经济学原理对应练习 15

Chapter 15 Monopoly

Multiple Choice

1. Which of the following statements is correct?

a. A competitive firm is a price maker and a monopoly is a price taker. b. A competitive firm is a price taker and a monopoly is a price maker. c. Both competitive firms and monopolies are price takers. d. Both competitive firms and monopolies are price makers. ANS: B PTS: 1 DIF: 1 REF: 15-1 TOP: Monopoly MSC: Interpretive

2. Angelo is a wholesale meatball distributor. He sells his meatballs to all the finest Italian restaurants in town. Nobody can make meatballs like Angelo. As a result, his is the only business in town that sells meatballs to restaurants. Assuming that Angelo is maximizing his profit, which of the following statements is true? a. Meatball prices will be less than marginal cost. b. Meatball prices will equal marginal cost. c. Meatball prices will exceed marginal cost.

d. Meatball prices will be a function of supply and demand and will therefore oscillate around marginal costs. ANS: C PTS: 1 DIF: 2 REF: 15-1 TOP: Pricing MSC: Interpretive

3. 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. ANS: B PTS: 1 DIF: 2 REF: 15-1 TOP: Marginal cost MSC: Interpretive

4. Which of the following statements is (are) true of a monopoly?

(i) A monopoly has the ability to set the price of its product at whatever level it desires.

(ii) A monopoly's total revenue will always increase when it increases the price of its product. (iii) A monopoly can earn unlimited profits. a. (i) only b. (ii) only c. (i) and (ii) d. (ii) and (iii) ANS: A PTS: 1 DIF: 2 REF: 15-1 TOP: Monopoly MSC: Interpretive

5. Young Johnny inherited the only local cable TV company in town after his father passed away. The company is completely unregulated by the government and is therefore free to operate as it wishes. Assuming that Johnny understands the true power of his new monopoly, he is probably most excited about which of the following statements?

(i) He will be able to set the price of cable TV service at whatever level he wishes.

(ii) The customers will be forced to purchase cable TV service at whatever price he wants to set. (iii) He will be able to achieve any profit level that he desires. a. (i) only b. (ii) only c. (i) and (iii)

d. All of the above are correct. ANS: A PTS: 1 DIF: 2 REF: 15-1 TOP: Monopoly MSC: Interpretive

621

622 ? Chapter 15/Monopoly

6. Which of the following is an example of a barrier to entry? (i) A key resource is owned by a single firm.

(ii) The costs of production make a single producer more efficient than a large number of producers. (iii) The government has given the existing monopoly the exclusive right to produce the good. a. (i) and (ii) b. (ii) and (iii) c. (i) only

d. All of the above are examples of barriers to entry. ANS: D PTS: 1 DIF: 1 REF: 15-1 TOP: Barriers to entry MSC: Interpretive

7. Which of the following are necessary characteristics of a monopoly?

(i) The firm is the sole seller of its product.

(ii) The firm's product does not have close substitutes. (iii) The firm generates a large economic profit.

(iv) The firm is located in a small geographic market. a. (i) and (ii) b. (i) and (iii) c. (ii) and (iv) d. (i), (ii), and (iii) ANS: A PTS: 1 DIF: 2 REF: 15-1 TOP: Monopoly MSC: Interpretive

8. A fundamental source of monopoly market power arises from a. perfectly elastic demand. b. perfectly inelastic demand. c. barriers to entry.

d. availability of \ANS: C PTS: 1 DIF: 2 REF: 15-1 TOP: Barriers to entry MSC: Interpretive

9. Because monopoly firms do not have to compete with other firms, the outcome in a market with a monopoly is often

a. not in the best interest of society.

b. one that fails to maximize total economic well-being. c. inefficient.

d. All of the above are correct. ANS: D PTS: 1 DIF: 2 REF: 15-1 TOP: Welfare MSC: Interpretive

10. A natural monopoly occurs when

a. the product is sold in its natural state (such as water or diamonds). b. there are economies of scale over the relevant range of output. c. the firm is characterized by a rising marginal cost curve.

d. production requires the use of free natural resources, such as water or air. ANS: B PTS: 1 DIF: 2 REF: 15-1 TOP: Natural monopoly MSC: Interpretive

11. An industry is a natural monopoly when

(i) the government assists the firm in maintaining the monopoly. (ii) a single firm owns a key resource. (iii) a single firm can supply a good or service to an entire market at a smaller cost than could two or more firms. a. (ii) only b. (iii) only c. (i) and (ii) d. (ii) and (iii) ANS: B PTS: 1 DIF: 2 REF: 15-1 TOP: Natural monopoly MSC: Interpretive

Chapter 15/Monopoly ? 623

12. When a natural monopoly exists, it is

a. always cost effective for government-owned firms to produce the product. b. never cost effective for one firm to produce the product.

c. always cost effective for two or more private firms to produce the product. d. never cost effective for two or more private firms to produce the product. ANS: D PTS: 1 DIF: 2 REF: 15-1 TOP: Natural monopoly MSC: Definitional 13. The defining characteristic of a natural monopoly is

a. constant marginal cost over the relevant range of output. b. economies of scale over the relevant range of output.

c. constant returns to scale over the relevant range of output. d. diseconomies of scale over the relevant range of output. ANS: B PTS: 1 DIF: 2 REF: 15-1 TOP: Natural monopoly MSC: Definitional

14. Natural monopolies differ from other forms of monopoly because they

a. are not subject to barriers to entry. b. are not regulated by government. c. generally don't make a profit.

d. are generally not worried about competition eroding their monopoly position in the market. ANS: D PTS: 1 DIF: 2 REF: 15-1 TOP: Natural monopoly MSC: Interpretive 15. Patent and copyright laws are major sources of

a. natural monopolies.

b. government-created monopolies. c. resource monopolies. d. antitrust regulation. ANS: B PTS: 1 DIF: 1 REF: 15-1 TOP: Patents MSC: Interpretive

16. Encouraging firms to invest in research and development and individuals to engage in creative endeavors such as

writing novels is one justification for a. resource monopolies. b. natural monopolies.

c. government-created monopolies.

d. breaking up monopolies into smaller firms. ANS: C PTS: 1 DIF: 1 REF: 15-1 TOP: Patents MSC: Interpretive 17. When a firm's average total cost curve continually declines, the firm is a

a. government-created monopoly. b. natural monopoly. c. revenue monopoly.

d. All of the above are correct. ANS: B PTS: 1 DIF: 1 REF: 15-1 TOP: Natural monopoly MSC: Definitional 18. The simplest way for a monopoly to arise is for a single firm to

a. decrease its price below its competitors’ prices.

b. decrease production to increase demand for its product. c. make pricing decisions jointly with other firms. d. own a key resource. ANS: D PTS: 1 DIF: 1 REF: 15-1 TOP: Monopoly MSC: Interpretive

624 ? Chapter 15/Monopoly

19. A government-created monopoly arises when

a. government spending in a certain industry gives rise to monopoly power.

b. the government exercises its market control by encouraging competition among sellers. c. the government gives a firm the exclusive right to sell some good or service. d. Both a and c are correct. ANS: C PTS: 1 DIF: 2 REF: 15-1 TOP: Patents MSC: Interpretive 20. Allowing an inventor to have the exclusive rights to market her new invention will lead to

(i) a product that is priced higher than it would be without the exclusive rights. (ii) desirable behavior in the sense that inventors are encouraged to invent. (iii) higher profits for the inventor.

a. (i) and (ii) b. (ii) and (iii) c. (i) and (iii) d. (i), (ii), and (iii) ANS: D PTS: 1 DIF: 2 REF: 15-1 TOP: Patents MSC: Interpretive 21. Drug companies are allowed to be monopolists in the drugs they discover in order to

a. allow drug companies to charge a price that is equal to their marginal cost. b. discourage new firms from entering the drug market. c. encourage research.

d. allow the government to earn patent revenue. ANS: C PTS: 1 DIF: 2 REF: 15-1 TOP: Patents MSC: Interpretive

22. Authors are allowed to be monopolists in the sale of their books in order to

a. encourage authors to write more and better books.

b. correct for the negative externalities that the internet and television impose. c. satisfy literary advocacy groups that exercise their lobbying power.

d. promote a society in which people think for themselves and learn from whichever books they please. ANS: A PTS: 1 DIF: 2 REF: 15-1 TOP: Copyrights MSC: Interpretive

23. Which of the following statements is true about patents and copyrights?

(i) They both have benefits and costs. (ii) They lead to higher prices. (iii) They enhance the ability of monopolists to earn above-average profits. a. (i) and (ii) b. (ii) and (iii) c. (ii) only

d. (i), (ii), and (iii) ANS: D PTS: 1 DIF: 2 REF: 15-1 TOP: Patents MSC: Interpretive

Chapter 15/Monopoly ? 625

Figure 15-1

24. Refer to Figure 15-1. The shape of the average total cost curve reveals information about the nature of the barrier to

entry that might exist in a monopoly market. Which of the following monopoly types best coincides with the figure? a. Ownership of a key resource by a single firm b. Natural monopoly

c. Government-created monopoly d. A patent or copyright monopoly ANS: B PTS: 1 DIF: 2 REF: 15-1 TOP: Natural monopoly MSC: Analytical 25. Refer to Figure 15-1. The shape of the average total cost curve in the figure suggests an opportunity for a

profit-maximizing monopolist to take advantage of a. economies of scale. b. diseconomies of scale.

c. diminishing marginal product. d. increasing marginal cost. ANS: A PTS: 1 DIF: 1 REF: 15-1 TOP: Economies of scale MSC: Analytical 26. Refer to Figure 15-1. Considering the relationship between average total cost and marginal cost, the marginal cost

curve for this firm

a. must lie entirely above the average total cost curve. b. must lie entirely below the average total cost curve. c. must be upward sloping. d. does not exist. ANS: B PTS: 1 DIF: 3 REF: 15-1 TOP: Marginal cost MSC: Analytical 27. When an industry is a natural monopoly,

a. it is characterized by constant returns to scale. b. it is characterized by diseconomies of scale.

c. a larger number of firms may lead to a lower average cost. d. a larger number of firms will lead to a higher average cost. ANS: D PTS: 1 DIF: 2 REF: 15-1 TOP: Natural monopoly MSC: Definitional

Chapter 15/Monopoly ? 631

62. Monopoly firms have

a. downward-sloping demand curves and they can sell as much output as they desire at the market price. b. downward-sloping demand curves and they can sell only a limited quantity of output at each price. c. horizontal demand curves and they can sell as much output as they desire at the market price. d. horizontal demand curves and they can sell only a limited quantity of output at each price. ANS: B PTS: 1 DIF: 2 REF: 15-2 TOP: Pricing MSC: Interpretive 63. Because many good substitutes exist for a competitive firm's product, the demand curve that it faces is

a. unit-elastic.

b. perfectly inelastic. c. perfectly elastic.

d. inelastic only over a certain region. ANS: C PTS: 1 DIF: 2 REF: 15-2 TOP: Competitive markets MSC: Analytical 64. When a monopolist decreases the price of its good, consumers

a. continue to buy the same amount. b. buy more. c. buy less.

d. may buy more or less, depending on the price elasticity of demand. ANS: B PTS: 1 DIF: 1 REF: 15-2 TOP: Demand curve MSC: Analytical

65. When a monopolist increases the amount of output that it produces and sells, the price of its output

a. stays the same. b. increases. c. decreases.

d. may increase or decrease depending on the price elasticity of demand. ANS: C PTS: 1 DIF: 2 REF: 15-2 TOP: Demand curve MSC: Analytical 66. When a monopolist increases the amount of output that it produces and sells, its average revenue

a. increases and its marginal revenue increases. b. increases and its marginal revenue decreases. c. decreases and its marginal revenue increases. d. decreases and its marginal revenue decreases. ANS: D PTS: 1 DIF: 2 REF: 15-2 TOP: Demand curve MSC: Analytical

632 ? Chapter 15/Monopoly

Table 15-1

Quantity 1 2 3 4 5 6 7 8 9 10 Price 35 29 23 17 Total Revenue 35 64 120 99 80 Average Revenue 32 11 8 Marginal Revenue 29 17 11 -1 -7 -13 67. Refer to Table 15-1. If the monopolist sells 8 units of its product, how much total revenue will it receive from the

sale? a. 14 b. 40 c. 112 d. 164 ANS: C PTS: 1 DIF: 2 REF: 15-2 TOP: Total revenue MSC: Applicative 68. Refer to Table 15-1. If the monopolist wants to maximize its revenue, how many units of its product should it sell?

a. 4 b. 5 c. 6 d. 8 ANS: C PTS: 1 DIF: 2 REF: 15-2 TOP: Total revenue MSC: Applicative 69. Refer to Table 15-1. When 4 units of output are produced and sold, what is average revenue?

a. 17 b. 21 c. 23 d. 26 ANS: D PTS: 1 DIF: 2 REF: 15-2 TOP: Average revenue MSC: Applicative 70. Refer to Table 15-1. What is the marginal revenue for the monopolist for the sixth unit sold?

a. 3 b. 5 c. 11 d. 17 ANS: B PTS: 1 DIF: 2 REF: 15-2 TOP: Marginal revenue MSC: Applicative

71. Refer to Table 15-1. Assume this monopolist's marginal cost is constant at $12. What quantity of output (Q) will it

produce and what price (P) will it charge? a. Q = 4, P = $29 b. Q = 4, P = $26 c. Q = 5, P = $23 d. Q = 7, P = $17 ANS: B PTS: 1 DIF: 2 REF: 15-2 TOP: Profit maximization MSC: Applicative

Chapter 15/Monopoly ? 633

72. Marginal revenue for a monopolist is computed as

a. average revenue divided by quantity sold.

b. average revenue times quantity divided by price. c. total revenue divided by quantity sold.

d. change in total revenue per one unit increase in quantity sold. ANS: D PTS: 1 DIF: 2 REF: 15-2 TOP: Marginal revenue MSC: Definitional

73. Which of the following statements is true?

(i) When a competitive firm sells an additional unit of output, its revenue increases by an amount less than the price. (ii) When a monopoly firm sells an additional unit of output, its revenue increases by an amount less than the price. (iii) Average revenue is the same as price for both competitive and monopoly firms. a. (ii) only b. (iii) only c. (i) and (ii) d. (ii) and (iii) ANS: D PTS: 1 DIF: 3 REF: 15-2 TOP: Marginal revenue MSC: Interpretive 74. For a monopoly firm, which of the following equalities is always true?

a. price = marginal revenue b. price = average revenue c. price = total revenue

d. marginal revenue = marginal cost ANS: B PTS: 1 DIF: 2 REF: 15-2 TOP: Average revenue MSC: Interpretive

75. The marginal revenue curve for a monopoly firm starts at the same point on the vertical axis as the

(i) average revenue curve. (ii) marginal cost curve. (iii) demand curve. a. (i) only b. (i) and (ii) c. (i) and (iii) d. (iii) only ANS: C PTS: 1 DIF: 2 REF: 15-2 TOP: Marginal revenue MSC: Analytical 76. Marginal revenue can become negative for

a. both competitive and monopoly firms.

b. competitive firms, but not for monopoly firms. c. monopoly firms, but not for competitive firms. d. neither competitive nor monopoly firms. ANS: C PTS: 1 DIF: 2 REF: 15-2 TOP: Marginal revenue MSC: Interpretive

634 ? Chapter 15/Monopoly

Figure 15-2

The figure below illustrates the cost and revenue structure for a monopoly firm.

77. Refer to Figure 15-2. The demand curve for a monopoly firm is depicted by curve

a. A. b. B. c. C. d. D. ANS: A PTS: 1 DIF: 1 REF: 15-2 TOP: Demand curve MSC: Interpretive 78. Refer to Figure 15-2. The marginal revenue curve for a monopoly firm is depicted by curve

a. A. b. B. c. C. d. D. ANS: B PTS: 1 DIF: 2 REF: 15-2 TOP: Marginal revenue MSC: Interpretive 79. Refer to Figure 15-2. The marginal cost curve for a monopoly firm is depicted by curve

a. A. b. B. c. C. d. D. ANS: C PTS: 1 DIF: 2 REF: 15-2 TOP: Marginal cost MSC: Interpretive 80. Refer to Figure 15-2. The average total cost curve for a monopoly firm is depicted by curve

a. A. b. B. c. C. d. D. ANS: D PTS: 1 DIF: 2 REF: 15-2 TOP: Average total cost MSC: Interpretive

Chapter 15/Monopoly ? 635

81. Refer to Figure 15-2. If the monopoly firm is currently producing Q3 units of output, then a decrease in output will

necessarily cause profit to a. remain unchanged. b. decrease.

c. increase as long as the new level of output is at least Q2. d. increase as long as the new level of output is at least Q1. ANS: C PTS: 1 DIF: 2 REF: 15-2 TOP: Profit maximization MSC: Analytical 82. Refer to Figure 15-2. Profit can always be increased by increasing the level of output by one unit if the monopolist

is currently operating at (i) Q0. (ii) Q1. (iii) Q2. (iv) Q3.

a. (i) or (ii) b. (i), (ii) or (iii) c. (iii) or (iv) d. (iv) only ANS: A PTS: 1 DIF: 2 REF: 15-2 TOP: Profit maximization MSC: Analytical 83. Refer to Figure 15-2. If the monopoly firm wants to maximize its profit, it should operate at a level of output equal

to

a. Q1. b. Q2. c. Q3. d. Q4. ANS: B PTS: 1 DIF: 2 REF: 15-2 TOP: Profit maximization MSC: Analytical 84. Refer to Figure 15-2. Profit will be maximized by charging a price equal to

a. P0. b. P1. c. P2. d. P3. ANS: D PTS: 1 DIF: 2 REF: 15-2 TOP: Profit maximization MSC: Analytical 85. Which of the following statements is true of a monopoly firm?

a. A monopoly firm is a price taker and has no supply curve. b. A monopoly firm is a price maker and has no supply curve

c. A monopoly firm is a price maker and has a downward-sloping supply curve. d. A monopoly firm is a price maker and has an upward-sloping supply curve. ANS: B PTS: 1 DIF: 2 REF: 15-2 TOP: Monopoly MSC: Interpretive

86. For a monopoly firm, the shape and position of the demand curve play a role in determining

(i) the profit-maximizing price.

(ii) the shape and position of the marginal cost curve. (iii) the shape and position of the marginal revenue curve. a. (i) and (ii) b. (ii) and (iii) c. (i) and (iii) d. (i), (ii), and (iii) ANS: C PTS: 1 DIF: 2 REF: 15-2 TOP: Demand curve MSC: Interpretive

656 ? Chapter 15/Monopoly

4. For a typical natural monopoly, average total cost is a. falling and marginal cost is above average total cost. b. falling and marginal cost is below average total cost. c. rising and marginal cost is below average total cost. d. rising and marginal cost is above average total cost. ANS: B PTS: 1 DIF: 2 REF: 15-4 TOP: Natural monopoly MSC: Analytical

5. One problem with regulating a monopolist on the basis of cost is that

a. regulators are unable to effectively control prices and/or production. b. it does not provide an incentive for the monopolist to reduce its cost.

c. a monopolist's costs, by definition, are higher than costs of perfectly competitive firms. d. a monopolist is still able to generate excessive economic profits. ANS: B PTS: 1 DIF: 2 REF: 15-4 TOP: Regulation MSC: Interpretive

6. When regulators use a marginal-cost pricing strategy to regulate a natural monopoly, the regulated monopoly a. will experience a loss.

b. will experience a price below average total cost.

c. may rely on a government subsidy to remain in business. d. All of the above are correct. ANS: D PTS: 1 DIF: 2 REF: 15-4 TOP: Regulation MSC: Interpretive

7. The key issue in determining the efficiency of public versus private ownership of a monopoly is a. the tendency for efficient management of publicly owned enterprises.

b. the inability of private monopolies to get rid of managers that are doing a bad job. c. the propensity of private monopolies to generate excessive profits. d. how ownership of the firm affects the cost of production. ANS: D PTS: 1 DIF: 2 REF: 15-4 TOP: Welfare MSC: Interpretive

8. The collection of statutes aimed at curbing monopoly power is called a. the 14th amendment. b. the Clayton Act. c. the Sherman Act. d. antitrust law. ANS: D PTS: 1 DIF: 2 REF: 15-4 TOP: Antitrust MSC: Interpretive

9. The legislation passed by Congress in 1890 to reduce the market power of large and powerful \a. Morgan Act. b. Sherman Act. c. Clayton Act.

d. 14th Amendment. ANS: B PTS: 1 DIF: 2 REF: 15-4 TOP: Antitrust MSC: Definitional 10. Antitrust laws allow the government to

a. prevent mergers. b. break up companies. c. promote competition.

d. All of the above are correct. ANS: D PTS: 1 DIF: 2 TOP: Antitrust MSC: Interpretive

REF: 15-4

Chapter 15/Monopoly ? 657

11. Since natural monopolies have a declining average cost curve, regulating natural monopolies by setting price equal to

marginal cost would

a. cause the monopolist to operate at a loss. b. result in a less than optimal total surplus. c. maximize producer surplus.

d. result in higher profits for the monopoly. ANS: A PTS: 1 DIF: 2 REF: 15-4 TOP: Natural monopoly MSC: Interpretive 12. The assessment by George Stigler concerning the tradeoffs between \

American economy provides support for which of the following solutions to the problems of monopolies? a. Public ownership of monopolies

b. Government regulation of monopolies

c. Government incentives to promote competition in monopolized industries d. Doing nothing at all ANS: D PTS: 1 DIF: 2 REF: 15-4 TOP: Regulation MSC: Interpretive

13. In order for antitrust laws to raise social welfare, the government must

a. disallow synergy benefits from accruing to monopolists. b. disallow any mergers from taking place.

c. be able to determine which mergers are desirable and which are not. d. always attempt to keep markets in their most competitive form. ANS: C PTS: 1 DIF: 2 REF: 15-4 TOP: Antitrust MSC: Interpretive

14. Reduced competition through merging of companies will raise social welfare

a. if the cost from the synergies exceeds the benefit of increased market power.

b. if the benefit from the synergies exceeds the social cost of increased market power. c. always. d. never. ANS: B PTS: 1 DIF: 2 REF: 15-4 TOP: Antitrust MSC: Interpretive

15. In the majority of cases where there is a natural monopoly, the U. S. government usually deals with the problem

a. by splitting the natural monopoly into smaller companies. b. through regulation.

c. by turning the natural monopoly into a public enterprise. d. by doing nothing. ANS: B PTS: 1 DIF: 2 REF: 15-4 TOP: Natural monopoly MSC: Interpretive 16. Private ownership of a monopoly may benefit society because the monopoly will have an incentive to

a. charge a price that is consistent with that of a benevolent social planner. b. charge a price that prevents some people from buying.

c. price its good according to the intersection of marginal cost and average revenue. d. lower its costs to earn a higher profit. ANS: D PTS: 1 DIF: 2 REF: 15-4 TOP: Welfare MSC: Interpretive

17. Policymakers are discussing various proposals regarding how to deal with natural monopolies. Senator Huff wants to

regulate natural monopolies by equating price with average total cost. Huff contends that such a policy will ensure that monopolies make every effort to reduce costs. Senator Puff wants the government to own natural monopolies. Puff argues that government-owned monopolies usually do a better job of holding down costs than privately owned monopolies. Which senator's argument is correct? a. Senator Huff b. Senator Puff c. Both Senators d. Neither Senator ANS: D PTS: 1 DIF: 2 REF: 15-4 TOP: Regulation MSC: Interpretive

658 ? Chapter 15/Monopoly

18. Which of the following is the most likely reason the city council in New York City consistently denies licenses to

independent van drivers selling rides to the public?

a. Allowing the vans to operate would reduce social welfare. b. The van drivers engage in price discrimination.

c. Allowing the vans to operate would allow them to unfairly take advantage of poor residents.

d. The vans are a threat to the public transit monopoly, which makes campaign contributions to the city council

members.

ANS: D PTS: 1 DIF: 2 REF: 15-4 TOP: Monopoly MSC: Interpretive

19. In a natural monopoly,

a. society would be better off if antitrust laws were used to create many different firms in the market. b. the marginal cost curve is positively sloped.

c. if the government requires marginal cost pricing, it must pay the monopolist a subsidy. d. the marginal revenue curve is horizontal. ANS: C PTS: 1 DIF: 2 REF: 15-4 TOP: Natural monopoly MSC: Interpretive

20. Which of the following is not a way the government can respond to the inefficient allocation of resources associated

with monopolies?

a. Preventing mergers through antitrust laws.

b. Regulating the prices that monopolies can charge.

c. Requiring the monopolies to produce more than their profit-maximizing level of output. d. Running the monopoly itself. ANS: C PTS: 1 DIF: 2 REF: 15-4 TOP: Monopoly MSC: Applicative

21. Which of the following statements comparing monopoly with competition is correct?

a. A monopolist produces a higher level of output and charges a lower price than a competitive firm would. b. With perfect price discrimination, the total surplus under monopoly can be the same as under competition. c. With or without price discrimination, the consumer surplus under monopoly is at least as large as it would be

under competition.

d. The deadweight loss associated with monopoly is caused by the positive economic profits of the monopolist;

competitive firms do not earn a positive economic profit so there is no deadweight loss under competition.

ANS: B PTS: 1 DIF: 2 REF: 15-4 TOP: Welfare MSC: Interpretive

22. For a long while, electricity producers were thought to be a classic example of a natural monopoly. People held this

view because

a. the average cost of producing units of electricity by one producer in a specific region was lower than if the same

quantity were produced by two or more producers in the same region.

b. the average cost of producing units of electricity by one producer in a specific region was higher than if the same

quantity were produced by two or more produced in the same region.

c. the marginal cost of producing units of electricity by one producer in a specific region was higher than if the same

quantity were produced by two or more producers in the same region.

d. electricity is a special non-excludable good that could never be sold in a competitive market. ANS: A PTS: 1 DIF: 2 REF: 15-4 TOP: Natural monopoly MSC: Interpretive 23. Concerning public utilities, the stated reason for resorting to regulation of a monopoly, rather than promoting

competition through antitrust, is that the industry in question is believed to be a a. profit-maximizing monopoly. b. producer of externalities.

c. revenue-maximizing monopoly. d. natural monopoly. ANS: D PTS: 1 DIF: 2 REF: 15-4 TOP: Natural monopoly MSC: Interpretive

Chapter 15/Monopoly ? 659

24. Splitting up a monopoly is often justified on the grounds that

a. consumers prefer dealing with small firms. b. small firms have lower costs.

c. competition is inherently efficient.

d. nationalization is a less-preferred option. ANS: C PTS: 1 DIF: 1 REF: 15-4 TOP: Monopoly MSC: Interpretive

25. The first major piece of antitrust legislation was the

a. Clayton Act.

b. Celler-Kefauver Act. c. Sherman Act.

d. Robinson-Patman Act. ANS: C PTS: 1 DIF: 1 REF: 15-4 TOP: Antitrust MSC: Interpretive

26. The task of economic regulation is to

a. protect monopoly profits.

b. approximate the results of the competitive market. c. replace competition with government ownership. d. increase competition within the market. ANS: B PTS: 1 DIF: 1 REF: 15-4 TOP: Regulation MSC: Interpretive

27. A perfectly price-discriminating monopolist is able to

a. maximize profit and produce a socially-optimal level of output. b. maximize profit, but not produce a socially-optimal level of output. c. produce a socially-optimal level of output, but not maximize profit.

d. exercise illegal preferences regarding the race and/or gender of its employees. ANS: A PTS: 1 DIF: 2 REF: 15-5 TOP: Perfect price discrimination MSC: Interpretive

28. When a monopolist is able to sell its product at different prices, it is engaging in

a. distribution pricing. b. quality-adjusted pricing. c. price differentiation. d. price discrimination. ANS: D PTS: 1 DIF: 1 REF: 15-5 TOP: Price discrimination MSC: Definitional

Scenario 15-3

Black Box Cable TV is able to purchase an exclusive right to sell a premium movie channel (PMC) in its market area. Let's assume that Black Box Cable pays $150,000 a year for the exclusive marketing rights to PMC. Since Black Box has already installed cable to all of the homes in its market area, the marginal cost of delivering PMC to subscribers is zero. The manager of Black Box needs to know what price to charge for the PMC service to maximize her profit. Before setting price, she hires an economist to estimate demand for the PMC service. The economist discovers that there are two types of subscribers who value premium movie channels. First are the 4,000 die-hard TV viewers who will pay as much as $150 a year for the new PMC premium channel. Second, the PMC channel will appeal to about 20,000 occasional TV viewers who will pay as much as $20 a year for a subscription to PMC.

29. Refer to Scenario 15-3. If Black Box Cable TV is unable to price discriminate, what price will it choose to maximize

its profit, and what is the amount of the profit? a. price = $20; profit = $400,000 b. price = $20; profit = $330,000 c. price = $150; profit = $450,000 d. price = $150; profit = $600,000 ANS: C PTS: 1 DIF: 2 REF: 15-5 TOP: Price discrimination MSC: Applicative

660 ? Chapter 15/Monopoly

30. Refer to Scenario 15-3. If Black Box Cable TV is able to price discriminate, what would be the maximum amount of

profit it could generate? a. $500,000 b. $600,000 c. $850,000 d. $925,000 ANS: C PTS: 1 DIF: 2 REF: 15-5 TOP: Price discrimination MSC: Applicative 31. Refer to Scenario 15-3. What is the deadweight loss associated with the nondiscriminating pricing policy compared

to the price discriminating policy? a. $375,000 b. $400,000 c. $475,000

d. It cannot be determined from the information provided. ANS: B PTS: 1 DIF: 3 REF: 15-5 TOP: Deadweight loss MSC: Applicative 32. Price discrimination is a rational strategy for a profit-maximizing monopolist when

a. the monopolist finds itself able to produce only limited amounts of output. b. consumers are unable to be segmented into identifiable markets.

c. the monopolist wishes to increase the deadweight loss that results from profit-maximizing behavior. d. there is no opportunity for arbitrage across market segments. ANS: D PTS: 1 DIF: 2 REF: 15-5 TOP: Arbitrage MSC: Interpretive

33. If a monopolist is able to perfectly price discriminate,

a. consumer surplus is always increased. b. total surplus is always decreased.

c. consumer surplus and deadweight losses are transformed into monopoly profits. d. the price effect dominates the output effect on monopoly revenue. ANS: C PTS: 1 DIF: 2 REF: 15-5 TOP: Perfect price discrimination MSC: Interpretive

34. The practice of selling the same goods to different customers at different prices, but with the same marginal cost, is

known as

a. price segregation. b. price discrimination. c. arbitrage.

d. monopoly pricing. ANS: B PTS: 1 DIF: 2 REF: 15-5 TOP: Price discrimination MSC: Definitional 35. In theory, perfect price discrimination

a. decreases the monopolist's profits. b. decreases consumer surplus. c. increases deadweight loss.

d. reduces the number of consumers who purchase the monopoly’s product. ANS: B PTS: 1 DIF: 2 REF: 15-5 TOP: Perfect price discrimination MSC: Interpretive

36. For a firm to price discriminate,

a. it must be a natural monopoly.

b. it must be regulated by the government. c. it must have some market power.

d. consumers must tell the firm what they are willing to pay for the product. ANS: C PTS: 1 DIF: 2 REF: 15-5 TOP: Price discrimination MSC: Interpretive

666 ? Chapter 15/Monopoly

65. With perfect price discrimination

a. the monopoly eliminates all price discrimination by charging each customer the same price.

b. the monopoly charges each customer an amount equal to the monopolist's marginal cost of production. c. the deadweight loss from monopoly is eliminated.

d. consumer surplus is gained as monopoly profits are eliminated. ANS: C PTS: 1 DIF: 2 REF: 15-5 TOP: Price discrimination MSC: Applicative 66. An airline knows that there are two types of travelers: business travelers and vacationers. For a particular flight, there

are 100 business travelers who will pay $600 for a ticket while there are 50 vacationers who will pay $300 for a ticket. There are 150 seats available on the plane. Suppose the cost to the airline of providing the flight is $20,000, which includes the cost of the pilots, flight attendants, fuel, etc. How much profit will the airline earn if it sets the price of a ticket at $600? a. -$5,000 b. $15,000 c. $40,000 d. $70,000 ANS: C PTS: 1 DIF: 2 REF: 15-5 TOP: Price discrimination MSC: Analytical 67. An airline knows that there are two types of travelers: business travelers and vacationers. For a particular flight, there

are 100 business travelers who will pay $600 for a ticket while there are 50 vacationers who will pay $300 for a ticket. There are 150 seats available on the plane. Suppose the cost to the airline of providing the flight is $20,000, which includes the cost of the pilots, flight attendants, fuel, etc. How much additional profit can the firm earn by charging each customer their willingness to pay relative to charging a flat price of $600 per ticket? a. $15,000 b. $25,000 c. $40,000 d. $70,000 ANS: A PTS: 1 DIF: 3 REF: 15-5 TOP: Price discrimination MSC: Analytical 68. Customers who purchase a book from Dave's Bookstore are charged 20% more than customers who purchase the

same book from the Dave's Bookstore website. This is an example of a. perfect price discrimination. b. price discrimination. c. deadweight loss.

d. socially inefficient output. ANS: B PTS: 1 DIF: 2 REF: 15-5 TOP: Price discrimination MSC: Applicative

Chapter 15/Monopoly ? 667

Table 15-5

Dreher's Designer Shirt Company, a monopolist, has the following cost and revenue information. Assume that Dreher’s is able to engage in perfect price discrimination.

Quantity Produced 0 1 2 3 4 5 6 7 8 COSTS Total Cost ($) 100 140 184 230 280 335 395 475 575 Marginal Cost -- Quantity Demanded 0 1 2 3 4 5 6 7 8 REVENUES Price Total ($) Revenue 170 160 150 140 130 120 110 100 95 Marginal Revenue -- 69. Refer to Table 15-5. What is the marginal revenue from selling the 5th shirt?

a. $80 b. $100 c. $110 d. $120 ANS: D PTS: 1 DIF: 2 REF: 15-5 TOP: Marginal revenue MSC: Applicative 70. Refer to Table 15-5. What is the marginal revenue from selling the 8th shirt?

a. $45 b. $60 c. $80 d. $95 ANS: D PTS: 1 DIF: 2 REF: 15-5 TOP: Marginal revenue MSC: Applicative 71. Refer to Table 15-5. What is the total revenue when 3 shirts are sold?

a. $140 b. $420 c. $450 d. $620 ANS: C PTS: 1 DIF: 3 REF: 15-5 TOP: Total revenue MSC: Applicative 72. Refer to Table 15-5. What is the total revenue when 7 shirts are sold?

a. $650 b. $700 c. $910 d. $1080 ANS: C PTS: 1 DIF: 3 REF: 15-5 TOP: Total revenue MSC: Applicative 73. Refer to Table 15-5. What is the average revenue when 7 shirts are sold?

a. $90 b. $100 c. $110 d. $130 ANS: D PTS: 1 DIF: 3 REF: 15-5 TOP: Average revenue MSC: Applicative

668 ? Chapter 15/Monopoly

74. Refer to Table 15-5. What is the quantity that maximizes economic profit?

a. 5 b. 6 c. 7 d. 8 ANS: C PTS: 1 DIF: 3 REF: 15-5 TOP: Profit maximization MSC: Applicative 75. Refer to Table 15-5. What is total profit at the profit-maximizing quantity?

a. $325 b. $435 c. $565 d. $1000 ANS: B PTS: 1 DIF: 3 REF: 15-5 TOP: Profit MSC: Applicative 76. Refer to Table 15-5. What are Dreher's Designer Shirt Company's fixed costs?

a. $100 b. $150 c. $354 d. $654 ANS: A PTS: 1 DIF: 2 REF: 15-5 TOP: Fixed cost MSC: Applicative

77. What do economists call the business practice of selling the same good at difference prices to different customers?

a. Price discrimination b. Collusion

c. Compensating differential d. Both a and b are correct ANS: A PTS: 1 DIF: 1 REF: 15-5 TOP: Price discrimination MSC: Definitional 78. During the holiday season, high-end retailers frequently place a high price on merchandise on weekends and discount

the price during the week. They do this because they believe that two groups of customers exist: shoppers with little free time and bargain hunters. Bargain hunters have time to shop around and frequently shop during the week. What do economists call this price strategy used by high-end retailers? a. Oligopoly

b. Price discrimination

c. Compensating differential d. In-kind transfers ANS: B PTS: 1 DIF: 2 REF: 15-5 TOP: Price discrimination MSC: Interpretive 79. Which of the following is an example of price discrimination?

a. Nabisco provides cents-off coupons for its products.

b. Amtrak offers a lower price for weekend travel compared to weekday rates on the same routes. c. Hotel rates for AAA members are lower than for nonmembers. d. All of the above are correct. ANS: D PTS: 1 DIF: 1 REF: 15-5 TOP: Price discrimination MSC: Analytical

80. A monopolist that practices perfect price discrimination

a. creates no deadweight loss.

b. charges one group of buyers a higher price than another group, such as offering a student discount. c. produces the same monopoly level of output as when a single price is charged.

d. charges some customers a price below marginal cost because costs are covered by the high-priced buyers. ANS: A PTS: 1 DIF: 2 REF: 15-5 TOP: Perfect price discrimination MSC: Interpretive

Chapter 15/Monopoly ? 669

81. A monopolist's profits with price discrimination will be

a. lower than if the firm charged a single, profit-maximizing price b. the same as if the firm charged a single, profit-maximizing price.

c. higher than if the firm charged just one price because the firm will capture more consumer surplus. d. higher than if the firm charged a single price because the costs of selling the good will be lower. ANS: C PTS: 1 DIF: 1 REF: 15-5 TOP: Price discrimination MSC: Interpretive

True/False

1. When a monopoly charges a higher price, fewer of its goods are sold. ANS: T DIF: 1 REF: 15-1 TOP: Demand curve MSC: Interpretive

2. The De Beers Diamond company advertises heavily to promote the sale of all diamonds, not just its own. This is

evidence that it has a monopoly position to some degree. ANS: T DIF: 1 REF: 15-1 TOP: Monopoly MSC: Interpretive

3. The De Beers Diamond company is not worried about differentiating its product from all other gemstones. ANS: F DIF: 1 REF: 15-1 TOP: Monopoly MSC: Interpretive

4. The amount of power that a monopoly has depends on whether there are close substitutes for its product. ANS: T DIF: 1 REF: 15-1 TOP: Monopoly MSC: Interpretive

5. If the government deems a newly invented drug to be truly original, the pharmaceutical company is given the exclusive right to manufacture and sell the drug for 50 years. ANS: F DIF: 1 REF: 15-1 TOP: Patents MSC: Interpretive 6. Declining average total cost with increased production is one of the defining characteristics of a natural monopoly. ANS: T DIF: 1 REF: 15-1 TOP: Natural monopoly MSC: Definitional 7. Average revenue for a monopoly is the total revenue divided by the quantity produced. ANS: T DIF: 1 REF: 15-2 TOP: Average revenue MSC: Definitional 8. For a monopoly, marginal revenue is often greater than the price they charge for their good. ANS: F DIF: 1 REF: 15-2 TOP: Marginal revenue MSC: Interpretive

9. Like monopolies, competitive firms choose to produce a quantity in which marginal revenue equals marginal cost. ANS: T DIF: 1 REF: 15-2 TOP: Profit maximization MSC: Interpretive 10. It doesn't make sense to talk about a monopolist's supply curve. ANS: T DIF: 1 REF: 15-2 TOP: Monopoly MSC: Interpretive

11. During the life of a drug patent, the monopoly pharmaceutical firm maximizes profit by producing the quantity at

which marginal revenue equals marginal cost. ANS: T DIF: 1 REF: 15-2 TOP: Profit maximization MSC: Interpretive 12. Antitrust laws give the Justice Department the authority to challenge potential mergers between companies in an

effort to safeguard society from monopoly power. ANS: T DIF: 1 REF: 15-4 TOP: Antitrust MSC: Interpretive

670 ? Chapter 15/Monopoly

13. Some companies merge in order to lower costs through efficient joint production. ANS: T DIF: 1 REF: 15-4 TOP: Antitrust MSC: Interpretive

14. A common solution to monopoly in European countries is public ownership. ANS: T DIF: 1 REF: 15-4 TOP: Monopoly MSC: Interpretive

15. The proper level of government intervention is ambiguous when dealing with a monopoly. ANS: T DIF: 1 REF: 15-4 TOP: Regulation MSC: Interpretive

16. Firms with substantial monopoly power are quite common, because many goods are truly unique. ANS: F DIF: 1 REF: 15-4 TOP: Monopoly MSC: Interpretive

17. By selling hardcover books to die-hard fans and paperback books to less enthusiastic readers, the publisher is able to

price discriminate and raise its profit. ANS: T DIF: 1 REF: 15-5 TOP: Price discrimination MSC: Interpretive 18. Movie theatres charge different prices to different groups of people based on the differing marginal costs that exist

from group to group. ANS: F DIF: 1 REF: 15-5 TOP: Price discrimination MSC: Interpretive 19. Airlines often separate their customers into business travelers and personal travelers by giving a discount to those

travelers who stay over a Saturday night. ANS: T DIF: 1 REF: 15-5 TOP: Price discrimination MSC: Interpretive 20. University financial aid can be viewed as a type of price discrimination. ANS: T DIF: 1 REF: 15-5 TOP: Price discrimination MSC: Interpretive

21. By offering lower prices to customers who buy a large quantity, a monopoly is price discriminating. ANS: T DIF: 1 REF: 15-5 TOP: Price discrimination MSC: Interpretive 22. Goods that do not have close substitutes have downward-sloping demand curves. ANS: T DIF: 1 REF: 15-5 TOP: Demand curve MSC: Interpretive

Short Answer

1. Describe how government is involved in creating a monopoly. Why might the government create one? Give an

example. ANS:

The government can create a monopoly by giving a single firm the exclusive right to produce some good. Monopolies are created for many reasons; one important one is the recognition that a single firm in industries characterized by high fixed costs can usually supply the entire market at a lower cost than having multiple firms in the industry. Examples include most utility companies. The government also grants sole ownership of inventions through patent laws in order to help eliminate the market failure that is likely to otherwise occur in the markets for those goods. DIF: 2 REF: 15-1 TOP: Government MSC: Applicative 2. What is the defining characteristic of a natural monopoly? Give an example of a natural monopoly. ANS:

The defining characteristic of a natural monopoly is when a firm can supply a good or service to an entire market at a smaller cost than could two or more firms. It may also be defined when goods are excludable, but non rival (see Chapter 11). The examples provided in the text include a water distribution system and a bridge. DIF: 2 REF: 15-1 TOP: Natural monopoly MSC: Definitional

本文来源：https://www.bwwdw.com/article/0xja.html