5. The supply curve of a monopolist is A) upward sloping. B) nonexistent. C) perfectly inelastic. D) horizontal.

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1 Chapter 12 monopoly 1. A monopoly firm is different from a competitive firm in that A) there are many substitutes for a monopolist's product but there are no substitutes for a competitive firm's product. B) a monopolist's demand curve is perfectly inelastic but a competitive firm's demand curve is perfectly elastic. C) a monopolist can influence market price but a competitive firm cannot. D) a monopolist earns economic profits in the long run but a competitive firm does not. 2. The demand curve for a monopolist differs from the demand curve faced by a competitive firm because the demand curve for A) a competitive firm lies above its marginal revenue curve. B) a competitive firm is inelastic. C) a monopolist is the market demand curve. D) a monopolist lies below its marginal revenue curve. 3. Marginal revenue is not equal to price for a monopolist because A) the monopolist's demand curve is below its marginal revenue curve. B) total revenue increases as output increases. C) the monopolist sets price equal to marginal cost. D) the monopolist must lower the price of all units in order to sell more. 4. For a monopolist, the price of the product A) equals the marginal revenue. C) exceeds the marginal revenue. B) is less than the marginal revenue. D) equals the marginal cost. 5. The supply curve of a monopolist is A) upward sloping. B) nonexistent. C) perfectly inelastic. D) horizontal. 6. If a monopolist produces beyond the quantity where =, then A) the increase in revenue is less than the increase in cost. B) total revenue is less than total cost. C) the increase in revenue exceeds the increase in cost. D) total revenue exceeds total cost. 7. If >, the monopolist should A) decrease production. C) maintain the same level of production. B) increase production. D) stop producing.

2 Price 8. If <, the monopolist should A) decrease production. C) maintain the same level of production. B) increase production. D) stop producing. Use the following to answer questions 9-14: 10 8 ATC D Output per day 9. Refer to the graph above. If the firm seeks to maximize profit, it should set a price equal to A) $10. B) $ 8. C) $ 6. D) $ Refer to the graph above. If the firm maximizes profit, its average revenue will be A) $10. B) $ 8. C) $ 6. D) $ Refer to the graph above. If the firm maximizes profit, the marginal cost of its product will be A) $10. B) $ 8. C) $ 6. D) $ Refer to the graph above. If the firm maximizes profit, its daily output will be A) 10 units. B) 20 units. C) 30 units. D) 45 units. 13. Refer to the graph above. The maximum possible total profit the firm can earn is A) $ 0. B) $ 60. C) $120. D) $ Refer to the graph above. If the firm produces 45 units of output per day, it A) will be maximizing profit. B) will charge a price that exceeds its marginal cost. C) will be able to increase profit by producing less per day. D) will be able to increase profit by producing more per day.

3 Use the following to answer questions 15-23: Price $20 $18 $16 $14 $12 $10 $8 $6 $4 $2 $0 0 AC D Quantity per day 15. Refer to the graph above. If the firm sets the price to maximize profit it will charge A) $16 for its product. B) $12 for its product. C) $8 for its product. D) $10 for its product. 16. Refer to the graph above. Assuming that the firm maximizes profit, it will produce A) 300 units of output per day. C) 700 units of output per day. B) 600 units of output per day. D) 800 units of output per day. 17. Refer to the graph above. Assuming that the firm maximizes profit, the marginal cost of its last unit of output will be A) $16. B) $12. C) $ 8. D) $ Refer to the graph above. Assuming that the firm maximizes profit, the marginal revenue of its last unit of output will be A) $16. B) $12. C) $ 8. D) $ Refer to the graph above. If the firm produces 700 units of output per day, it A) can increase profit by producing more. C) will be maximizing profit. B) can increase profit by producing less. D) will incur economic losses. 20. Refer to the graph above. In a perfectly competitive industry, price would A) equal $16. B) be greater than $16. C) equal $12. D) be less than $ Refer to the graph above. If a monopolist sets the price to maximize profit it will earn economic profit of A) $1600 per day. B) $2400 per day. C) $4800 per day. D) $7200 per day.

4 22. Refer to the graph above. If the firm sets price to maximize profit it will A) produce the product at minimum possible average total cost. B) produce the product at minimum possible marginal cost. C) produce the product at an average total cost that is greater than the minimum possible average total cost. D) incur economic losses. 23. Refer to the graph above. If the firm charges a price of $8 for its product A) it maximizes profit. C) it earns zero economic profits. B) it incurs losses. D) it can increase profits by increasing output. 24. A price-discriminating monopolist A) charges the same price to everyone. B) charges a different price for different customers. C) has the same level of output as a normal monopolist. D) produces where price equals total cost. 25. Why do some stores offer senior citizen discounts on Tuesday? A) Most stores are perfect competitors in their geographic region. B) Senior citizens have perfectly inelastic demand curves, while other shoppers do not. C) Senior citizens have more elastic demands compared to other shoppers. D) Senior citizens have less elastic demands compared to other shoppers. 26. A movie theater is a price discriminating monopolist and charges a higher ticket price for late-evening showings. From this we know that A) Late-evening moviegoers have perfectly inelastic demands. B) Late-evening moviegoers have less elastic demands than daytime or early-evening moviegoers. C) Late-evening moviegoers have more elastic demands than daytime or early-evening moviegoers. D) Daytime and early-evening moviegoers have perfectly elastic demands. 27. If the quantity demanded at a price of $10 is 2,000 and the quantity demanded at a price of $8 is 2,400, then a price-discriminating monopolist would want to A) charge all consumers the higher price of $10 and sell 2,000 units. B) charge all consumers $8 in order to increase quantity sold to 2,400. C) sell 2,000 units for $8 each, then sell an additional 400 units for $10 each. D) sell 2,000 units for $10 each, then sell an additional 400 units for $8 each.

5 28. Suppose quantity demanded is 2,000 when price is $10 and 3,000 when price is $5. If a monopolist who was initially charging a price of $10 discovers a way to price discriminate, it will be able to increase revenue from $20,000 to A) $25,000 by charging consumers with less elastic demands only $5 and keeping the price for consumers with more elastic demands at $10. B) $35,000 by charging consumers with less elastic demands only $5 and keeping the price for consumers with more elastic demands at $10. C) $25,000 by charging consumers with more elastic demands only $5 and keeping the price for consumers with less elastic demands at $10. D) $35,000 by charging consumers with more elastic demands only $5 and keeping the price for consumers with less elastic demands at $ As compared to a normal monopolist, a price-discriminating monopolist produces a A) smaller output at a lower profit. C) larger output at a larger profit. B) smaller output but at a larger profit. D) larger output but at a lower profit. Use the following to answer questions 30-33: Price Pm Pc C D B Qm A Qc Quantity Demand 30. Refer to the graph above. Triangle B represents A) the loss of consumer surplus resulting from a monopoly. B) the cost to society of increasing output from Qm to Qc. C) consumer surplus redistributed to the monopolist. D) the loss of producer surplus resulting from a monopoly. 31. Refer to the graph above. Triangle D represents A) a loss of consumer surplus resulting from a monopoly. B) the cost to society of increasing output from Qm to Qc. C) consumer surplus redistributed to the monopolist. D) the loss of producer surplus resulting from a monopoly.

6 32. Refer to the graph above. The areas which represents the net gain to society of eliminating monopoly are A) A and B. B) A and C. C) D and B. D) D and C. 33. Refer to the graph above. Area C represents A) the loss of consumer surplus resulting from a monopoly. B) the cost to society of increasing output from Qm to Qc. C) consumer surplus redistributed to the monopolist. D) the loss of producer surplus resulting from a monopoly. 34. The deadweight loss from monopoly exists because A) there are no net gains to society at the output level produced by a monopolist. B) resource owners hired by the monopolist gain at the expense of consumers. C) the monopolist produces at an output level at which no one can be made better off without making someone worse off. D) the marginal benefit of the monopolist's product to society exceeds the marginal cost. Use the following to answer questions 35-36: Price P1 P2 P3 P4 AC D Quantity 35. Refer to the graph above. If a natural monopolist were not regulated, the firm would charge A) P1. B) P2. C) P3. D) P Refer to the graph above. If the government set the selling price equal to the marginal cost, the firm in the graph would A) be making economic profits. B) be making normal profits. C) be sustaining losses and would eventually go out of business. D) be making zero economic profits.

7 37. If government regulators want a natural monopolist to earn only zero economic profit, then they will set price equal to A) marginal cost (). C) average fixed cost (AFC). B) average variable cost (AVC). D) average total cost (ATC).

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