ECON 1900-02
Chapter 8 Monopoly Review Quiz
) Which of the following is the best example of a monopoly?
a) a neighbourhood grocer in Saskatoon
b) the only gas station in a remote town
c) the manufacturer of Crest toothpaste
d) a bank in downtown Winnipeg
2) Reasons for the existence of monopoly include all but:
a) patents
b) declining long-run average costs over a large range of output relative to industry
demand
c) control of a raw material
d) inelastic demand for the product
3) Because the monopolist is the sole producer in the industry:
a) the demand curve for the monopolist is the industry demand curve
b) the monopolist's demand curve will be inelastic
c) the monopolist will not lose sales when price is raised
d) the marginal revenue will be greater than price at all levels of output
4) At its present output a monopolist determines that its marginal cost is $18 and its marginal
revenue is $21. The monopolist will maximize profits or minimize losses by:
a) increasing price while keeping output constant
b) decreasing price and increasing output
c) decreasing both price and output
d) increasing both price and output
5)
Output Price Total Cost
0
$80
$50
1
70
60
2
60
72
3
50
86
4
40
102
5
30
120
The marginal revenue of the third unit of output is:
a) $10
b) $20
c) $30
d) $40
6)
Output Price Total Cost
0
$80
$50
1
70
60
2
60
72
3
50
86
4
40
102
5
30
120
The profit-maximizing monopolist sets price at:
a) $20
b) $30
c) $40
d) $50
7) Use the diagram for this question
The profit-maximizing monopolist would produce:
a) 0k units
b) 0l units
c) 0m units
d) zero units
8) Use the diagram for this question
The profit-maximizing monopolist would earn an economic profit of:
a) deji
b) bck0
c) abc
d) bced
9) At the output which maximizes profits, the monopoly may not be productively efficient
because:
a) the average total cost of producing is not a minimum
b) the marginal cost of producing the last unit is less than its price
c) marginal cost may not be at its minimum value
d) average revenue exceeds the cost of producing an extra unit of output
10) Monopoly fails to achieve allocative efficiency because
a) P > ATC
b) P > MC
c) ATC is not minimum
d) MR= MC
11) Monopolies fail to achieve allocative efficiency because:
a) they produce to maximize their profits at an output level where MC<P
b) they produce to maximize their profits at an output level where MC>P
c) they produce to maximize their profits at an output level where output is less than the
minimum efficient scale
d) they produce to maximize their profits at an output level where output is more than the
minimum efficient scale
12) A firm experiencing X-inefficiency would likely:We didn’t cover this in class. Do not need
to know.
a) pay managers salaries above the going market rate
b) produce more output than is optimal
c) earn unusually high profits
d) experience economies of scale
13) Which is not one of the conditions for successful price discrimination?
a) the buyer must be unable to resell the product
b) the product must be a service
c) the seller must have some monopoly power
d) the seller must be able to segment the market
14) The question is based on the graph.
The monopoly depicted in the graph is:
a) a natural monopoly because the demand curve is downward sloping
b) a natural monopoly because ATC is still falling where it intersects demand
c) a natural monopoly because MR and MC intersect at an output level below the social
optimum
d) not a natural monopoly
15) The question is based on the graph.
If the government regulates this monopolist so as to avoid allocative inefficiency, the price and
output combination should be:
a) Pa and Qa
b) Pd and Qa
c) Pb and Qb
d) Pc and Qc
16) The question is based on the graph.
A regulatory compromise is to charge a price that allows the monopolist a "fair return" but also
results in an output level close to the social optimum. Such a price and output combination is:
a) Pa and Qa
b) Pd and Qa
c) Pb and Qb
d) Pc and Qc
17) The deadweight loss that results from unregulated monopoly occurs because:
a) monopolists produce less than optimal amount
b) the value to consumers of the output not produced exceeds the costs of producing that
output
c) both (a) and (b)
d) neither (a) and (b)
18) Use this graph for this question
The area of producer surplus under monopoly is:
a) ABC
)
b) ACGF
c) CGE
d) BCGF
19) The DeBeers company enforced their diamond monopoly for many years by:
a) convincing independent producers to market through one central agency
b) cutting prices to discipline producers who sold outside the cartel
c) buying and stockpiling diamonds produced by independent mines
d) all of the above
Key
1b
2d
3a
4b
5c
6d
7a
8d
9a
10b
11a
12a
13b
14b
15d
16c
17c
18d
19d