Economics (McConnell), 18th Edition

Chapter 10: Pure Monopoly

Quiz

1
At a monopolist's current output, ATC = $10, P = $11, MC = $8 and MR = $7. This firm is realizing:
A)an economic profit that could be increased by producing more output
B)an economic profit that could be increased by producing less output
C)an economic loss that could be reduced by producing more output
D)an economic loss than could be reduced by producing less output
2
Use the following diagram to answer the next question.

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Refer to the diagram. At output q2:
A)marginal revenue exceeds marginal cost by the greatest amount
B)demand is inelastic
C)profit is maximized
D)marginal revenue is zero
3
In long run equilibrium, profit-maximizing competitive firms and a monopolistic firms both:
A)earn zero economic profits
B)set price equal to marginal revenue
C)produce at minimum average total cost
D)produce the output at which marginal revenue equals marginal cost
4
Use the following diagram to answer the next question:

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Refer to the diagram. This nondiscriminating monopolist will produce:
A)M units at price A and make a profit
B)N units at price B and earn zero profits
C)M units at price C and incur a loss
D)Q units at price J and earn zero profits
5
Use the following diagram to answer the next question:

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Refer to the diagram. If this firm produces its profit-maximizing output, its potential profit is:
A)zero
B)area AFHC
C)area AFGB
D)area BGHC
6
Suppose a monopolist could segment its market into two distinct submarkets and prevent resale between them. Its profits would increase if it charged a higher price to the group whose:
A)demand is more elastic
B)demand is more inelastic
C)demand is greater
D)cost is lower
7
Answer the next question on the basis of the following table showing the demand schedule facing a nondiscriminating monopolist.
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Refer to the data. The marginal revenue of the fourth unit of output is:
A)$10
B)$8
C)$4
D)$2
8
Use the following diagram to answer the next question.

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Refer to the diagram. A regulatory commission that wished to establish a socially optimum output level for this firm would set price at:
A)P2 and the firm would break even
B)P3 and the firm would earn a profit
C)P1 but the firm would incur a loss
D)P2 but the firm would incur a loss
9
Use the following diagram of a pure monopolist to answer the next question.

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Refer to the diagram. Which of the following is a correct statement?
A)Maximum profits are obtained by selling at price $a
B)Maximum profits are obtained by producing output g
C)The firm's per-unit profits are $c – $a
D)Demand is elastic at price $c
10
The allocative inefficiency of nondiscriminating monopoly arises from the fact that:
A)price exceeds marginal cost
B)output falls short of the output at which average cost is minimized
C)output exceeds that at which average cost is minimized
D)price exceeds minimum average cost
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