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50) The figure above shows the demand, marginal revenue, and marginal cost curves for Paul's
Parrot Pillows, a single-price monopoly producer of pillows stuffed with parrot feathers. When
Paul maximizes his profit, he produces ________ pillows per hour.
A) 1,000
B) 3,000
C) 4,000
D) 0
E) 2,000
51) The figure above shows the demand, marginal revenue, and marginal cost curves for Paul's
Parrot Pillows, a single-price monopoly producer of pillows stuffed with parrot feathers. When
Paul maximizes his profit, the price per pillow is
A) $70.
B) $60.
C) $40.
D) $100.
E) $30.
52) The figure above shows the demand, marginal revenue, and marginal cost curves for Paul's
Parrot pillows, a single-price monopoly producer of pillows stuffed with parrot feathers. When
Paul maximizes his profit, the difference between marginal cost and price
A) $0.
B) $40.
C) $60.
D) $30.
E) $20.
53) The figure above shows the demand, marginal revenue, and marginal cost curves for Paul's
Parrot pillows, a single-price monopoly producer of pillows stuffed with parrot feathers. When
Paul maximizes his profit, the price is ________ per pillow and the marginal cost is ________
per pillow.
A) $60; $60
B) $60; $40
C) $70; $60
D) $70; $40
E) $100; $40
54) The figure above shows the demand, marginal revenue, and marginal cost curves for Paul's
Parrot pillows, a single-price monopoly producer of pillows stuffed with parrot feathers. When
Paul maximizes his profit, his total economic profit is
A) $60.
B) $405.
C) $0.
D) $210,000.
E) unknown because more information is needed to determine Paul's profit.
55) In the above figure, the profit-maximizing output for this single-price monopoly is ________
units and the price is ________.
A) 200; $10
B) 300; $20
C) 500; $50
D) 200; $30
E) 300; $30
56) A single-price monopoly has marginal revenue and marginal cost equal to $19 at 15 units of
output where the price on the demand curve is $38. At what price will this firm sell the output?
A) $19
B) $38
C) $285
D) $570
E) There is not enough information given to answer the question.
57) A single-price monopoly has marginal cost of $23 and marginal revenue of $28. Which of
the following is definitely correct?
A) It is maximizing profit.
B) To increase profit, it should produce less.
C) To increase profit, it should produce more.
D) It should shut down.
E) It is earning an economic profit.
58) A profit-maximizing output for a single-price monopoly is determined by the intersection of
the ________ curves and the profit-maximizing price is found on the ________ curve.
A) marginal cost and marginal revenue; marginal revenue
B) marginal cost and marginal revenue; demand
C) total revenue and total cost, total revenue
D) marginal cost and average total cost; demand
E) demand and supply; supply
59) For a single-price monopoly,
A) if marginal cost exceeds marginal revenue, profits will increase if output decreases.
B) if marginal revenue exceeds marginal cost, profits will increase if output decreases.
C) there are several different price and output combinations that maximize profit.
D) marginal revenue will be greater than price if demand is elastic.
E) marginal revenue will be greater than price if demand is inelastic.
60) A single-price monopoly has marginal revenue and marginal cost equal to $19 at 15 units of
output where the price on the demand curve is $38. At this output, average total cost is $15.
What is the total profit earned?
A) $225
B) $285
C) $345
D) $570
E) $19
61) A single-price monopoly has marginal revenue and marginal cost equal to $19 at 15 units of
output where the price on the demand curve is $38. What is the firm's total revenue?
A) $38
B) $285
C) $570
D) $19
E) There is not enough information given to answer the question.
62) If a single-price monopoly is earning a large economic profit, what keeps other firms from
competing away the profit?
A) There are barriers to entry.
B) The monopoly must be keeping the amount earned secret.
C) The market must be too small.
D) The existing firm's ATC must be too large to allow competitors to enter and earn an economic
profit.
E) Nothing, other firms will enter and will compete away the profit.
63) In contrast to competitive firms, single-price monopolies
A) do not have to worry about market demand.
B) sell only if demand is inelastic.
C) can never incur a loss.
D) can earn economic profit indefinitely.
E) must take the price that is determined by the market demand and market supply.
64) A monopolist can make an economic profit in the long run because of
A) the relatively elastic demand for its product.
B) the relatively inelastic demand for its product.
C) the firm's price setting behavior.
D) barriers to entry.
E) the fact that the firm produces where MR = MC.
65) Why can a monopoly make an economic profit in the long run?
A) because there are close substitutes for the firm's product
B) because the firm is protected by barriers to entry
C) because the firm produces where MR=MC
D) because P > MR
E) ALL of the above are reasons why a monopoly can make an economic profit in the long run.
66) For a single-price monopoly, price is
A) greater than marginal revenue.
B) one half of marginal revenue.
C) equal to marginal revenue.
D) unrelated to marginal revenue.
E) always less than average total cost when the firm maximizes its profit.
67) A single-price monopoly can sell 1 unit for $9.00. To sell 2 units, the price must be $8.50 per
unit. The marginal revenue from selling the second unit is
A) $17.50.
B) $17.00.
C) $8.50.
D) $8.00.
E) $9.00
68) When demand is elastic, marginal revenue is
A) positive.
B) negative.
C) zero.
D) increasing as output increases.
E) undefined.
69) To maximize its profit, a single-price monopoly produces the quantity at which
A) the difference between marginal revenue and marginal cost is as large as possible.
B) marginal revenue equals marginal cost.
C) average total cost is at its minimum.
D) the marginal cost curve intersects the demand curve.
E) the marginal revenue curve intersects the horizontal axis.
70) Once a monopoly has determined how much it produces, it will charge a price that
A) is determined by the intersection of the marginal cost and average total cost curves.
B) minimizes marginal cost.
C) is determined by its demand curve.
D) is independent of the amount produced.
E) is equal to its average total cost.
15.3 Monopoly and Competition Compared
1) Assume someone organizes all farms in the nation into a monopoly. What is the monopoly's
marginal cost curve?
A) It is a horizontal line at the competitive industry's price.
B) It is a vertical line at the formerly competitive industry's quantity.
C) It is a vertical line at the monopoly's chosen output level.
D) It is the formerly competitive industry's supply curve.
E) It is the same as the formally competitive industry's average total cost curve.
2) Assume someone organizes all farms in the nation into a single-price monopoly. What is the
monopoly's marginal revenue curve?
A) It is a horizontal line at the competitive industry's price.
B) It is a line that lies below the new monopoly's demand curve.
C) It is a vertical line at the monopoly's chosen output level.
D) It is identical to the demand curve for the monopolist's output.
E) It is a line that lies above the new monopoly's demand curve.
3) Compared to a perfectly competitive industry, a single-price monopoly produces
A) more output.
B) less output.
C) the same output.
D) some amount that might be more, less, or the same depending on whether the monopoly's
marginal revenue curve lies above, below, or on its demand curve.
E) some amount that might be more, less, or the same depending on whether the monopoly's
marginal cost curve lies above, below, or on its marginal revenue curve.
4) Assume someone organizes all farms in the nation into a single-price monopoly. As a result,
the amount of food produced
A) remains constant.
B) decreases.
C) increases.
D) might increase or decrease depending on whether the demand for food is elastic or inelastic.
E) might increase or decrease depending on whether the monopoly's marginal revenue curve lies
below or above its demand curve.
5) Compared to a perfectly competitive market, a single-price monopoly sets
A) a lower price.
B) the same price.
C) a higher price.
D) a price that might be higher, lower, or the same depending on whether the monopoly's
marginal revenue curve lies above, below, or on its demand curve.
E) a price that might be higher, lower, or the same depending on whether the monopoly's
marginal cost curve lies above, below, or on its marginal revenue curve.
6) Assume someone organizes all farms in the nation into a single-price monopoly. As a result,
the price consumers pay for food
A) does not change, that is, it remains constant.
B) falls.
C) rises.
D) might rise or fall depending on whether the demand for food is elastic or inelastic.
E) might rise or fall depending on whether the monopoly's marginal revenue curve lies above or
below its demand curve.
7) If we compare a perfectly competitive market to a single-price monopoly with the same costs,
the monopoly sells
A) the same quantity at a higher price.
B) a smaller quantity at a higher price.
C) a larger quantity at a lower price.
D) a larger quantity at a higher price.
E) a smaller quantity at the same price.
8) When compared to a perfectly competitive market, a single-price monopoly with the same
costs produces ________ output and charges ________ price.
A) a larger; a lower
B) a smaller; a lower
C) the same; a higher
D) a smaller; a higher
E) a smaller; the same
9) A single-price monopoly transfers
A) consumer surplus to producers.
B) producer surplus to consumers.
C) economic profit to consumers.
D) economic profit to the government.
E) economic profit to deadweight loss.
10) Assume someone organizes all farms in the nation into a monopoly. As a result, consumer
surplus will
A) not change.
B) increase.
C) decrease.
D) either increase, decrease, or not change depending if the monopoly's marginal revenue curve
lies below, above, or is the same as its demand curve.
E) None of the above answers is correct because the effect on consumer surplus depends on
whether the monopoly is a single-price or a price-discriminating monopoly.
11) Assume someone organizes all farms in the nation into a monopoly. Which of the following
occurs?
i. Consumer surplus decreases.
ii. Economic profit increases.
iii. A deadweight loss is created.
A) i only
B) ii only
C) iii only
D) i and ii
E) i, ii, and iii
12) When a perfectly competitive industry is taken over by a monopoly, some consumer surplus
is transferred to the monopolist in the form of
A) marginal cost.
B) economic profit.
C) deadweight loss.
D) taxes.
E) average variable cost.
13) Which of the following statements is FALSE?
A) A perfectly competitive market produces more output and charges a lower price than a
monopoly.
B) A perfectly competitive firm produces where MR = MC but a monopoly produces where MR
> MC.
C) In a perfectly competitive market, the price is equal to the marginal cost, but in a market with
a single-price monopoly, price exceeds marginal cost.
D) The consumer surplus is smaller for a market with a monopoly than for a perfectly
competitive market.
E) In the long run, a monopoly can earn a larger economic profit than can a perfectly competitive
firm.
14) Suppose the grocery store market in Kansas City is perfectly competitive. Then one store
buys all the others and becomes a single-price monopoly. The figure above shows the relevant
demand and cost curves. When the market is perfectly competitive, the price of a pound of steak
is
A) $4.
B) $8.
C) $12.
D) $20.
E) $2.
15) Suppose the grocery store market in Kansas City is perfectly competitive. Then one store
buys all the others and becomes a single-price monopoly. The figure above shows the relevant
demand and cost curves. When the market is a monopoly, the price of a pound of steak is
A) $4.
B) $8.
C) $12.
D) $20.
E) $2.
16) Suppose the grocery store market in Kansas City is perfectly competitive. Then one store
buys all the others and becomes a single-price monopoly. The figure above shows the relevant
demand and cost curves. When the market is perfectly competitive, the price of a pound of steak
is ________ and when it is a monopoly, the price of a pound of steak is ________.
A) $4; $20
B) $8; $4
C) $8; $12
D) $4; $8
E) $4; $12
17) Suppose the grocery store market in Kansas City is perfectly competitive. Then one store
buys all the others and becomes a single-price monopoly. The figure above shows the relevant
demand and cost curves. When the market is perfectly competitive, the quantity of steak is
A) 2,000 pounds.
B) 3,000 pounds.
C) 4,000 pounds.
D) 5,000 pounds.
E) less than 2,000 pounds.
18) Suppose the grocery store market in Kansas City is perfectly competitive. Then one store
buys all the others and becomes a single-price monopoly. The figure above shows the relevant
demand and cost curves. When the market is a monopoly, the quantity of steak is
A) 2,000 pounds.
B) 3,000 pounds.
C) 4,000 pounds.
D) 5,000 pounds.
E) less than 2,000 pounds.
19) Suppose the grocery store market in Kansas City is perfectly competitive. Then one store
buys all the others and becomes a single-price monopoly. The figure above shows the relevant
demand and cost curves. When the market is perfectly competitive, the quantity of steak is
________ pounds and when the market is a monopoly the quantity of steak is ________ pounds.
A) 2,000; 4,000
B) 3,000; 2,000
C) 4,000; 4,000
D) 5,000; 3,000
E) 4,000; less than 2,000 pounds.
20) The figure above shows the demand, marginal revenue, and marginal cost curves for Paul's
Parrot pillows, a monopoly producer of pillows stuffed with parrot feathers. When Paul
maximizes his profit, Paul produces ________ pillows per hour and if the market was perfectly
competitive, ________ pillows per hour would be produced.
A) 0; 4,000
B) 3,000; 4,000
C) 4,000; 4,000
D) 3,000; 3,000
E) 0; 3,000
21) The figure above shows the demand, marginal revenue, and marginal cost curves for Paul's
Parrot pillows, a monopoly producer of pillows stuffed with parrot feathers. When the pillow
market is a monopoly, the price of a pillow is ________ and if the pillow market is perfectly
competitive, the price of a pillow is ________.
A) $40; $20
B) $70; $60
C) $40; $60
D) $60; $40
E) $100; $40
22) The figure above shows the demand curve, marginal revenue curve, and marginal cost curve.
The amount of consumer surplus when the market has a monopoly producer is
A) ace.
B) abf.
C) bcd.
D) bcef.
E) acd.
23) The figure above shows the demand curve, marginal revenue curve, and marginal cost curve.
The amount of consumer surplus when the market has a monopoly producer is ________ and the
amount of consumer surplus when the market is perfectly competitive is ________.
A) abf; ace
B) abf; bcd
C) ace; bcd
D) ace; abf
E) bcd; ace
24) The figure above shows the demand curve, marginal revenue curve, and marginal cost curve.
The deadweight loss when the market has a monopoly producer is
A) ace.
B) abf.
C) bcd.
D) bcef.
E) acd.
25) In the above figure, a perfectly competitive market will have a price of ________ and a
single-price monopoly will have a price of ________.
A) P1 and quantity of Q1; P2 and quantity of Q2
B) P2 and quantity of Q2; P1 and quantity of Q1
C) P3 and quantity of Q3; P1 and quantity of Q1
D) P2 and quantity of Q2; P3 and quantity of Q1
E) P2 and quantity of Q1; P1 and quantity of Q1
26) In the above figure, for a single-price monopoly the consumer surplus is equal to the area
A) abP1.
B) acP2.
C) bce.
D) bed.
E) cQ20P2.
