will produce the output at which ________.
A) marginal revenue equals marginal cost
B) demand is perfectly inelastic
C) marginal revenue is zero
D) demand is inelastic but not perfectly inelastic
Answer:

52) Tris owns the only auto repair shop on Lonely Island. Tris is a single-price monopoly, so Tris
operates on the ________ part of the ________ curve.
A) elastic; supply
B) inelastic; supply
C) inelastic; demand
D) elastic; demand
Answer:

53) Suppose that a monopoly is currently producing the quantity at which marginal revenue is less
than marginal cost. The monopoly can increase its profit by ________.
A) shutting down
B) lowering its price and increasing its output
C) raising its price and decreasing its output
D) lowering its price and decreasing its output
Answer:

54) Donna owns the only dog grooming salon on Lonely Island. The figure above shows the dog
grooming market. Donna is a single-price monopoly that maximizes profit by charging
________ per grooming and producing ________ groomings per day.
A) $30; 8
B) $20; $8
C) $20; $12
D) None of the above answers is correct.
Answer:

55) Roxieʹs Movie Theatre is the only one in town. The table above gives the demand schedule for
movies. If Roxieʹs is a single-price monopoly and the marginal cost of a movie is $6, Roxieʹs will
charge ________ a movie and will sell ________ movie tickets a week.
A) $15; 100
B) $12; 200
C) $6; 400
D) $9; 300
Answer:
56) The table above gives the demand schedule for water bottled by Wandaʹs Healthy Waters. If the
marginal cost is a constant $4 a bottle, Wandaʹs will produce ________ a day and charge
________ a bottle.
A) 8 bottles; $8
B) 4 bottles; $12
C) 1 bottle; $15
D) 6 bottles; $10
Answer:

57) The table above gives the demand schedule for water bottled by Wandaʹs Healthy Waters.
Wandaʹs marginal cost is a constant $4 a bottle and has no fixed cost. Wandaʹs makes an
economic profit of ________ a day.
A) $0
B) $24
C) $36
D) $60
Answer:

Part C: Single-Price Monopoly and Competition Compared

1) Which of the following is true for BOTH monopoly and perfect competition?
A) The demand for the individual firmʹs product is perfectly elastic.
B) Economic profits can be sustained indefinitely over time.
C) The marginal revenue curve is horizontal at the industry equilibrium price.
D) Profits are maximized by producing at the level of output where marginal revenue is equal
to marginal cost.
Answer:

2) A key difference between a monopoly and a perfectly competitive firm is that the monopolist
A) does not face fixed costs in the short run.
B) has a marginal revenue curve that lies below its demand curve.
C) has no marginal cost curve.
D) faces a perfectly elastic demand for its product.
Answer:

3) Compared to a single-price monopoly, a perfectly competitive industry with the same costs
produces ________ output and has a ________ price.
A) less; lower
B) less; higher
C) more; lower
D) more; higher
Answer:
4) Which of the following statements is true?
A) A perfectly competitive industry produces more output and charges a lower price than a
single-price monopoly.
B) A perfectly competitive industry produces more output and charges the same price as a
single-price monopoly.
C) A perfectly competitive industry produces less output and charges a lower price than a
single-price monopoly.
D) A perfectly competitive industry produces less output and charges the same price as a
single-price monopoly.
Answer:

5) The fundamental reason a single-price monopoly creates a deadweight loss is that it

A) raises variable cost.
B) raises fixed cost.
C) restricts output.
D) reduces the elasticity of demand.
Answer:

6) The unregulated, single-price monopolist illustrated in the figure above has a total revenue of
A) $8.00 per day.
B) $16.00 per day.
C) $36.00 per day.
D) $40.00 per day.
Answer:
7) The unregulated, single-price monopolist illustrated in the figure above has a total cost of
A) $8.00 per day.
B) $16.00 per day.
C) $32.00 per day.
D) $40.00 per day.
Answer:

8) The unregulated, single-price monopolist illustrated in the figure above earns an economic
profit of
A) zero.
B) $8.00 per day.
C) $10.00 per day.
D) $40.00 per day.
Answer:

9) The unregulated, single-price monopolist illustrated in the figure above will produce
A) 0 units per day.
B) 4 units per day.
C) 6 units per day.
D) 9 units per day.
Answer:

10) In the figure above, compared to a perfectly competitive industry with the same costs, a
single-price, unregulated monopoly will decrease production by
A) zero.
B) 2 units per day.
C) 4 units per day.
D) 6 units per day.
Answer:

11) The unregulated, single-price monopolist illustrated in the figure above will set a price of
A) $2.00 per unit.
B) $6.00 per unit.
C) $8.00 per unit.
D) $10.00 per unit.
Answer:

12) In the figure above, compared to a perfectly competitive industry with the same costs, a
single-price, unregulated monopoly will raise the price by
A) $2.00 per unit.
B) $4.00 per unit.
C) $6.00 per unit.
D) $8.00 per unit.
Answer:
13) In the figure above, the deadweight loss created if the industry changes from perfectly
competitive to a single-price, unregulated monopoly is
A) zero.
B) $8.00 per day.
C) $24.00 per day.
D) $36.00 per day.
Answer:

14) In the figure above, the redistribution from the consumers to the producer if the firm is a
single-price, unregulated monopoly rather than a perfectly competitive industry is
A) zero.
B) $8.00 per day.
C) $16.00 per day.
D) $32.00 per day.
Answer:

15) In the figure above, the single-price, unregulated monopoly produces

A) less than 19 units per day.
B) 20 units per day.
C) between 21 and 39 units per day.
D) 40 or more units per day.
Answer:

16) If the industry in the above figure was perfectly competitive, the level of output would
A) be less than the single-price monopoly level of output.
B) be the same as the single-price monopoly level of output.
C) exceed the single-price monopoly level of output by 20 units per day.
D) exceed the single-price monopoly level of output by 60 units per day.
Answer:
17) In the figure above, the efficient amount of output is
A) 20 units per day.
B) 40 units per day.
C) 60 units per day.
D) 80 units per day.
Answer:

18) The output produced by the single-price, unregulated monopoly in the above figure is
A) efficient because profit is maximized.
B) inefficient because less than the efficient quantity is produced.
C) efficient because marginal costs equals marginal revenue.
D) inefficient because more than the efficient quantity is produced.
Answer:

19) In the figure above, the single-price, unregulated monopoly sets a price of
A) $80 per unit.
B) $60 per unit.
C) $40 per unit.
D) $0 per unit.
Answer:

20) Consumer surplus is

A) positive in the case of a monopolist practicing perfect price discrimination.
B) equal to the price minus the marginal cost.
C) less in the case of a single-price monopoly than in the case of a perfectly competitive
industry.
D) zero for a single-price monopolist.
Answer:

21) In comparison with a perfect competition, a single-price monopolist with the same costs creates
a ________ consumer surplus and earns a ________ economic profit.
A) smaller; larger
B) smaller; smaller
C) larger; larger
D) larger; smaller
Answer:

22) Compared to a competitive industry, a monopoly transfers

A) deadweight loss away from producers to consumers.
B) deadweight loss away from consumers to producers.
C) producer surplus to consumers.
D) consumer surplus to producers.
Answer:
23) Consider the monopolist depicted in the figure above. The profit maximizing level of output for
a single-price monopolist is
A) 7.
B) 11.
C) 13.
D) 22.
Answer:

24) Consider the monopolist depicted in the figure above. The price a single-price monopolist will
charge for the profit-maximizing level of output is
A) $4.
B) $7.
C) $9.
D) $11.
Answer:

25) If the above figure illustrated a perfectly competitive industry, the equilibrium industry output
would be equal to
A) 7.
B) 11.
C) 13.
D) 22.
Answer:

26) If the above figure illustrated a perfectly competitive industry, the equilibrium industry price
would be equal to
A) $4.
B) $7.
C) $9.
D) $11.
Answer:

27) In the above figure, if a single-price monopolist maximized its profit, the deadweight loss in the
market is equal to the area
A) ace.
B) acg.
C) ecg.
D) bch.
Answer:

28) Which area in the above figure shows the consumer surplus at the price and quantity that
would be attained if the industry were perfectly competitive?
A) A + B + C + D
B) A + B + C + D + E
C) F + G + H
D) A + B + C + D + E + F + G + H
Answer:
29) Which area in the above figure shows the producer surplus at the price and quantity that would
be attained if the industry were perfectly competitive?
A) A + B + C + D + E
B) C + D + E + F + G + H
C) F + G + H
D) F + G + H + I + J + K
Answer:

30) Which area in the above figure shows the consumer surplus at the price and quantity that
would be set by a single-price monopoly?
A) A + B
B) A + B + C + D + E
C) C + D
D) C + D + E + F + G + H
Answer:

31) Which area in the above figure shows the producer surplus at the price and quantity that would
be set by a single-price monopoly?
A) C + D
B) C + D + E
C) C + D + F + G
D) C + D + F + G + I
Answer:

32) In the above figure, if the market was a single-price monopoly rather than perfectly
competitive, which area shows the transfer of consumer surplus from consumers to producers?
A) A + B
B) C + D
C) C + D + E
D) E + H
Answer:

33) In the above figure, which area is the deadweight loss from a single-price monopoly?
A) E
B) E + H
C) E + H + K
D) E + H + K + J
Answer:
34) In the market depicted in the above figure, if a single-price monopoly maximizes its profit
,which area shows the deadweight loss?
A) area FHIL
B) area GHJM
C) area IJH
D) area LJK
Answer:

35) In the market depicted in the above figure, if a single-price monopoly maximizes its profit,
which area shows the consumer surplus?
A) area GHIL
B) area HIJ
C) area HJKG
D) area NFL
Answer:

36) Any attempt to capture a consumer surplus, a producer surplus, or an economic profit is called
A) profit-maximizing.
B) rent-seeking.
C) price discriminating.
D) efficiency gain.
Answer:

37) Efforts by a firm to obtain a monopoly

A) are called price discrimination.
B) increase consumer surplus.
C) are called rent seeking.
D) are called price taking.
Answer:
38) Activity aimed at creating artificial barriers to entry into a particular market
A) is rent seeking.
B) has no social cost.
C) improves competition.
D) improves the economyʹs efficiency.
Answer:

39) Rent seeking is devoted to the creation of

A) monopolies.
B) competitive industries.
C) human capital.
D) more elastic demand.
Answer:

40) Rent seeking through lobbying

A) reduces deadweight loss.
B) uses up resources.
C) results in perfect price discrimination.
D) results in perfectly competitive industries.
Answer:

41) The value of resources devoted to rent seeking will

A) equal the monopolyʹs economic profits.
B) reduce deadweight loss.
C) reduce consumer surplus.
D) raise output to an efficient level.
Answer:

42) Because of a decrease in labor costs, a monopoly finds that its marginal cost and average total
cost have decreased. The monopoly ________ and ________ its quantity.
A) raises; increases
B) raises; decreases
C) lowers; increases
D) lowers; decreases
Answer:

43) Compared to a single-price monopoly, the output of a perfectly competitive industry with the
same costs
A) is more than the monopolyʹs output.
B) is the same as the monopolyʹs output.
C) is less than the monopolyʹs output.
D) could be more than, less than, or equal to the monopolyʹs output.
Answer:
44) Compared to a single-price monopoly, the price charged by a perfectly competitive industry
with the same costs
A) is higher than the monopolyʹs price.
B) is the same as the monopolyʹs price.
C) is lower than the monopolyʹs price.
D) could be higher than, lower than, or the same as the monopolyʹs price.
Answer:

45) If a perfectly competitive industry becomes a monopoly and the costs do not change, which of
the following allocation of costs and benefits applies?
A) The producer benefits, but consumers and society are harmed.
B) The producer and society are harmed, but consumers benefit.
C) The producer and society benefit, but consumers are harmed.
D) The producer is harmed, but consumers and society benefit.
Answer:

46) Consumer surplus is largest for

A) a perfectly competitive industry.
B) a single-price monopoly.
C) any price-discriminating monopoly.
D) a perfectly price-discriminating monopoly.
Answer:

47) Producer surplus is equal to the ________.

A) opportunity cost of producing the good minus the consumerʹs value of the good
B) producerʹs revenue minus the value of the good
C) opportunity cost of producing the good minus the marginal cost
D) producerʹs revenue minus the opportunity cost of production
Answer:

48) Deadweight loss measures the inefficiency of the market as the loss of ________.
A) consumer surplus and producer surplus
B) producer surplus only
C) consumer surplus only
D) consumer surplus minus producer surplus
Answer:

49) The attempt to capture consumer surplus, producer surplus, or economic profit is called
________.
A) a natural monopoly
B) price discrimination
C) rent seeking
D) gouging
Answer:
50) The maximum amount a rent seeker would pay for a monopoly is the ________.
A) market price
B) deadweight loss
C) monopolyʹs economic profit
D) monopolyʹs normal profit
Answer:

51) The figure shows the demand for and costs of producing Charleneʹs Chocolates. If Charleneʹs
Chocolates is a monopoly and charges one price to all customers, then the consumer surplus is
________.
A) $400
B) $900
C) $0
D) $200
Answer:

52) A single-price monopoly causes a deadweight loss because it ________.

A) restricts its output
B) increases the amount produced beyond the efficient quantity
C) maximizes marginal revenue rather than minimizes marginal cost
D) increases marginal cost
Answer:
53) The figure above shows the demand for and costs of producing Charleneʹs Chocolates. If
Charleneʹs Chocolates is a monopoly that charges one price to all customers, then consumer
surplus is ________ and it creates a deadweight loss of ________.
A) $800; $400
B) $200; $100
C) $400; $200
D) $0; $200
Answer:

54) Rent seeking ________.

A) increases consumer surplus
B) occurs only when the firm practices perfect price discrimination
C) increases deadweight loss
D) results in a larger output than a competitive industry would produce
Answer:

Part D: Price Discrimination

1) Which of the following is NOT necessary for a firm to engage in price discrimination?
A) The firm must be able to identify different types of buyers.
B) The firm must be able to separate buyers by preventing resales from one customer to
another.
C) The firm must produce output for different buyers at different costs.
D) The firm must sell a product that cannot be resold.
Answer:
2) Price discrimination
A) is common in perfectly competitive markets.
B) is more likely for services than for goods that can be stored and resold.
C) is illegal because it always violates antitrust laws.
D) works only if all groups of demanders have the same price elasticity of demand for the
product.
Answer:

3) Price discrimination by a monopoly

A) increases consumer surplus.
B) decreases consumer surplus.
C) increases the firmʹs profit.
D) Both answers B and C are correct.
Answer:

4) A monopolist engages in price discrimination because

A) it is philanthropic.
B) its primary goal is to maximize total revenue.
C) price discrimination allows it to earn greater economic profit than charging the same price
to all customers.
D) price discrimination is less expensive than charging the same price to all customers.
Answer:

5) A price discriminating monopolist charges lower prices to customers with

A) lower supply elasticities.
B) higher supply elasticities.
C) lower average willingness-to-pay.
D) higher average willingness-to-pay.
Answer:

6) Monopolists are able to price discriminate because

A) of differing average willingness-to-pay among consumers.
B) of differing price elasticities of supply.
C) they have constant marginal cost.
D) they have constant average cost.
Answer:

7) The more perfectly a monopoly can price discriminate, the

A) smaller its output and the lower its profits.
B) smaller its output and the higher its profits.
C) larger its output and the lower its profits.
D) larger its output and the higher its profits.
Answer:
8) Which of the following occurs with both perfectly price discriminating and single-price
monopolies?
A) The amount of output is inefficient.
B) All consumer surplus goes to the monopoly.
C) Deadweight loss is created.
D) There is a redistribution of consumer surplus to the monopoly.
Answer:

9) In the case of a perfectly price-discriminating monopoly, there is no

A) transfer of consumer surplus to the producer.
B) deadweight loss.
C) short-run economic profit.
D) long-run economic profit.
Answer:

10) Using the demand schedule in the above table, if the firmʹs marginal cost is constant at $3.00,
output for a perfectly price discriminating monopolist is
A) 2 units.
B) 3 units.
C) 4 units.
D) 5 units.
Answer:

11) Using the demand schedule in the above table, the marginal revenue for a perfectly price
discriminating monopolist from the sale of the third unit of output is
A) $3.
B) $4.
C) $5.
D) $6.
Answer:
12) Using the demand schedule in the table above, the total revenue a perfectly price discriminating
monopolist receives from selling 5 units of output is
A) $5.
B) $15.
C) $18.
D) $25
Answer:

13) If the monopoly illustrated in the figure above could engage in perfect price discrimination, then
each buyer would pay
A) $2.00.
B) $3.00.
C) $3.50.
D) a different price.
Answer:

14) If the monopoly illustrated in the figure above could engage in perfect price discrimination, then
the lowest ticket price would be
A) $1.00.
B) $2.00.
C) $3.00.
D) $3.50.
Answer:
15) If the monopoly illustrated in the figure above could engage in perfect price discrimination, then
it would sell
A) 30 tickets.
B) 50 tickets.
C) 60 tickets.
D) 100 tickets.
Answer:

16) If the monopoly illustrated in the figure above could engage in perfect price discrimination, then
when it maximizes its profit the total revenue collected by the firm would be
A) $110.
B) $120.
C) $210.
D) $310.
Answer:

17) In the figure above, what is the loss of consumer surplus if the firm is a perfectly
price-discriminating monopoly instead of a perfectly competitive industry?
A) $0
B) $22.50
C) $45.00
D) $90.00
Answer:

18) If the monopoly illustrated in the figure above could engage in perfect price discrimination, the
deadweight loss would be
A) $0.
B) $22.50.
C) $90.00.
D) $250.00.
Answer:
19) In the figure above, the elasticity of demand facing the monopoly equals one when it produces
________ units of output.
A) h
B) j
C) k
D) none of the above
Answer:

20) In the figure above, a single-price unregulated monopoly sets a price equal to
A) a.
B) b.
C) c.
D) d.
Answer:

21) In the figure above, a single-price unregulated monopoly will produce an amount of output
equal to
A) h.
B) j.
C) k.
D) none of the above
Answer:
22) In the figure above, if the market is a single-price monopoly rather than a perfectly competitive
industry, the transfer of consumer surplus from consumers to the producer is the area of
A) trapezoid beic.
B) triangle abe.
C) rectangle begd.
D) rectangle befc.
Answer:

23) In the figure above, consumer surplus at the price that maximizes the profit for an unregulated,
single-price monopolist is the area of
A) rectangle 0heb.
B) triangle abe.
C) triangle eig.
D) rectangle 0hgd.
Answer:

24) In the figure above, the deadweight loss when the market is a single-price monopoly rather
than perfectly competitive is the area of
A) triangle aeb.
B) triangle aic.
C) triangle eig.
D) triangle eif.
Answer:

25) In the figure above, a perfectly price-discriminating monopoly will maximize profit by
producing at amount of output equal to
A) h.
B) j.
C) k.
D) none of the above
Answer:

26) In the figure above, the total revenue of a perfectly price-discriminating monopolist at the
profit-maximizing output is equal to the area of
A) 0aij.
B) 0dgh.
C) aci.
D) obeij.
Answer:
27) Prime Pharmaceuticals has developed a new asthma medicine, for it has a patent. An inhaler
can be produced at a constant marginal cost of $2/inhaler. The demand curve, marginal revenue
curve, and marginal cost curve for this new asthma inhaler are in the figure above. With its
patent giving it a monopoly for its new inhaler, if it is a single-price monopoly, Prime
Pharmaceuticals will produce ________ inhalers and set a price of ________ for each inhaler.
A) 16 million; $2
B) 10 million; $5
C) 8 million; $6
D) 8 million; $2
Answer:

28) Prime Pharmaceuticals has developed a new asthma medicine, for which is has a patent. An
inhaler can be produced at a constant marginal cost of $2/inhaler. The demand curve, marginal
revenue curve, and marginal cost curve for this new asthma inhaler are in the figure above.
With its patent giving it a monopoly for its new inhaler, if Prime Pharmaceuticals operates as a
single-price monopoly, then consumer surplus is ________ and producer surplus is ________.
A) zero; $64 million
B) $32 million; $32 million
C) $16 million; $32 million
D) $16 million; $48 million.
Answer:
29) Prime Pharmaceuticals has developed a new asthma medicine, for which it has a patent. An
inhaler can be produced at a constant marginal cost of $2/inhaler. The demand curve, marginal
revenue curve, and marginal cost curve for this new asthma inhaler are in the figure above.
With its patent giving it a monopoly for its new inhaler, if Prime Pharmaceuticals operates as a
single-price monopoly, then there will be a deadweight loss equal to
A) $24 million.
B) zero.
C) $16 million.
D) $32 million.
Answer:

30) Prime Pharmaceuticals has developed a new asthma medicine, for which it has a patent. An
inhaler can be produced at a constant marginal cost of $2/inhaler. The demand curve, marginal
revenue curve, and marginal cost curve for this new asthma inhaler are in the figure above.
With its patent giving it a monopoly for its new inhaler, if Prime Pharmaceuticals could
perfectly price discriminate, then which of the following is true?
A) It would produce and sell 16 million inhalers.
B) Inhalers would sell for $5 each.
C) Inhalers would sell for $2 each.
D) None of the above answers is correct.
Answer:

31) Prime Pharmaceuticals has developed a new asthma medicine, for which it has a patent. An
inhaler can be produced at a constant marginal cost of $2/inhaler. The demand curve, marginal
revenue curve, and marginal cost curve for this new asthma inhaler are in the figure above.
With its patent giving it a monopoly for its new inhaler, if Prime Pharmaceuticals could
perfectly price discriminate, then consumer surplus would equal
A) $64 million.
B) $16 million.
C) $32 million.
D) zero.
Answer:

32) Prime Pharmaceuticals has developed a new asthma medicine, for which it has a patent. An
inhaler can be produced at a constant marginal cost of $2/inhaler. The demand curve, marginal
revenue curve, and marginal cost curve for this new asthma inhaler are in the figure above.
With its patent giving it a monopoly for its new inhaler, if Prime Pharmaceuticals could
perfectly price discriminate, then producer surplus would equal
A) $64 million.
B) $16 million.
C) $32 million.
D) zero.
Answer:
33) Prime Pharmaceuticals has developed a new asthma medicine, for which it has a patent. An
inhaler can be produced at a constant marginal cost of $2/inhaler. The demand curve, marginal
revenue curve, and marginal cost curve for this new asthma inhaler are in the figure above.
With its patent giving it a monopoly for its new inhaler, if there is competitive rent seeking, then
Prime Pharmaceuticalsʹ producer surplus is equal to
A) $32 million.
B) $48 million.
C) zero.
D) $64 million.
Answer:

34) Consumer surplus is the ________ summed over the quantity purchased.
A) price of a good minus the value the consumer places on it
B) opportunity cost of a good minus its value
C) price of a good minus its opportunity cost
D) value the consumer places on a good minus its price
Answer:

35) When a monopoly perfectly price discriminates, there is ________.

A) no producer surplus
B) an increase in supply
C) no consumer surplus
D) a large consumer surplus
Answer:

36) A perfect price discriminating monopoly produces ________.

A) a larger output than a perfectly competitive industry
B) the same quantity as a single-price monopoly
C) an output at which marginal revenue exceeds marginal cost
D) the same quantity of output as a perfectly competitive industry
Answer:

37) Donna owns the only dog grooming salon on Lonely Island. If Donna can price discriminate
between dog owners who are seniors and those who are not, her economic profit will be
________ than if she does not price discriminate and the number of dog groomings will be
________ than if she does not price discriminate.
A) greater; more
B) greater; less
C) less; more
D) less; less
Answer:

38) A monopoly can price discriminate between two groups of consumers if each group has
________.
A) a large consumer surplus
B) a different average willingness to pay
C) the same willingness to pay
D) the ability to resell the good to the other group.
Answer:

39) A perfect price discriminating monopoly produces the same output as a ________.
A) single-price monopoly but charges a higher price
B) perfectly competitive industry
C) perfectly competitive firm
D) perfectly competitive industry but charges a lower price
Answer:

40) Roxieʹs Movie Theatre has a monopoly and discovers that at $12 a movie, no one is buying
movie tickets during weekdays. Roxieʹs conducts a survey and the table above reveals the
results of the survey. Roxie decides to price discriminate between weekend and weekday
moviegoers. The marginal cost of a showing a movie is $6. Roxieʹs charges ________ on
weekdays and ________ on weekends.
A) $9; $12
B) $6; $15
C) $6; $18
D) $3; $12
Answer:

Part E: Monopoly Policy Issues

1) When an increase in a firmʹs production of a good or service brings a decrease in the average
total cost of producing it, the firm is experiencing
A) economies of scope.
B) diseconomies of scale.
C) economies of scale.
D) diminishing returns.
Answer:

2) Economies of scope arise when

A) an increase in output lowers average total cost.
B) an increase in the range of goods produced lowers average total cost.
C) doubling inputs more than doubles output.
D) high profit allows a company to undertake research and development.
Answer:

3) When an increase in the range of goods produced brings a decrease in the average total cost, the
firm is experiencing
A) economies of scope.
B) diseconomies of scale.
C) economies of scale.
D) diminishing returns.
Answer:

4) Which of the following is NOT a possible gain to society from a monopoly?

A) The monopoly might lead to rent seeking.
B) The monopoly might achieve economies of scale.
C) The monopoly might achieve economies of scope.
D) The monopoly might induce innovation.
Answer:

5) Which of the following statements regarding a marginal-cost pricing rule for a natural
monopoly is WRONG?
A) It maximizes total surplus in a regulated industry.
B) It is efficient.
C) It sets price equal to marginal cost.
D) It allows the firm to earn a normal profit.
Answer:

6) Which of the following statements regarding an average-cost pricing rule for a natural
monopoly is WRONG?
A) It sets price equal to average total cost.
B) It is efficient.
C) The firm earns a normal profit.
D) More output is produced than if the firm maximized profit.
Answer:

7) Which of the following might be a gain to society from monopoly?

A) Monopolists do not waste resources trying to innovate.
B) Monopolies might be able to generate economies of scale.
C) Monopolies might be able to price discriminate, thereby boosting consumer surplus.
D) Monopolies might earn an economic profit in the long run.
Answer:

8) A natural monopoly regulated with an average cost pricing rule is ________.

A) efficient and incurs an economic loss
B) inefficient and earns a normal profit
C) inefficient and earns an economic profit
D) efficient and earns a normal profit
Answer:

9) A monopoly might be more beneficial than a perfectly competitive industry if it ________.

A) employs fewer workers
B) has a bigger incentive to innovate
C) never price discriminates
D) produces where MR = MC
Answer:

10) A natural monopoly that charges the profit-maximizing price will produce ________ amount of
output than a ________.
A) a larger; natural monopoly regulated by an average cost pricing rule
B) a more efficient; perfectly competitive industry
C) the same; natural monopoly regulated by a marginal cost pricing rule
D) a smaller; natural monopoly regulated by a marginal cost pricing rule
Answer:
11) Mountain Water is a natural monopoly. The government decides to regulate Mountain Water by
imposing a marginal cost pricing rule. The figure above shows the demand for Mountain Water.
Marginal cost is $0.20 per bottle. The price of a bottle of Mountain Water is ________, and
________ thousand bottles are sold per month.
A) $0.20; 400
B) $0.50; 250
C) $0.20; 500
D) $1.00; 500
Answer:

12) Natural gas is a natural monopoly. The figure above shows the market for natural gas in the city
of Lucknow. When an average cost price rule regulation is imposed, the price per household per
month is ________.
A) $20 and 30,000 households are served
B) $40 and 40,000 households are served
C) $40 and 30,000 households are served
D) $60 and 20,000 households are served
Answer: