Multiple Choice
Identify the
letter of the choice that best completes the statement or answers the question.
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1.
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Which
of the following is true? A) | Patents reduce a firm's incentive to develop new
products. | B) | Patents are given for new works of art or
literature. | C) | Patents give a permanent exclusive right to produce a new
good. | D) | Patents give a temporary exclusive right to produce a new
good. | E) | Patents guarantee economic profits. | | |
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2.
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Patent laws promote technical progress in all of the following ways except one. Which
is the exception? A) | They allow other
firms to copy successful products as soon as they are marketed. | B) | They prevent
duplication of inventions. | C) | They provide a stimulus to
innovation. | D) | They provide the inventor with a temporary
monopoly. | E) | They increase a firm's incentive to incur the up-front costs of
developing new products. | | |
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3.
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Which
of the following could not bar entry into an industry? A) | economies of
scale | B) | diseconomies of scale | C) | patents | D) | licenses | E) | one firm's
control of essential resources | | |
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4.
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For a
nondiscriminating monopolist, marginal revenue is A) | equal to price | B) | greater than
price | C) | less than price | D) | represented by a
horizontal curve | E) | equal to average revenue | | |
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5.
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For
the nondiscriminating monopolist, A) | P = MR = AR | B) | P = MR >
AR | C) | P > MR =
AR | D) | P = MR <
AR | E) | P = AR >
MR | | |
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6.
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A
nondiscriminating monopolist's demand curve A) | is horizontal at the market price | B) | lies above its
marginal revenue curve | C) | is the same as its marginal cost
curve | D) | indicates that the firm must raise price to sell additional
units | E) | lies above the marginal cost curve at all levels of
output | | |
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7.
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A
profit-maximizing monopoly will always produce at the minimum point of its average total cost (ATC)
curve.
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8.
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A
monopolist maximizes profit at the quantity where the slope of its total revenue curve equals the
slope of its total cost curve.
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9.
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Which
of the following is not true of monopolists? A) | The entry of new
firms is not a major concern. | B) | Monopolists seek to maximize profits. | C) | Monopolists can
charge any price they want and make a profit. | D) | Monopolists can
choose any point on the market demand curve. | E) | Monopolists can
raise price more than 10 percent. | | |
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10.
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A
monopolist earning short-run economic profit determines that at its present level of output, marginal
revenue is $23 and marginal cost is $30. Which of the following should the firm do to increase
profit? A) | Raise price and
lower output. | B) | Lower price and lower output. | C) | Raise price and
raise output. | D) | Lower price and raise output. | E) | Lower output but
leave price unchanged. | | |
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11.
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Consider Exhibit 0145. What is the profit-maximizing output for a monopolist that does
not price discriminate? A) | 1 unit | B) | 2
units | C) | 3 units | D) | 4
units | E) | 5 units | | |
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12.
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In
the short run, a monopolist will shut down when A) | average total cost is greater than price at all output
levels | B) | average variable cost is greater than average fixed cost at all
output levels | C) | price is greater than average variable cost at all output
levels | D) | average fixed cost is greater than price at all output
levels | E) | average variable cost is greater than price at all output
levels | | |
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13.
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For a
nondiscriminating monopolist, which of the following statements is true? A) | Unlike a firm in
perfect competition, a monopolist produces where MR > MC. | B) | The monopolist's
marginal revenue curve is the same as its demand curve. | C) | The monopolist
will always produce in the inelastic range of its demand curve. | D) | The monopolist
does not have a supply curve. | E) | The monopolist produces where MR <
MC. | | |
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14.
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The
profit-maximizing (or loss-minimizing) price the monopoly will charge in Exhibit 9-1
is A) | irrelevant since
the firm should shut down | B) | $11 | C) | $16 | D) | $18 | E) | $22 | | |
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15.
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Which
of the following would not bar entry into a market? A) | control by a
single firm of an essential resource | B) | the necessity of taking risks when starting a
firm | C) | patents | D) | economies of scale | E) | government
regulations limiting the number of firms in an industry | | |
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16.
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Firms
can earn economic profits even in the long run if A) | they charge the highest price
possible | B) | there is a cost-reducing technological
change | C) | there are significant barriers to
entry | D) | marginal revenue equals marginal cost | E) | price is less
than average variable cost at all rates of output | | |
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17.
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In
the long run, which of the following is not a problem for a monopolist earning economic
profit? A) | other firms have
an incentive to create substitutes for the monopolist's product | B) | technological
change tends to break down barriers to entry | C) | patents expire,
licenses must be renewed, and new sources of essential resources may be
discovered | D) | government often decides to regulate
monopolies | E) | all profit will gradually be converted to consumer
surplus | | |
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18.
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In
Exhibit 0150, the level of output that would achieve allocative efficiency is A) | 700
units | B) | 810 units | C) | 884
units | D) | 976 units | E) | 1,000
units | | |
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19.
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Compared to the productive efficiency of a perfectly competitive firm, a monopolist
tends to be A) | very efficient
because it charges higher prices | B) | more efficient because it produces greater
output | C) | inefficient | D) | equally
efficient, as it also produces where MR = MC | E) | very efficient
because it conserves resources by producing less output | | |
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20.
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Total
deadweight loss in society is reduced through rent seeking by monopolists.
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21.
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The
U.S. Postal Service has found its monopoly eroded over time because A) | the demand for
mail delivery has become more inelastic | B) | Congress has taken away their monopoly over first-class
mail | C) | the U.S. Postal
Service cannot handle the volume of transactions | D) | the price of
stamps has increased relative to other substitutes, such as the telephone | E) | of the decline
in the use of fax machines | | |
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22.
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Suppose that a price-discriminating monopolist divides its market into two segments.
In each market segment, price is determined by finding the level of output where that
market's A) | average revenue
equals average total cost | B) | average revenue equals average variable
cost | C) | marginal revenue
equals average total cost | D) | marginal revenue equals marginal cost | E) | marginal cost
equals average total cost | | |
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23.
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If
the monopolist in Exhibit 0150 engages in perfect price discrimination, price would
be A) | $120 for the
884th unit | B) | $212 on all units | C) | $120 on all
units | D) | $136 on all units | E) | $104 on all
units | | |
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24.
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If
the monopolist in Exhibit 0150 engages in perfect price discrimination, price would A) | vary between
$212 and $120 | B) | vary between $212 and $104 | C) | be $136 on all
units | D) | be $110 on all units | E) | be $104 on all
units | | |
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25.
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In
Exhibit 0153, which area represents the amount of consumer surplus received by consumers under
perfect price discrimination? A) | area a | B) | area
b | C) | area a + b +
c | D) | area b +
e | E) | there is no
consumer surplus | | |
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