61) A monopoly market has
A) a few firms.
B) a single firm.
C) two dominating firms in the market.
D) only two firms in it.
E) some unspecified number of firms in it.
62) Two types of barriers to entry are called ________ barriers to entry and ________ barriers to
entry.
A) legal; illegal
B) natural; legal
C) natural; illegal
D) natural; rent seeking
E) ownership; rent seeking
63) A natural monopoly is one that arises from
A) patent law.
B) copyright law.
C) a firm buying all of a natural resource.
D) economies of scale.
E) ownership of a natural resource.
64) A legal barrier is created when a firm
A) has economies of scale, which allow it to produce at a lower cost than two or more firms.
B) is granted a public franchise, government license, patent, or copyright.
C) produces a unique product or service.
D) produces a standardized product or service.
E) has an ownership barrier to entry.
65) Pizza producers charge one price for a single pizza and almost give away a second one. This
is an example of
A) monopoly.
B) a barrier to entry.
C) behavior that is not profit-maximizing.
D) price discrimination.
E) rent seeking.
15.2 Single-Price Monopoly
1) The demand curve for a monopoly is
A) horizontal because the demand is perfectly elastic.
B) downward sloping.
C) vertical because the demand is perfectly inelastic.
D) upward sloping.
E) undefined because it is the only supplier in the market.
2) If a monopoly wants to sell a greater quantity of output, it must
A) lower its price.
B) raise its price.
C) tell consumers to buy more because it’s a monopolist.
D) raise its marginal cost.
E) change its fixed costs.
3) A single-price monopoly
A) must practice price discrimination.
B) can lower its price for only a few select consumers if it wants to increase its sales.
C) will set its price equal to a consumer’s willingness to pay.
D) must lower the price for all customers if it wants to increase its sales.
E) is able to raise its price as high as it wants and consumers must still buy from it because it is a
monopoly.
4) Total revenue is equal to
A) the change in price resulting from a one-unit increase in quantity sold.
B) the amount people will buy at a given price.
C) the change in the quantity sold when you change the price by one unit.
D) price multiplied by the quantity sold.
E) the price at which the good or service is sold.
5) For a monopoly, marginal revenue is equal to
A) the amount people buy at a given price.
B) the amount people buy between two prices.
C) the change in total revenue brought about by a one-unit increase in quantity sold.
D) the price multiplied by the quantity sold.
E) the price of the product.
6) For a single-price monopoly, price is
A) equal to marginal revenue.
B) greater than marginal revenue.
C) less than marginal revenue because the firm must lower its price in order to sell another unit
of output.
D) less than marginal revenue because the firm cannot increase its total revenue when the
demand curve is downward sloping.
E) equal to zero because the firm is not a price taker.
7) Which of the following is always true for a single-price monopolist?
A) P > MR
B) P < MR
C) P = MR
D) P = elasticity of demand
E) None of the above answers is correct because none of them is always true.
8) For a single-price monopolist, why is marginal revenue less than price?
A) Because the firm is a price taker
B) To sell another unit, the price must be lowered.
C) Demand is elastic when another unit is sold.
D) Demand is inelastic when another unit is sold.
E) The question is false because marginal revenue is always equal to price.
9) The marginal revenue for a single-price monopoly with a downward-sloping demand curve
A) is less than the price.
B) is greater than the price.
C) is equal to the price.
D) might be more than, less than, or equal to the price, depending on whether the slope of the
demand curve exceeds 1.0 in magnitude.
E) might be more than, less than, or equal to the price, depending on whether the price elasticity
of demand exceeds 1.0 in magnitude.
10) A single-price monopoly faces a linear demand curve. If the marginal revenue for the second
unit is $20, then the marginal revenue for the
A) first unit is less than $20.
B) third unit is less than $20.
C) third unit is more than $20.
D) third unit is also $20.
E) more information is needed to determine if the marginal revenue for the third unit is more
than, less than, or equal to $20.
11) A single-price monopoly can sell 2 units for $8.50 per unit. In order to sell 3 units, the price
must be $8.00 per unit. The marginal revenue from selling the third unit is
A) $24.00.
B) $8.50.
C) $7.00.
D) $6.50.
E) $17.00.
12) A single-price monopoly can sell 10 units of its product at a price of $45 each but to sell 11
units, the monopoly must cut the price to $44. What is the marginal revenue of the extra unit
sold?
A) $484
B) $450
C) $44
D) $34
E) -$1
13) Suppose a monopoly can sell 10 units of output for $21. In order to sell 11 units of output,
the price must fall to $20. What is the marginal revenue of the 11th unit?
A) $41
B) $20
C) $10
D) $1
E) $220
14) Suppose a single-price monopoly sells 3 units of a good at $20 per unit. If the monopoly sells
4 units, the total revenue increases to $72. What is the marginal revenue of the fourth unit?
A) $52
B) $18
C) $60
D) $12
E) $20
15) Suppose a single-price monopoly sells 3 units of a good at $20 per unit. If the monopoly sells
4 units, the total revenue increases to $72. What price is being charged for 4 units?
A) $52 each
B) $18 each
C) $60 each
D) $12 each
E) $20 each
Price
(dollars
per
haircut)
Quantity
demanded
(haircuts per
day)
5
50
10
40
15
30
20
20
25
10
30
0
16) 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?
A) zero
B) $5.00
C) $17.50
D) $50.00
17) 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 35th haircut?
A) zero
B) -$5.00
C) $5.00
D) $12.50
Quantity
(units)
Price
(dollars
per unit)
1
8
2
7
3
6
4
5
5
4
6
3
18) The table above gives the demand for a monopolist’s output. Between which two quantities is
marginal revenue equal to 0?
A) 4 and 5
B) 3 and 4
C) 2 and 3
D) 1 and 2
19) The table above gives the demand for a monopolist’s output. Between which two quantities is
demand elastic?
A) 6 and 5
B) 5 and 4
C) 4 and 3
D) 3 and 2
20) The table above gives the demand for a monopolist’s output. What is the total revenue in
when 3 units of output are produced?
A) $21
B) $20
C) $18
D) $6
21) The table above gives the demand for a monopolist’s output. What is the marginal revenue
when output is increased from 5 to 6 units?
A) $18
B) $4
C) $3
D) -$2
22) The table above gives the demand for a monopolist’s output. What is the marginal revenue
when output is increased from 2 to 3 units?
A) $18
B) $4
C) $7
D) $6
23) The demand curve facing a single-price monopoly is
A) below the marginal revenue curve.
B) above the marginal revenue curve.
C) the same as only the marginal revenue curve.
D) the same as only the marginal cost curve.
E) the same as both the marginal revenue curve and the marginal cost curve.
24) A single-price monopoly has a marginal revenue curve that is
A) horizontal and equal to price.
B) downward sloping and below the demand curve.
C) upward sloping and equal to the supply curve.
D) downward sloping and above the demand curve.
E) vertical at the profit-maximizing quantity.
25) If Microsoft is a monopoly and currently charges prices where its demand is elastic, then
Microsoft’s marginal revenue is
A) negative.
B) positive.
C) zero.
D) minimized.
E) undefined.
26) When marginal revenue is positive, total revenue ________ when output increases and
demand is ________.
A) decreases; elastic
B) decreases; inelastic
C) increases; elastic
D) increases; inelastic
E) does not change; unit elastic
27) The relationship between marginal revenue and elasticity is
A) when demand is elastic, marginal revenue is positive and when demand is inelastic, marginal
revenue is negative.
B) whenever the elasticity is positive, marginal revenue is positive.
C) whenever the elasticity is negative, marginal revenue is positive.
D) when demand is elastic, marginal revenue is negative and when demand is inelastic, marginal
revenue is positive.
E) that total revenue equals zero at the quantity for which the demand is unit elastic.
28) If total revenue falls when output increases, marginal revenue is
A) positive.
B) negative.
C) zero.
D) greater than total revenue.
E) elastic.
29) If the Boston Red Sox baseball team is currently charging a ticket price where its demand is
inelastic, then the Red Sox’s marginal revenue is
A) negative.
B) positive.
C) zero.
D) maximized.
E) undefined.
30) If the single restaurant in an Eastern Kentucky town is currently charging a price for its ham
and eggs where the demand is unit elastic, its marginal revenue for ham and eggs is
A) negative.
B) positive.
C) zero.
D) maximized.
E) undefined.
31) Suppose that along a linear demand curve, the elasticity of demand is equal to 1 when the
price is $4 and the quantity is 100 units. Then the
A) total revenue is at its maximum when 100 units are produced.
B) marginal revenue is positive at 100 units.
C) marginal revenue is negative at 100 units.
D) Both answers A and B are correct.
E) Both answers A and C are correct.
32) Suppose that along a linear demand curve, the elasticity of demand is equal to 1 when the
price is $4 and the quantity is 100 units. Then the
A) marginal revenue is negative when output exceeds 100 units.
B) elasticity of demand is less than 1 when output exceeds 100 units.
C) marginal revenue is 0 when output equals 100 units.
D) Only answers A and B are correct.
E) Answers A, B, and C are correct.
33) The above table gives the demand schedule for a monopoly. The demand is elastic at all
prices between
A) $6 and $1.
B) $5 and $1.
C) $3 and $1.
D) $6 and $4.
E) $4 and $3.
34) The above table gives the demand schedule for a monopoly. The demand is inelastic over the
entire price range between
A) $6 and $1.
B) $5 and $1.
C) $3 and $1.
D) $6 and $4.
E) $4 and $3.
35) To maximize its profit, a single-price monopoly the amount of output so that its marginal
revenue
A) equals zero.
B) equals its marginal cost.
C) exceeds its marginal cost but not necessarily by as much as possible.
D) is less than its marginal cost.
E) exceeds its marginal cost by as much as possible.
36) The maximum profit for a single-price monopoly is found when the firm produces the level
of output so that
A) marginal revenue equals marginal cost.
B) price equals marginal cost.
C) it can charge the highest possible price.
D) marginal revenue exceeds marginal cost by as much as possible.
E) total revenue equals total cost.
37) To maximize its profit, a perfectly competitive firm produces so that ________ and a single-
price monopoly produces so that ________.
A) MR = MC; MR > MC
B) MR > MC; MR = MC
C) MR = MC; MR = MC
D) MR > MC; MR > MC
E) P = ATC; P = ATC
38) In order to maximize its profit, a single-price monopoly produces the amount of output so
that
A) P = MC.
B) MR = MC.
C) P = MC – MR.
D) P = MR.
E) P = ATC.
39) Which of the following is ALWAYS true when a single-price monopolist maximizes its
profit?
A) P = MC
B) P = MR
C) MR = MC
D) MC = ATC
E) P > ATC
40) Which of the following is NOT correct about a single-price monopoly?
A) Maximum profit is found where demand is the most inelastic.
B) Marginal revenue is negative when demand is inelastic.
C) Marginal revenue is positive when demand is elastic.
D) To sell more output, the firm must lower its price.
E) To maximize its profit, the firm produces so that marginal revenue equals marginal cost.
41) Which of the following is correct for a single-price monopoly?
i. The firm can determine the quantity it produces and the price it charges.
ii. It would never profitably produce output in the inelastic range of its demand.
iii. Its marginal revenue is less than price.
A) i only
B) i and iii
C) ii only
D) ii and iii
E) i, ii, and iii
42) Suppose that a monopoly is currently producing the quantity at which marginal revenue is
less than marginal cost. The monopoly can increase its profit by ________.
A) shutting down
B) lowering its price and increasing its output
C) raising its price and decreasing its output
D) lowering its price and decreasing its output
E) not changing its price and increasing its output
43) A single-price monopoly is producing at an output level where marginal revenue is $15,
marginal cost is $13, and price is $20. This monopoly is
A) not maximizing its profit and should decrease output to increase its profit.
B) not maximizing its profit and should increase output to increase its profit.
C) maximizing its profit but should shut down.
D) maximizing its profit and should not shut down.
E) maximizing its profit but still should decrease output to earn even more profit.
44) The above table gives the demand schedule for a single-price monopoly. The marginal
revenue first becomes negative when going from
A) 1 unit to 2 units.
B) 2 units to 3 units.
C) 3 units to 4 units.
D) 4 units to 5 units.
E) None of the above; the total revenue is always positive so the marginal revenue must always
be positive.
45) The above table gives the demand schedule for a single-price monopoly. If the marginal cost
is $3, the profit maximizing output for the monopoly will be between
A) 1 to 2 units.
B) 2 to 3 units.
C) 3 to 4 units.
D) 4 to 5 units.
E) Exactly 5 units.
46) Suppose the Busy Bee Café is the monopoly producer of hamburgers in Hugo, Oklahoma.
The above figure represents the demand, marginal revenue, and marginal cost curves for this
establishment. What quantity will the Busy Bee produce to maximize its profit?
A) 20 hamburgers per hour
B) 30 hamburgers per hour
C) 50 hamburgers per hour
D) 0 hamburgers per hour.
E) 10 hamburgers per hour
47) Suppose the Busy Bee Café is the monopoly producer of hamburgers in Hugo, Oklahoma.
The above figure represents the demand, marginal revenue, and marginal cost curves for this
establishment. What price will the Busy Bee charge to maximize its profit?
A) $5.00 for a hamburger
B) $3.00 for a hamburger
C) $2.00 for a hamburger
D) $1.00 for a hamburger
E) $4.00 for a hamburger
48) Suppose the Busy Bee Café is the monopoly producer of hamburgers in Hugo, Oklahoma.
The above figure represents the demand, marginal revenue, and marginal cost curves for this
establishment. In order to maximize profit, the Busy Bee produces ________ hamburgers per
hour and sets a price of ________ per hamburger.
A) 20; $3.00
B) 20; $1.00
C) 30; $2.00
D) 30; $4.00
E) 50; $5.00
49) Suppose the Busy Bee Café is the monopoly producer of hamburgers in Hugo, Oklahoma.
The above figure represents the demand, marginal revenue, and marginal cost curves for this
establishment. If the Busy Bee produces 40 hamburgers per hour, then
A) marginal revenue will exceed marginal cost.
B) profit will be maximized.
C) marginal revenue will be negative.
D) marginal revenue will be maximized.
E) both the marginal revenue and the price will be negative.