Question 1

Which of the following is not a precondition for price discrimination?

Accepted Answer

A)   The commodity involved must be a durable good.
B)   The good or service cannot be resold by the original buyers.
C)   The seller must be able to distinguish buyers with different elasticities of demand.
D)   The seller must possess some degree of monopoly power.E) All of the above
F) A) and D)

Question 2

A purely competitive firm is a price maker,but a monopolist is a price taker.

Accepted Answer

A) True 
 B)False

Question 3

1P3AE. B)  will be equal to the area P2P3B. C)  will be equal to the area P1P3AC. D)  cannot be determined from the information given." class="answers-bank-image d-inline" rel="preload" > Refer to the above graph.The monopolist's profits:

Accepted Answer

A)   will be equal to the area P1P3AE.
B)   will be equal to the area P2P3B.
C)   will be equal to the area P1P3AC.
D)   cannot be determined from the information given.E) None of the above
F) A) and C)

Question 4

What do economies of scale,the ownership of essential raw materials,and patents have in common?

Accepted Answer

A)   They must all be present before price discrimination can be practiced.
B)   They are all barriers to entry.
C)   They all help explain why a monopolist's demand and marginal revenue curves coincide.
D)   They all help explain why the long-run average cost curve is U-shaped.E) C) and D)
F) None of the above

Question 5

As a monopolist increases its output,it finds that its total revenue at first increases,and that after some output level is reached,its total revenue begins to decrease.

Accepted Answer

A) True 
 B)False

Question 6

Suppose a monopolist calculates that at present output and sales levels,marginal revenue is $1.00 and marginal cost is $2.00.He could maximize profits (or minimize losses) by:

Accepted Answer

A)   decreasing price and increasing output.
B)   increasing price and decreasing output.
C)   decreasing price and leaving output unchanged.
D)   decreasing output and leaving price unchanged.E) A) and C)
F) B) and C)

Question 7

Allocative inefficiency due to unregulated monopoly is characterized by the condition:

Accepted Answer

A)   P = MC.
B)   P = MR.
C)   P > MC.
D)   P > AVC.E) None of the above
F) C) and D)

Question 8

If a monopolist engages in price discrimination,it will:

Accepted Answer

A)   realize a smaller profit.
B)   charge a higher price where individual demand is inelastic and a lower price where individual demand is elastic.
C)   produce a smaller output than when it did not discriminate.
D)   charge a competitive price to all its customers.E) A) and D)
F) A) and C)

Question 9

Which is a barrier to entry?

Accepted Answer

A)   Patents
B)   Revenue maximization
C)   Profit maximization
D)   Elastic product demandE) A) and B)
F) A) and C)

Question 10

The above diagram implies that whenever a firm's demand curve is downsloping:

Accepted Answer

A)   price discrimination is not possible.
B)   monopolists will be more efficient than competitors.
C)   the demand and marginal revenue curves will coincide.
D)   marginal revenue is less than price.E) All of the above
F) B) and D)

Question 11

The cornerstone of antitrust legislation is the:

Accepted Answer

A)   Clayton Act.
B)   Sherman Act.
C)   Celler-Kefauver Act.
D)   Federal Trade Commission Act.E) A) and B)
F) None of the above

Question 12

Refer to the above graph.The profit-maximizing monopolist shown sets its price at:

Accepted Answer

A)   0J.
B)   0G.
C)   0K.
D)   0H.E) B) and C)
F) A) and D)

Question 13

If a price-discriminating monopolist sells the same product in two markets but charges a lower price in market X and a higher price in market Y,the pricing difference indicates that demand is:

Accepted Answer

A)   more elastic in market X than market Y.
B)   less elastic in market X than market Y.
C)   more elastic in market Y than market X.
D)   the same in both markets X and Y.E) B) and C)
F) A) and C)

Question 14

Firms are prohibited from entering into contracts,combinations,and conspiracies that restrain trade by:

Accepted Answer

A)   Section 2 of the Sherman Act.
B)   Section 8 of the Clayton Act.
C)   Section 1 of the Sherman Act.
D)   the Wheeler-Lea Act.E) B) and D)
F) All of the above

Question 15

Other things equal,in which of the following cases would economic profit be the greatest?

Accepted Answer

A)   An unregulated monopolist who is able to engage in price discrimination
B)   An unregulated,nondiscriminating monopolist
C)   A regulated monopolist charging a price equal to average total cost
D)   A regulated monopolist charging a price equal to marginal costE) B) and C)
F) A) and D)

Question 16

The legislation that prohibited "every contract,combination,...or conspiracy" that limits competition is the:

Accepted Answer

A)   Federal Trade Commission Act.
B)   Clayton Act.
C)   Celler-Kefauver Act.
D)   Sherman Act.E) A) and C)
F) A) and B)

Question 17

Based on the diagram above,what is the difference between the purely competitive level of output and the pure monopolist level of output?

Accepted Answer

A)   10
B)   20
C)   50
D)   100The purely competitive level of output occurs where the demand curve crossed the MC curve,that is,100 units.The monopoly output occurs where MC = MR,that is,50 units.The difference is 50 units.E) A) and B)
F) A) and C)

Question 18

One major barrier to entry under pure monopoly arises from:

Accepted Answer

A)   the availability of close substitutes for a product.
B)   ownership of essential resources.
C)   the price taking ability of the firm.
D)   diseconomies of scale.E) C) and D)
F) B) and D)

Question 19

Which piece of federal legislation aims to prevent monopolization and restraint of trade?

Accepted Answer

A)   Sherman Act
B)   Clayton Act
C)   Wheeler-Lea Act
D)   Federal Trade Commission ActE) None of the above
F) A) and B)

Question 20

Which is not true of price discrimination?

Accepted Answer

A)   It exists when price differences depend critically on different buyers' evaluations of a product.
B)   Successful price discrimination will provide the firm with more profit than if it does not discriminate.
C)   Successful price discrimination implies that the producer can separate customers into easily identifiable groups.
D)   Successful price discrimination will generally result in a lower level of output than would be the case under a single-price monopoly.E) B) and C)
F) B) and D)

Exam 8: Pure Monopoly

Firms are prohibited from entering into contracts,combinations,and conspiracies that restrain trade by:

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A purely competitive firm is a price maker,but a monopolist is a price taker.

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Suppose a monopolist calculates that at present output and sales levels,marginal revenue is $1.00 and marginal cost is $2.00.He could maximize profits (or minimize losses) by:

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As a monopolist increases its output,it finds that its total revenue at first increases,and that after some output level is reached,its total revenue begins to decrease.

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Allocative inefficiency due to unregulated monopoly is characterized by the condition:

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If a price-discriminating monopolist sells the same product in two markets but charges a lower price in market X and a higher price in market Y,the pricing difference indicates that demand is:

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The legislation that prohibited "every contract,combination,...or conspiracy" that limits competition is the:

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Refer to the above graph.The profit-maximizing monopolist shown sets its price at:

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The cornerstone of antitrust legislation is the:

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Based on the diagram above,what is the difference between the purely competitive level of output and the pure monopolist level of output?

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Refer to the above graph.The monopolist's profits:

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The above diagram implies that whenever a firm's demand curve is downsloping:

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Which is not true of price discrimination?

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Other things equal,in which of the following cases would economic profit be the greatest?

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Which piece of federal legislation aims to prevent monopolization and restraint of trade?

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If a monopolist engages in price discrimination,it will:

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One major barrier to entry under pure monopoly arises from:

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Which of the following is not a precondition for price discrimination?

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Which is a barrier to entry?

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What do economies of scale,the ownership of essential raw materials,and patents have in common?

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