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MULTIPLE CHOICE
1. Natural monopoly occurs when demand limit sales to a quantity at which average total cost exceeds
a. the price.
b. average fixed cost.
c. average variable cost.
d. marginal cost.
2. In the inelastic range of the demand curve, a monopoly's
a. total revenue and price are positively related.
b. total revenue and price are negatively related.
c. marginal revenue is positive.
d. marginal revenue is equal to zero.
3. In Fig. 12.1, the demand facing a monopoly is inelastic at point
a. x.
b. r.
c. t.
d. u.
4. In Fig. 12.1, at point u a monopoly's average revenue is
a. negative and its marginal revenue is negative.
b. negative and its marginal revenue is positive.
c. positive and its marginal revenue is negative.
d. negative and its marginal revenue is positive.
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5. In Fig. 12.2, a monopoly's average revenue is zero at point
a. a.
b. b.
c. c.
d. d.
6. In Fig. 12.3, a monopoly's marginal revenue exceeds its marginal cost at point
a. a.
b. b.
c. c.
d. r.
7. In Fig. 12.4, the unregulated monopolist's total revenue is
a. $10.00 per day.
b. $16.00 per day.
c. $18.00 per day.
d. $21.00 per day.
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8. In Fig. 12.4, the short-run increase in price caused by production under monopoly instead of perfect competition is approximately
a. $1.00 per unit.
b. $2.00 per unit.
c. $2.00 per unit.
d. $4.00 per unit.
The monopoly described in Fig. 12.5 produces only at the output level that will maximize profits and charges a single price unless otherwise stated.
9. In Fig. 12.5, the profit-maximizing price is
a. $20.
b. $25.
c. $50.
d. $75.
10. At the profit-maximizing output in Fig. 12.5, total revenue is
a. $500.
b. $1,000.
c. $1,500
d. $2,000
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Table 12.2
Demand Schedule Facing a Perfectly Price-Discriminating Firm
컴컴컴컴컴컴컴컴컴컴컴컴컴컴컴컴컴컴컴컴컴컴컴컴컴컴컴컴컴컴컴컴
Price in Dollars 8 7 6 5 4 3 2 1
Quantity Demanded 0 1 2 3 4 5 6 7
11. In Table 12.2, total revenue from selling 5 units of output is
a. $5.
b. $15.
c. $18.
d. $25
12. The unregulated monopoly in Fig. 12.6, will set output where the demand curve
a. intersects the MC curve.
b. intersects the ATC curve.
c. is inelastic.
d. is elastic.
13. For the unregulated monopoly in Fig. 12.6, total profit will be approximately
a. $3.
b. $4.
c. $6.
d. $9.
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The monopoly described in Fig. 12.7 produces at the profit-maximizing level of output unless otherwise stated.
14. In Fig. 12.7, the loss of consumer surplus caused by production under a perfectly price-discriminating monopoly instead of perfect competition would be
a. $0.
b. $22.50.
c. $45.00.
d. $90.00.
15. In Fig. 12.8, the transfer of consumer surplus from consumers to the producer caused by production under a single-price monopoly instead of perfect competition is the area of
a. triangle ufg.
b. triangle egx.
c. rectangle cexh.
d. 1/2 of rectangle cexh.
16. Activity aimed at creating artificial barriers to entry to a particular market
a. is rent seeking.
b. has no social cost.
c. improves competition.
d. improves allocative efficiency.
17. In a small town, Marilyn's Christmas Tree lot has a monopoly on sales of Christmas trees. In order to increase her sales from 100 trees to 101 trees, she must drop the price of a tree from $20 to $19. What is the marginal revenue?
a. $2000.
b. $20.
c. $19.
d. minus $81.
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18. Which of the following is a loss from monopoly?
a. For a single-price monopoly the price exceeds the marginal cost of the product.
b. Monopolies capture economies of scale.
c. Monopolies may be able to price discriminate, thereby boosting deadweight loss.
d. Monopolies may earn an economic profit in the long run.
19. In a small town, Marilyn's Christmas tree lot has a monopoly on sales of Christmas trees. To increase her sales from 100 trees to 101 trees, she must drop the price of all her trees from $28 to $27. What is the marginal revenue?
a. $2,800
b. $28
c. $27
d. -$73
20. Figure 12.9 shows the cost and revenue conditions facing Sally's Pizza Palace. The demand curve for pizzas sold by Sally's restaurant
a. has negative slope.
b. has positive slope.
c. is horizontal.
d. is vertical.
21. Refer to Fig. 12.9. La Bella Pizza is the only pizza place on Pepper Island. The graph shows La Bella Pizza's demand curve, marginal revenue curve, and marginal cost curve. If La Bella's economic profit is zero, then its annual average fixed costs is
a. $12.
b. $14.
c. $26.
d. $38.
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22. Figure 12.13 shows the total revenue and cost curves for Bob's Books, the only bookstore in town. At the profit maximizing quantity, the price Bob charges for a typical book is
a. $14.62.
b. between $14.62 and $20.00.
c. $20.00.
d. more than $20.00.
