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- 1. Multiple Choice
monopoly has two key features, which are
barriers to entry and no close substitutes.
franchises and barriers to entry.
barriers to entry and close substitutes.
close substitutes and no barriers to entry.
- 2. Multiple Choice
An example of a monopoly is
a big city restaurant.
the stock market.
the only veterinarian in an isolated farm community.
PPUM
- 3. Multiple Choice
A single-price monopoly is characterized by a marginal revenue curve that is
upward sloping.
downward sloping.
horizontal.
vertical.
- 4. Multiple Choice
Which of the following is a characteristic of a single-price monopoly?
The firm is a price taker.
Demand is perfectly elastic.
There are many close substitutes for the firm's product.
The market price exceeds marginal revenue.
- 5. Multiple Choice
For a single-price monopolist, marginal revenue is less than price because
the revenue gain from the last unit sold is offset by a revenue loss on the units that previously had been sold at a higher price.
the revenue gain from the last unit sold is offset by further gains in price on units not sold at all.
total revenue always decreases as output increases.
the price does not have to be lowered on all previous units sold.
- 6. Multiple Choice
A major difference between a single-price monopolist and a perfectly competitive firm is that the
monopolist can maximize profit by setting the price of the output where demand is inelastic.
monopolist can always increase its profits by increasing the price of its output.
monopolist's marginal revenue is less than price.
monopolist is guaranteed to earn an economic profit.
- 7. Multiple Choice
In the monopoly, the firm's marginal revenue curve is ________, while in a perfectly competitive market, each firm's marginal revenue curve is ________.
downward sloping; horizontal
horizontal; downward sloping
upward sloping; horizontal
downward sloping; upward sloping
- 8. Multiple Choice
Christy's Haircuts, the sole supplier of haircuts in a small town, faces the demand schedule shown in the table above. What is Christy's marginal revenue from the 25th haircut?
zero
$5
$7
$5.50
- 9. Multiple Choice
For a single-price monopoly, marginal revenue is ________ when demand is elastic and is ________ when demand is inelastic.
negative; negative
negative; positive
positive; negative
positive; positive
- 10. Multiple Choice
Which of the following is TRUE of a monopoly?
It can always increase its revenue by increasing the price to its customers.
It will always operate somewhere along the inelastic portion of the demand curve.
Its marginal cost curve is always downward sloping.
None of above
- 11. Multiple Choice
A single-price monopolist will always produce where the elasticity of demand
is greater than 1.
is smaller than 1.
equals 1.
equals infinity.
- 12. Multiple Choice
Roxie's Movie Theatre is the only one in town. The table above gives the demand schedule for movies. If Roxie's is a single-price monopoly and the marginal cost of a movie is $6, Roxie's will charge ________ a movie and will sell ________ movie tickets a week.
$15; 100
$12; 200
$6; 400
$9; 300
- 13. Multiple Choice
For the unregulated, single-price monopoly shown in the figure above, when its profit is maximized, output will be
4 units per year and the price will be $6.
4 units per year and the price will be $4.
6 units per year and the price will be $4.
None of the above answers is correct.
- 14. Multiple Choice
Sue's Surfboards is the sole renter of surfboards on Big Wave Island. Sues demand and marginal revenue curves are illustrated in the figure above. Sue's Surfboards currently rents 15 surfboards an hour. Sue's total revenue from the 15 surfboards is
$300
$220
$150
$100
- 15. Multiple Choice
The figure above shows the demand and marginal revenue curves facing Sue's 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 Sue's Surfboards
can increase its profit by increasing the number of rentals.
must face an inelastic demand for surfboard rentals.
must face a unit elastic demand for surfboard rentals.
must face an elastic demand for surfboard rentals.
- 16. Multiple Choice
Compared to a perfectly competitive industry, a single-price monopoly with the same costs will
A) create less consumer surplus.
B) create less economic profit.
C) create a deadweight loss.
D) Both answers A and C are correct.
- 17. Multiple Choice
In the above figure, what price will a single-price monopoly set?
P1
P2
P3
P4
P5
- 18. Multiple Choice
Gene's Car Wash is a natural monopoly. To wash 100 cars a week, if Gene is unregulated, he would charge a price of $10. Gene's long-run average cost for washing 100 cars is $8, his average variable cost is $6, and his marginal cost is constant at $4. If Gene was regulated using a marginal cost pricing rule, the price he would be allowed to charge to wash 100 cars is
$10
$8
$6
$4
- 19. Multiple Choice
Consider the market for cable television in the figure above. This graph depicts a natural monopoly because the
marginal cost curve is constant.
demand curve is downward sloping.
average cost curve is declining as it crosses the demand curve.
marginal revenue curve is downward sloping.
- 20. Multiple Choice
A monopoly can price discriminate between two groups of consumers if each group has
a large consumer surplus.
a different willingness to pay.
the same willingness to pay.
the ability to resell the good to the other group.
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