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12-101
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
D ifficulty: 02 Medium
Learning Objective: 12-05 Discuss the economic effects of monopoly.
Test Bank: I
Topic: Economic Effects of Monopoly
174.
Because of the ability to influence price, a pure monopolist can increase price and
increase volume of sales simultaneously.
175.
In the accompanying diagrams, both firms are selling their products in purely competitive
markets.
12-102
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
To p i c : Monopoly Demand
Type: Graph
176.
In the accompanying diagram, the demand for Firm B's product is elastic at all prices in
excess of $4.
12-103
177.
In the accompanying diagram, Firm B's average revenue curve coincides with its marginal
revenue curve.
178.
Natural monopoly may result where products produce substantial network effects and
can be simultaneously consumed by a large number of
consumers.
179.
Extensive network effects may drive a market toward natural monopoly because
consumers tend to choose a common, standard product that
everyone else is using.
180.
Price discrimination occurs whenever a firm sells a good for two different prices.
181.
Price discrimination will result in consumers with more elastic demand purchasing
more of the good than when a single price is charged to all
consumers in the market.
182.
Successful price discrimination requires that buyers charged the different prices be
physically separated.
12-105
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
AACSB: Knowledge Application
Acc es si bi lit y: Keyboard Navigation
Blooms: Understand
D iffi c ul t y : 02 Medium
Learning Objective: 12-06 Describe why a monopolist might prefer to charge different prices
in different markets.
Test Bank: I
To p i c : Price Discrimination
183.
Price discrimination is illegal in the United States under all circumstances due to
antitrust regulations.
184.
Refer to the diagram for a nondiscriminating monopolist. The profit-maximizing output for
this firm is M.
185.
Refer to the diagram for a nondiscriminating monopolist. At the profit-maximizing output, the
firm's economic profit will be BAFG.
12-107
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Test Bank: I
To p i c : Output and Price Determination
Type: Graph
186.
Refer to the diagram for a nondiscriminating monopolist. At output R economic profits will
be zero.
187.
Refer to the diagram for a nondiscriminating monopolist. At output Q production will be
unprofitable.
188.
Refer to the diagram for a nondiscriminating monopolist. The profit-maximizing price for this
firm is J.
189.
Refer to the diagram for a nondiscriminating monopolist. At output M total cost will be
0CHM.
190.
Refer to the diagram for a nondiscriminating monopolist. From society's point of view, it
would be desirable to have the monopolist produce a
larger output than M.
191.
Refer to the diagram for a nondiscriminating monopolist. If the government regulates the
monopolist so that it charges the "fair return" price, the
monopolist will produce output N.
192.
Refer to the diagram for a nondiscriminating monopolist. If the government regulates the
monopolist so that it charges the socially optimal price, the
monopolist will produce output
Q.
Multiple Choice Questions
193.
One feature of pure monopoly is that the firm is
194.
One defining characteristic of pure monopoly is that
195.
Which phrase would be most characteristic of pure monopoly?
196.
If you want to enjoy a Major League Baseball game at the stadium in St Louis, you must
patronize the Cardinals. This makes the Cardinals
organization a
12-115
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
C.
monopoly firm in Major League Baseball.
D.
purely competitive firm in Major League Baseball.
197.
A market where there are many firms, but one firm dominates and has the bulk (85
percent) of sales in the market, is called a
198.
One major barrier to entry under pure monopoly arises from
199.
Barriers to entry
200.
Which of the following is a barrier to entry?
201.
A monopoly is most likely to emerge and be sustained when
12-117
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Test Bank: II
Topic: Barriers to Entry
202.
A firm that has the long-run cost curves shown in the graph would be able to do or have the
following, except
203.
Natural monopolies result from
12-118
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
D. control over an essential natural resource.
204.
Which of the following is not a barrier to entry in an industry?
205.
In many large U.S. cities, taxicab companies operate as near monopolies because of
206.
An exclusive legal right as sole producer for 20 years granted to an inventor of a
product is called a
207.
One feature of pure monopoly is that the demand curve
208.
The nondiscriminating pure monopolist must decrease price on all units of a product
sold in order to sell more units. This explains why
12-120
Copyright © 2018 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior
written consent of McGraw-Hill Education.
Test Bank: II
Topic: Monopoly Demand
209.
The demand curve confronting a nondiscriminating pure monopolist is
210.
"Price makers" refers to firms that
211.
Under pure monopoly, a profit-maximizing firm will produce
