Professional Documents
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True/False
Indicate whether the sentence or statement is true or false.
ANSWER: F
POINTS: 0 / 1
2. The most common source of a barrier to entry into a monopolist's market is that the
monopolist owns a key resource necessary for production of that good.
ANSWER: F
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ANSWER: T
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ANSWER: F
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5. The demand curve facing a monopolist is the market demand curve for its product.
ANSWER: T
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6. For the monopolist, marginal revenue is always less than the price of the good.
ANSWER: T
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7. The monopolist chooses the quantity of output at which marginal revenue equals
marginal cost and then uses the demand curve to find the price that will induce
consumers to buy that quantity.
ANSWER: T
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ANSWER: F
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ANSWER: F
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10. Using regulations to force a natural monopoly to charge a price equal to its
marginal cost of production will cause the monopoly to lose money and exit the
industry.
ANSWER: T
POINTS: 0 / 1
11. Most economists argue that the most efficient solution to the problem of monopoly
is that the monopoly should be publicly owned.
ANSWER: F
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ANSWER: T
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13. Price discrimination can raise economic welfare because output increases beyond
that which would result under monopoly pricing.
ANSWER: T
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14. Perfect price discrimination is efficient but all of the surplus is received by the
consumer.
ANSWER: F
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15. Universities are engaging in price discrimination when they charge different levels
of tuition to poor and wealthy students.
ANSWER: T
POINTS: 0 / 1
Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
ANSWER: A
POINTS: 0 / 1
17. A firm whose average total cost continually declines at least to the quantity that
could supply the entire market is known as a
a. natural monopoly.
b. perfect competitor.
c. government monopoly.
d. regulated monopoly.
ANSWER: A
POINTS: 0 / 1
18. When a monopolist produces an additional unit, the marginal revenue generated by
that unit must be
a. below the price because the price effect outweighs the output effect.
b. above the price because the output effect outweighs the price effect.
c. above the price because the price effect outweighs the output effect.
d. below the price because the output effect outweighs the price effect.
ANSWER: A
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ANSWER: A
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20. Which of the following statements about price and marginal cost in competitive and
monopolized markets is true?
a. In competitive markets, price equals marginal cost; in monopolized markets,
price exceeds marginal cost.
b. In competitive markets, price equals marginal cost; in monopolized markets,
price equals marginal cost.
c. In competitive markets, price exceeds marginal cost; in monopolized
markets, price exceeds marginal cost.
d. In competitive markets, price exceeds marginal cost; in monopolized
markets, price equals marginal cost.
ANSWER: A
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ANSWER: A
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22. Refer to Exhibit 4. The profit-maximizing monopolist will choose the price and
quantity represented by point
a. A.
b. B.
c. C.
d. D.
e. none of these answers.
ANSWER: A
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23. Refer to Exhibit 4. The efficient price and quantity are represented by point
a. D.
b. A.
c. B.
d. C.
e. none of these answers.
ANSWER: A
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ANSWER: A
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ANSWER: A
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ANSWER: A
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27. Using government regulations to force a natural monopoly to charge a price equal
to its marginal cost will
a. cause the monopolist to exit the market.
b. improve efficiency.
c. raise the price of good.
d. attract additional firms to enter the market.
ANSWER: A
POINTS: 0 / 1
28. The purpose of antitrust (also known as competition) laws is to
a. increase competition in an industry by preventing mergers and breaking up
large firms.
b. regulate the prices charged by a monopoly.
c. increase merger activity to help generate synergies that reduce costs and
raise efficiency.
d. create public ownership of natural monopolies.
e. do all of these answers.
ANSWER: A
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ANSWER: A
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30. Which of the follow statements about price discrimination is not true?
a. Perfect price discrimination generates a deadweight loss.
b. Price discrimination can raise economic welfare.
c. Price discrimination requires that the seller be able to separate buyers
according to their willingness to pay.
d. Price discrimination increases a monopolist's profits.
e. For a monopolist to engage in price discrimination, buyers must be unable to
engage in arbitrage.
ANSWER: A
POINTS: 0 / 1
31. If regulators break up a natural monopoly into many smaller firms, the cost of
production
a. will rise.
b. will fall.
c. will remain the same.
d. could either rise or fall depending on the elasticity of the monopolist's
supply curve.
ANSWER: A
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32. A monopoly is able to continue to generate economic profits in the long run
because
a. there is some barrier to entry to that market.
b. potential competitors sometimes don't notice the profits.
c. the monopolist is financially powerful.
d. antitrust laws eliminate competitors for a specified number of years.
e. of all of the things described in these answers
ANSWER: A
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ANSWER: A
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