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Monopoly 3801
23.
A monopoly market
a.
always maximizes total economic well-being.
b.
always minimizes consumer surplus.
c.
generally fails to maximize total economic well-being.
d.
generally fails to maximize producer surplus.
24.
Suppose a monopolist chooses the price and production level that maximizes its profit. From that
point, to increase
society’s economic welfare, output would need to be increased as long as
a.
average revenue exceeds marginal cost.
b.
average revenue exceeds average total cost.
c.
marginal revenue exceeds marginal cost.
d.
marginal revenue exceeds average total cost.
25.
The socially efficient level of production occurs where the marginal cost curve intersects
a.
average variable cost.
b.
average total cost.
c.
demand.
d.
marginal revenue.
26.
Many economists criticize monopolists because they
a.
charge a price that equals marginal cost rather than a price that equals average cost.
b.
do not innovate.
c.
produce a large quantity of waste.
d.
produce less than the socially efficient level of output.
27.
Selling a good at a price determined by the intersection of the demand curve and the marginal cost
curve is
consistent with the
(i)
socially-optimal level of output.
(ii)
market solution for profit-maximizing competitive firms.
(iii)
market solution for a profit-maximizing monopoly.
a.
(i) and (ii) only
b.
(ii) and (iii) only
c.
(i) and (iii) only
d.
(i), (ii), and (iii)
28.
When the government creates a monopoly, the social loss may include
a.
declining marginal costs.
b.
the cost of lawyers and lobbyists hired to convince lawmakers to continue the monopoly.
c.
excessive monopoly profits.
d.
diminishing marginal revenue.
29.
If a social planner were running a monopoly, that planner could achieve an efficient outcome by
charging the price
that is determined by the
a.
minimum point on the average total cost curve.
b.
intersection of the average total cost curve and the demand curve.
c.
intersection of the marginal cost curve and the demand curve.
d.
intersection of the marginal cost curve and the marginal revenue curve.
30.
For a monopoly, the socially efficient level of output occurs where
a.
marginal revenue equals marginal cost.
b.
average revenue equals marginal cost.
c.
marginal revenue equals average total cost.
d.
average revenue equals average total cost.
31.
The difference in total surplus between the socially efficient level of production and the
monopolist's level of
production is
a.
offset by regulatory revenues.
b.
called a deadweight loss.
c.
equal to the monopolist’s profit.
d.
Both b and c are correct.
32.
Economic welfare is generally measured by
(i)
profit.
(ii)
total surplus.
(iii)
the price consumers pay for the product.
a.
(i) and (ii) only
b.
(ii) and (iii) only
c.
(ii) only
d.
(i), (ii), and (iii)
33.
For a monopoly market, total surplus can be defined as the value of the good to
a.
producers minus the cost incurred by consumers.
b.
producers plus the cost incurred by consumers.
c.
consumers minus the costs of producing the good.
d.
consumers plus the cost of producing the good.
34.
To maximize total surplus with a monopoly firm, a benevolent social planner would choose the
level of output where
a.
MR = MC.
b.
MR intersects the demand curve.
c.
MC intersects the demand curve.
d.
MR exceeds MC by the greatest amount.
35.
Consumers' willingness to pay for a good minus the amount they actually pay for it equals
a.
consumer surplus.
b.
consumer benefit.
c.
price discriminant.
d.
deadweight loss.
36.
The amount that producers receive for a good minus their costs of producing it equals
a.
quantity supplied.
b.
supply price.
c.
deadweight loss.
d.
producer surplus.
37.
A monopoly chooses to supply the market with a quantity of a product that is determined by the
intersection of the
a.
marginal cost and demand curves.
b.
average total cost and demand curves.
c.
marginal revenue and average total cost curves.
d.
marginal revenue and marginal cost curves.
3808 Monopoly
Figure 15-8
38.
Refer to Figure 15-8. What is the socially efficient price and quantity?
a.
price = A; quantity = X
b.
price = B; quantity = Y
c.
price = B; quantity = X
d.
price = C; quantity = X
39.
Refer to Figure 15-8. What is the monopoly price and quantity?
a.
price = A; quantity = X
b.
price = B; quantity = Y
c.
price = B; quantity = X
d.
price = C; quantity = X
40.
Refer to Figure 15-8. What is the area of deadweight loss?
a.
the rectangle (A-C)*X
b.
the triangle 1/2[(A-C)*(Y-X)]
c.
the triangle 1/2[(A-B)*(Y-X)]
d.
the rectangle (A-C)*X plus the triangle 1/2[(A-C)*(Y-X)]
41.
Refer to Figure 15-8. What area represents the total surplus lost due to monopoly pricing?
a.
the rectangle (A-C)*X
b.
the triangle 1/2[(A-C)*(Y-X)]
c.
the triangle 1/2[(A-B)*(Y-X)]
d.
the rectangle (A-C)*X plus the triangle 1/2[(A-C)*(Y-X)]
Figure 15-9
42.
Refer to Figure 15-9. To maximize total surplus, a benevolent social planner would choose
which of the following
outcomes?
a.
100 units of output and a price of $20 per unit
b.
150 units of output and a price of $20 per unit
c.
150 units of output and a price of $30 per unit
d.
200 units of output and a price of $20 per unit
43.
Refer to Figure 15-9. To maximize its profit, a monopolist would choose which of the following
outcomes?
a.
100 units of output and a price of $20 per unit
b.
100 units of output and a price of $40 per unit
c.
150 units of output and a price of $30 per unit
d.
200 units of output and a price of $40 per unit
44.
Refer to Figure 15-9. The monopolist's maximum profit
a. is $1,600.
b. is $2,000.
c. is $2,500.
d. cannot be determined from the diagram.
45.
Refer to Figure 15-9. The deadweight loss caused by a profit-maximizing monopoly amounts to
a. $250.
b. $500.
c. $750.
d. $1,000.
Figure 15-10
46.
Refer to Figure 15-10. What area measures the deadweight loss?
a. (B-F)*K
b. 0.5[(P-O)*(L-O)]
c. 0.5[(A-H)*(L-J)]
d. 0.5[(B-F)*(L-K)]
Monopoly 3813
Figure 15-11
47.
Refer to Figure 15-11. Which area represents the deadweight loss from monopoly?
a.
J
b.
H
c.
A+B+C+D+F+I+J+H
d.
J+H
3814 Monopoly
Figure 15-12
48.
Refer to Figure 15-12. Which area represents the deadweight loss from monopoly?
a.
A+B
b.
C+F
c.
G
d.
A+B+C+F
Figure 15-13
49.
Refer to Figure 15-13. A profit-maximizing monopolist would create a deadweight loss to
society valued at
a. $12.
b.
$24.
c.
$42.
Figure 15-14
50.
Refer to Figure 15-14. A benevolent social planner would have the monopoly operate at an
output level
a.
less than Q0.
b.
greater than Q0.
c.
equal to Q0.
d.
equal to zero.
51.
Refer to Figure 15-14. If the monopoly operates at an output level less than Q0, then an
increase in output toward
(but not exceeding) Q0 would
a.
raise the price and raise total surplus.
b.
lower the price and raise total surplus.
c.
raise the price and lower total surplus.
d.
lower the price and lower total surplus.
Monopoly 3817
Figure 15-15
52.
Refer to Figure 15-15. To maximize total surplus, a benevolent social planner would choose
which of the following
outcomes?
a.
Q = 30 and P = 30
b.
Q = 30 and P = 60
c.
Q = 45 and P = 45
d.
Q = 60 and P = 30
53.
Refer to Figure 15-15. To maximize its profit, a monopolist would choose which of the
following outcomes?
a.
Q = 30 and P = 30
b.
Q = 30 and P = 60
c.
Q = 45 and P = 45
d.
Q = 60 and P = 30
Monopoly 3819
Figure 15-16
54.
Refer to Figure 15-16. Which triangle represents the monopoly deadweight loss?
a.
the triangle with vertical lines that is bordered by ACT
b.
the triangle with vertical lines and light grey shading that is bordered by ABH
c.
the triangle with vertical lines and dark grey shading that is bordered by HIT
d.
the triangle with dark grey shading that is bordered by HKT
3820 Monopoly
Scenario 15-4
Suppose a monopolist has a demand curve that can be expressed as P=90-Q. The monopolist’s
marginal revenue curve can be expressed as MR=90-2Q. The monopolist has constant marginal
costs and average total costs of $10.
55.
Refer to Scenario 15-4. The profit-maximizing monopolist will produce an output level of
a.
80 units.
b.
40 units.
c.
20 units.
d.
10 units.
56.
Refer to Scenario 15-4. The profit-maximizing monopolist will charge a price of
a. $50.
b.
$40.
c.
$20.
d.
$10.
