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Chapter 15/Monopoly ❖ 41
116. Refer to Table 15-7. What is the total revenue from selling 6 pairs of shoes?
a.
$100
b.
$600
c.
$625
d.
$660
117. Refer to Table 15-7. What is the total revenue from selling 8 pairs of shoes?
a.
$90
b.
$695
c.
$720
d.
$800
118. Refer to Table 15-7. What is the marginal revenue from selling the 2nd pair of shoes?
a.
$140
b.
$150
c.
$160
d.
$170
119. Refer to Table 15-7. What is the marginal revenue from selling the 8th pair of shoes?
a.
$10
b.
$20
c.
$40
d.
$90
120. Refer to Table 15-7. What is the average revenue when Sally sells 7 pairs of shoes?
a.
$40
b.
$90
c.
$100
d.
$700
121. Refer to Table 15-7. Sally will maximize her profits by selling
a.
3 pairs of shoes.
b.
4 pairs of shoes.
c.
6 pairs of shoes.
d.
7 pairs of shoes.
42 ❖ Chapter 15/Monopoly
122. Refer to Table 15-7. What is total profit at the profit-maximizing quantity?
a.
$100
b.
$245
c.
$265
d.
$395
123. Refer to Table 15-7. What are Sally's fixed costs?
a.
$0
b.
$100
c.
$600
d.
$745
124. Refer to Table 15-7. What is the total variable cost of production when Sally produces six pairs of shoes?
a.
$100
b.
$295
c.
$600
d.
$620
Table 15-8
The following table provides information on the price, quantity, and average total cost for a monopoly.
Price
Quantity
Average Total
Cost
$24
0
---
$18
5
$14.00
$12
10
$11.00
$6
15
$10.67
$0
20
$11.00
125. Refer to Table 15-8. How much extra revenue does the monopolist earn when he lowers the price
from $18 to $12?
a.
$10
b.
$12
c.
$30
d.
$41
126. Refer to Table 15-8. What is the additional cost to the firm when the monopolist lowers the price from $18 to
$12?
a.
The firm saves $15.
b.
$15
c.
$30
d.
$40
Chapter 15/Monopoly ❖ 43
127. Refer to Table 15-8. At what price will the monopolist maximize his profit?
a.
$6
b.
$12
c.
$18
d.
$24
128. Refer to Table 15-8. What is the maximum profit that the monopolist can earn?
a.
$10
b.
$20
c.
$30
d.
$40
NAT: Analytic LOC: Monopoly TOP: Profit MSC: Applicative
Table 15-9
Consider the following demand and cost information for a monopoly.
Quantity
Price
Total Cost
0
$32
$6
1
$28
$20
2
$24
$34
3
$20
$48
4
$16
$62
5
$12
$76
129. Refer to Table 15-9. What is the marginal revenue of the 3rd unit?
a.
$4
b.
$12
c.
$20
d.
$28
130. Refer to Table 15-9. What is the marginal cost of the 4th unit?
a.
$4
b.
$14
c.
$31
d.
$62
131. Refer to Table 15-9. What price should the monopoly charge to maximize profit?
a.
$16
b.
$20
c.
$24
d.
$28
44 ❖ Chapter 15/Monopoly
132. Refer to Table 15-9. At the profit-maximizing price, how much profit will the monopoly earn?
a.
$8
b.
$10
c.
$12
d.
$14
133. Refer to Table 15-9. What is the monopolist’s average total cost of production at the profit-maximizing
price?
a.
$12
b.
$14
c.
$16
d.
$17
Table 15-10
The monopolist faces the following demand curve:
Price
Quantity
$10
5
$9
10
$8
16
$7
23
$6
31
$5
45
$4
52
$3
60
134. Refer to Table 15-10. If the monopolist has total fixed costs of $40 and a constant marginal cost
of $5, what is the profit-maximizing level of output?
a.
7 units
b.
16 units
c.
23 units
d.
31 units
135. Refer to Table 15-10. If the monopolist has total fixed costs of $40 and a constant marginal cost of $5, how
much profit can the firm earn at the profit-maximizing level of output?
a.
$128
b.
$120
c.
$80
d.
$8
Chapter 15/Monopoly ❖ 45
Table 15-11
The following table shows quantity, price, and marginal cost information for a monopoly:
Output
Price
MC
0
$10
--
1
$9
$3
2
$8
$4
3
$7
$5
4
$6
$6
5
$5
$7
6
$4
$8
136. Refer to Table 15-11. What price should the firm charge to maximize its profit?
a.
$4
b.
$5
c.
$6
d.
$7
137. Refer to Table 15-11. What level of output should the firm produce to maximize its profit?
a.
2 units
b.
3 units
c.
4 units
d.
5 units
138. Refer to Table 15-11. What would be the firm’s marginal revenue at the profit-maximizing level of output?
a.
$7
b.
$6
c.
$5
d.
$1
Table 15-12
The following table provides information on the price, quantity, and average total cost for a monopoly.
Price
Output
ATC
$5
0
--
$4
4
$1.00
$3
8
$0.75
$2
12
$0.75
$1
16
$0.81
$0
20
$0.90
139. Refer to Table 15-12. At what price will the firm maximize its profit?
a.
$1
b.
$2
c.
$3
d.
$4
46 ❖ Chapter 15/Monopoly
140. Refer to Table 15-12. In order to maximize profits, the firm should produce
a.
4 units of output.
b.
8 units of output.
c.
12 units of output.
d.
16 units of output.
141. Refer to Table 15-12. If the firm produces the profit-maximizing level of output, it will earn profits of
a.
$24.
b.
$18.
c.
$15.
d.
$12.
Table 15-13
The following table gives information on the price, quantity, and total cost of production for a monopolist.
Price
Output
Total Costs
$5
0
$3
$4
5
$8
$3
10
$20
$2
15
$33
$1
20
$53
$0
25
$78
142. Refer to Table 15-13. If the monopolist maximizes profits, he will charge a price of
a.
$4.
b.
$3.
c.
$2.
d.
$1.
143. Refer to Table 15-13. How much profit will the firm earn at the profit-maximizing price?
a.
$9
b.
$12
c.
$15
d.
$18
Chapter 15/Monopoly ❖ 47
Table 15-14
The following table gives information on the price, quantity, and total cost of production for a monopolist.
Price
Output
Total Costs
$5
0
$3
$4
5
$8
$3
10
$18
$2
15
$33
$1
20
$53
$0
25
$78
144. Refer to Table 15-14. At what price does marginal revenue equal marginal cost?
a.
$5
b.
$4
c.
$3
Table 15-15
A monopolist faces the following demand curve:
Price
Quantity
$10
5
$9
10
$8
16
$7
23
$6
31
$5
45
$4
52
$3
60
145. Refer to Table 15-15. The monopolist has total fixed costs of $40 and a constant marginal cost of $5. At the
profit-maximizing level of output, the monopolist's profit is
a.
$88.
b.
$8.
c.
$6.
d.
We do not have enough information to determine profit.
48 ❖ Chapter 15/Monopoly
Table 15-16
A monopolist faces the following demand curve:
Price
Quantity
$10
5
$9
10
$8
16
$7
23
$6
31
$5
45
$4
52
$3
60
146. Refer to Table 15-16. The monopolist has total fixed costs of $40 and a constant marginal cost of $5. At the
profit-maximizing level of output, the monopolist's average total cost is
a.
$9.00.
b.
$7.50.
c.
$6.74.
Table 15-17
Quantity
Price
0
$10
1
$9
2
$8
3
$7
4
$6
5
$5
6
$4
7
$3
8
$2
9
$1
10
$0
147. Refer to Table 15-17. If a monopolist faces a constant marginal cost of $5, how much output should the firm
produce?
a.
3 units
b.
4 units
c.
5 units
d.
6 units
148. Refer to Table 15-17. If a monopolist faces a constant marginal cost of $4, how much output should the firm
produce?
a.
3 units
b.
4 units
c.
5 units
d.
6 units
Chapter 15/Monopoly ❖ 49
149. Refer to Table 15-17. If a monopolist faces a constant marginal cost of $3, how much output should the firm
produce in order to equate marginal revenue with marginal cost?
a.
3 units
b.
4 units
c.
5 units
d.
6 units
150. Refer to Table 15-17. If a monopolist faces a constant marginal cost of $2, how much output should the firm
produce?
a.
3 units
b.
4 units
c.
5 units
d.
6 units
151. Refer to Table 15-17. If a monopolist faces a constant marginal cost of $1, how much output should the firm
produce in order to equate marginal revenue with marginal cost?
a.
3 units
b.
4 units
c.
5 units
d.
6 units
Scenario 15-3
A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its
marginal revenue is $30, its average revenue is $60, and its average total cost is $34.
152. Refer to Scenario 15-3. The firm's profit-maximizing price is
a.
$30.
b.
between $30 and $34.
c.
between $34 and $60.
d.
$60.
153. Refer to Scenario 15-3. At Q = 500, the firm's total revenue is
a.
$13,000.
b.
$15,000.
c.
$17,000.
d.
$30,000.
154. Refer to Scenario 15-3. At Q = 500, the firm's profit is
a.
$13,000.
b.
$15,000.
c.
$17,000.
d.
$30,000.
50 ❖ Chapter 15/Monopoly
155. Refer to Scenario 15-3. At Q = 500, the firm's marginal cost is
a.
less than $30.
b.
$30.
c.
$34.
d.
greater than $34.
156. A monopolist maximizes profits by
a.
producing an output level where marginal revenue equals marginal cost.
b.
charging a price equal to marginal revenue and marginal cost.
c.
charging a price where marginal cost equals average total cost.
d.
Both a and b are correct.
157. A monopolist maximizes profits by
a.
producing an output level where marginal revenue equals marginal cost.
b.
charging a price that is greater than marginal revenue.
c.
earning a profit of (P - MC) x Q.
d.
Both a and b are correct.
158. A profit-maximizing monopolist will produce the level of output at which
a.
average revenue is equal to average total cost.
b.
average revenue is equal to marginal cost.
c.
marginal revenue is equal to marginal cost.
d.
total revenue is equal to opportunity cost.
159. For a profit-maximizing monopolist,
a.
P > MR = MC.
b.
P = MR = MC.
c.
P > MR > MC.
d.
MR < MC < P.
160. The monopolist's profit-maximizing quantity of output is determined by the intersection of which of the fol-
lowing two curves?
a.
marginal cost and demand
b.
marginal cost and marginal revenue
c.
average total cost and marginal revenue
d.
average variable cost and average revenue
Chapter 15/Monopoly ❖ 51
161. A monopolist will choose to increase output when
a.
market price increases.
b.
at all levels of output, marginal cost increases.
c.
at the present level of output, marginal revenue exceeds marginal cost.
d.
the demand curve shifts to the left.
162. Which of the following statements is not correct?
a.
The competitive firm produces where P = MC.
b.
The monopolist produces where P = MC.
c.
The competitive firm produces where MR = MC.
d.
The monopolist produces where MR = MC.
163. Which of the following statements is correct?
a.
If the monopolist's marginal revenue is greater than its marginal cost, the monopolist can increase
profit by selling more units at a lower price per unit.
b.
If the monopolist's marginal revenue is greater than its marginal cost, the monopolist can increase
profit by selling fewer units at a higher price per unit.
c.
When a monopolist produces where price equals the minimum of average total cost, it earns a
positive economic profit.
d.
If the monopolist is earning a positive economic profit, it must be producing where MR = MC.
164. A reduction in a monopolist's fixed costs would
a.
decrease the profit-maximizing price and increase the profit-maximizing quantity produced.
b.
increase the profit-maximizing price and decrease the profit-maximizing quantity produced.
c.
not effect the profit-maximizing price or quantity.
d.
possibly increase, decrease or not effect profit-maximizing price and quantity, depending on the
elasticity of demand.
165. Suppose when a monopolist produces 50 units its average revenue is $8 per unit, its marginal revenue is $4 per
unit, its marginal cost is $4 per unit, and its average total cost is $3 per unit. What can we conclude about this
monopolist?
a.
The monopolist is currently maximizing profits, and its total profits are $200.
b.
The monopolist is currently maximizing profits, and its total profits are $250.
c.
The monopolist is not currently maximizing its profits; it should produce more units and charge a
lower price to maximize profit.
d.
The monopolist is not currently maximizing its profits; it should produce fewer units and charger a
higher price to maximize profit.
52 ❖ Chapter 15/Monopoly
166. Suppose when a monopolist produces 75 units its average revenue is $10 per unit, its marginal revenue is $5
per unit, its marginal cost is $6 per unit, and its average total cost is $5 per unit. What can we conclude about
this monopolist?
a.
The monopolist is currently maximizing profits, and its total profits are $375.
b.
The monopolist is currently maximizing profits, and its total profits are $300.
c.
The monopolist is not currently maximizing profits; it should produce more units and charge a
lower price to maximize profits.
d.
The monopolist is not currently maximizing profits; it should produce fewer units and charge a
higher price to maximize profits.
167. A profit-maximizing monopolist charges a price of $12. The intersection of the marginal revenue and marginal
cost curves occurs where output is 10 units and marginal cost is $6. Average total cost for 10 units of output is
$5. What is the monopolist’s profit?
a.
$60
b.
$70
c.
$100
d.
$120
168. A profit-maximizing monopolist charges a price of $14. The intersection of the marginal revenue curve and
the marginal cost curve occurs where output is 15 units and marginal cost is $7. What is the monopolist’s
profit?
a.
$90
b.
$105
c.
$180
d.
Not enough information is given to determine the answer.
169. If a monopolist sells 100 units at $8 per unit and realizes an average total cost of $6 per unit, what is the mo-
nopolist's profit?
a.
$200
b.
$400
c.
$600
d.
$800
170. Suppose a monopolist charges a price of $27 for its product and sells 10 units at that price. At 10 units of pro-
duction the firm has average fixed cost equal to $10 and average variable cost equal to $12. How much total
profit is the firm earning at this price?
a.
$5
b.
$25
c.
$50
d.
$140
Chapter 15/Monopoly ❖ 53
171. Which of the following formulas would correctly calculate a monopolist’s profit?
a.
profit = price – marginal cost
b.
profit = price – average total cost
c.
profit = (price – marginal cost) quantity
d.
profit = (price – average total cost) quantity
172. A monopoly's marginal cost will
a.
be less than its average fixed cost.
b.
be less than the price per unit of its product.
c.
exceed its marginal revenue.
d.
equal its average total cost.
173. If a pharmaceutical company discovers a new drug and successfully patents it, patent law gives the firm
a.
partial ownership of the right to sell the drug for a limited number of years.
b.
partial ownership of the right to sell the drug for an unlimited number of years.
c.
sole ownership of the right to sell the drug for a limited number of years.
d.
sole ownership of the right to sell the drug for an unlimited number of years.
174. Due to the nature of the patent laws on pharmaceuticals, the market for such drugs
a.
always remains a competitive market.
b.
always remains a monopolistic market.
c.
switches from competitive to monopolistic once the firm's patent runs out.
d.
switches from monopolistic to competitive once the firm's patent runs out.
175. What happens to the price and quantity sold of a drug when its patent runs out?
(i)
The price will fall.
(ii)
The quantity sold will fall.
(iii)
The marginal cost of producing the drug will rise.
a.
(i) only
b.
(i) and (ii) only
c.
(ii) and (iii) only
d.
(i), (ii), and (iii)
176. Generic drugs enter the pharmaceutical drug market once
a.
the ingredients to the name brand drug have been discovered.
b.
10 years have passed.
c.
they are patented.
d.
the patent on the name brand drug expires.
54 ❖ Chapter 15/Monopoly
177. Name brand drugs are able to continue capitalizing on their market power even after generic drugs enter the
market because
(i)
almost all people fear the generic drug companies are devoting too few resources to research
and development.
(ii)
some people fear that generic drugs are inferior.
(iii)
some people are loyal to the name brand.
a.
(i) and (ii) only
b.
(ii) and (iii) only
c.
(i) and (iii) only
d.
(i), (ii), and (iii)
178. After the patent runs out on a brand name drug, generic drugs enter the market. What happens next in the mar-
ket?
a.
Price increases, and total surplus decreases.
b.
Price decreases, and total surplus decreases.
c.
Price decreases, and total surplus increases.
d.
Price increases, and total surplus increases.
179. A monopolist
a.
has a supply curve that is upward-sloping, just like a competitive firm.
b.
does not have a supply curve because the monopolist sets its price at the same time it chooses the
quantity to supply.
c.
has a horizontal supply curve, just like a competitive firm.
d.
does not have a supply curve because marginal revenue exceeds the price it charges for its products.
180. The supply curve for the monopolist
a.
is horizontal.
b.
is vertical.
c.
is upward sloping.
d.
does not exist.
181. In a competitive market, a firm's supply curve dictates the amount it will supply. In a monopoly market the
a.
same is true.
b.
supply curve conceptually makes sense, but in practice is never used.
c.
supply curve will have limited predictive capacity.
d.
decision about how much to supply is impossible to separate from the demand curve it faces.
Chapter 15/Monopoly ❖ 55
THE WELFARE COST OF MONOPOLY
1. Monopolies are inefficient because they
(i)
eliminate barriers to entry.
(ii)
price their product at a level where marginal revenue exceeds marginal cost.
(iii)
restrict output below the socially efficient level of production.
a.
(i) and (ii) only
b.
(ii) and (iii) only
c.
(iii) only
d.
(i), (ii), and (iii)
2. A monopolist produces
a.
more than the socially efficient quantity of output but at a higher price than in a competitive market.
b.
less than the socially efficient quantity of output but at a higher price than in a competitive market.
c.
the socially efficient quantity of output but at a higher price than in a competitive market.
d.
possibly more or possibly less than the socially efficient quantity of output, but definitely at a
higher price than in a competitive market.
3. "Monopolists do not worry about efficient production and minimizing costs since they can just
pass along any increase in costs to their consumers." This statement is
a.
false; price increases will mean fewer sales, which may lower profits.
b.
true; this is the primary reason why economists believe that monopolies result in economic
inefficiency.
c.
false; the monopolist is a price taker.
d.
true; consumers in a monopoly market have no substitutes to turn to when the monopolist raises
prices.
4. Deadweight loss
a.
measures monopoly inefficiency.
b.
exceeds monopoly profits.
c.
equals monopoly profits.
d.
equals monopoly revenues minus profits.
5. A monopoly is an inefficient way to produce a product because
a.
it can earn both short-run and long-run profits.
b.
it faces a downward-sloping demand curve.
c.
the cost to the monopolist of producing one more unit exceeds the value of that unit to potential
buyers.
d.
it produces a smaller level of output than would be produced in a competitive market.
56 ❖ Chapter 15/Monopoly
6. The deadweight loss associated with a monopoly occurs because the monopolist
a.
maximizes profits.
b.
produces an output level less than the socially optimal level.
c.
produces an output level greater than the socially optimal level.
d.
equates marginal revenue with marginal cost.
7. The economic inefficiency of a monopolist can be measured by the
a.
number of consumers who are unable to purchase the product because of its high price.
b.
excess profit generated by monopoly firms.
c.
poor quality of service offered by monopoly firms.
d.
deadweight loss.
8. The economic inefficiency of a monopolist can be measured by the
a.
deadweight loss.
b.
value of the unrealized trades that could be made if the monopolist produced the socially-efficient
output.
c.
area above marginal cost but beneath demand from the monopoly output to the socially-efficient
output.
d.
All of the above are correct.
9. Monopoly pricing prevents some mutually beneficial trades from taking place. These unrealized, mutually
beneficial trades are
a.
of little concern to society.
b.
a deadweight loss to society.
c.
a sunk cost to society.
d.
also observed in competitive markets.
10. Monopoly pricing prevents some mutually beneficial trades from taking place. These unrealized, mutually
beneficial trades are
a.
not a concern if a market is perfectly competitive.
b.
a deadweight loss to society.
c.
a function of the reduction in the quantity produced by a monopolist in comparison to a competitive
market.
d.
All of the above are correct.
Chapter 15/Monopoly ❖ 57
11. Monopoly pricing prevents some mutually beneficial trades from taking place. These unrealized, mutually
beneficial trades are
a.
less of a concern for a monopoly than competitive market.
b.
offset by the higher profits earned by a monopolist.
c.
a function of the reduction in the quantity produced by a monopolist in comparison to a competitive
market.
d.
All of the above are correct.
12. The deadweight loss that arises from a monopoly is a consequence of the fact that the monopoly
a.
quantity is lower than the socially-optimal quantity.
b.
price equals marginal revenue.
c.
price is the same as average revenue.
d.
earns positive profits.
13. Which of the following statements is correct?
a.
The benefits that accrue to a monopoly’s owners are equal to the costs that are incurred by
consumers of that firm's product.
b.
The deadweight loss that arises in monopoly stems from the fact that the profit-maximizing
monopoly firm produces a quantity of output that exceeds the socially-efficient quantity.
c.
The deadweight loss caused by monopoly is similar to the deadweight loss caused by a tax on a
product.
d.
The primary social problem caused by monopoly is monopoly profit.
14. The social cost of a monopoly is equal to its
a.
economic profit.
b.
fixed cost.
c.
dead weight loss.
d.
variable cost.
15. Which of the following statements is not correct?
a.
Part of the deadweight loss associated with monopoly is measured by the monopolist's economic
profit.
b.
Marginal cost is always less than average total cost in a natural monopoly.
c.
Discount coupons available free to the public are a type of price discrimination.
d.
Anti-trust laws make it harder for firms to create synergies.
58 ❖ Chapter 15/Monopoly
16. Monopolies are socially inefficient because the price they charge is
a.
equal to marginal revenue.
b.
above marginal cost.
c.
equal to demand.
d.
above demand.
17. Which of the following statements is correct? Monopolies are socially inefficient because they
(i)
charge a price above marginal cost.
(ii)
produce too little output.
(iii)
earn profits at the expense of consumers.
(iv)
maximize the market’s total surplus.
a.
(iii) only
b.
(iii) and (iv) only
c.
(i) and (ii) only
d.
(i), (ii), (iii), and (iv)
18. Consider a profit-maximizing monopoly pricing under the following conditions. The profit-maximizing quan-
tity is 40 units, the profit-maximizing price is $160, and the marginal cost of the 40th unit is $120. If the good
were produced in a perfectly competitive market, the equilibrium quantity would be 50, and the equilibrium
price would be $150. The demand curve and marginal cost curves are linear. What is the value of the
deadweight loss created by the monopolist?
a.
$40
b.
$100
c.
$200
d.
$400
19. Consider a profit-maximizing monopoly pricing under the following conditions. The profit-maximizing price
charged for goods produced is $12.The intersection of the marginal revenue and marginal cost curves occurs
where output is 10 units and marginal cost is $6. The socially efficient level of production is 12 units. The de-
mand curve and marginal cost curves are linear. What is the value of the deadweight loss created by the mo-
nopolist?
a.
$4
b.
$6
c.
$12
d.
$16
20. When we compare economic welfare in a monopoly market to a competitive market, the profits earned by the
monopolist represent
a.
a transfer of benefits from the consumer to the producer.
b.
a loss in total welfare.
c.
the higher marginal costs incurred by the monopolists in comparison to competitive firms.
d.
the higher marginal revenues gained by the monopolists in comparison to competitive firms.
Chapter 15/Monopoly ❖ 59
21. When we compare economic welfare in a monopoly market to a competitive market, the profits earned by the
monopolist represent
a.
a loss in total welfare.
b.
a transfer of benefits from the buyer to the seller.
c.
the higher marginal costs incurred by the monopolists in comparison to competitive firms.
d.
All of the above are correct.
22. 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.
23. 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.
24. 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.
25. 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.
26. 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)
60 ❖ Chapter 15/Monopoly
27. 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.
28. 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.
29. 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.
30. 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.
31. 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)
32. 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.
