# Chapter 12

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48. In the long run a pure monopolist will maximize profits by producing that output at which marginal cost is equal to:
Marginal Revenue
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49. An unregulated pure monopolist will maximize profits by producing that output at which:
MR=MC.
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50. Suppose that a pure monopolist can sell 5 units of output at \$4 per unit and 6 units at \$3.90 per unit. The monopolist will produce and sell the sixth unit if its marginal cost is
: \$3.40 or less
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51. Suppose that a pure monopolist can sell 4 units of output at \$2 per unit and 5 units at \$1.75 per unit. The monopolist will produce and sell the fifth unit if its marginal cost is:
\$.75 or less
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52. If a monopolist's marginal revenue is \$3.00 and its marginal cost is \$4.50, it will increase its profits by:
reducing output and raising price.
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53. Refer to the above diagram. To maximize profits or minimize losses this firm should produce:
E units and charge price A.
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54. Refer to the above diagram. At the profit-maximizing level of output, total revenue will be:
0AJE.
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55. Refer to the above diagram. At the profit-maximizing level of output, total cost will be:
0BHE.
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56. Refer to the above diagram. At the profit-maximizing level of output, the firm will realize:
an economic profit of ABHJ.
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57. If profits are maximized (or losses minimized), which of the following conditions is common to both unregulated monopoly and to pure competition?
MR = MC
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58. If a pure monopolist is producing at that output where P = ATC, then:
its economic profits will be zero.
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59. A pure monopolist's short-run profit-maximizing or loss-minimizing position is such that price:
will vertically intersect demand where MR = MC.
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60. Refer to the above diagram for a pure monopolist. Monopoly price will be:
c.
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61. Refer to the above diagram for a pure monopolist. Monopoly output will be:
f.
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62. Refer to the above diagram for a pure monopolist. Monopoly profit:
cannot be determined from the information given.
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63. In the short run, a monopolist's economic profits:
may be positive or negative depending on market demand and cost conditions.
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64. Refer to the above diagram. If this industry is purely competitive, the profit-maximizing price and quantity will be:
P2 and Q2.
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65. Refer to the above diagram. If this industry is comprised of only one seller, the profit-maximizing price and quantity will be:
P3 and Q3.
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66. When a pure monopolist is producing its profit-maximizing output, price will:
equal neither MC nor MR.
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67. The supply curve for a monopolist is:
nonexistent
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68. The supply curve of a pure monopolist:
does not exist because prices are not "given" to a monopolist.
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69. To maximize profit a pure monopolist must:
maximize the difference between total revenue and total cost.
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70. Economic profit in the long run is:
possible for a pure monopoly, but not for a pure competitor
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71. Which of the following statements is correct?
In seeking the profit-maximizing output the pure monopolist underallocates resources to its production.
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72. Confronted with the same unit cost data, a monopolistic producer will charge:
a higher price and produce a smaller output than a competitive firm.
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73. An important economic problem associated with pure monopoly is that, at the profit maximizing outputs, resources are:
underallocated because price exceeds marginal cost.
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74. A single-price monopoly is economically inefficient because, at the profit maximizing output:
society values additional units of the monopolized product more highly than it does the alternative products those resources could otherwise produce.
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75. At its profit-maximizing output, a pure nondiscriminating monopolist achieves:
neither productive efficiency nor allocative efficiency.
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76. The profit-maximizing output of a pure monopoly is not socially optimal because in equilibrium:
price exceeds marginal cost.
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77. A single-price pure monopoly is economically inefficient:
because it produces short of minimum average total cost and price is greater than marginal cost.
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78. Refer to the above diagrams. Diagram (A) represents:
equilibrium price and quantity in a purely competitive industry.
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79. Refer to the above diagrams. In diagram (B) the profit-maximizing quantity is:
g and the profit-maximizing price is d.
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80. Refer to the above diagrams. With the industry structure represented by diagram:
(A) there will be only a normal profit in the long run, while in (B) an economic profit can persist.
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81. Refer to the above diagrams. With the industry structure represented by diagram:
(B) output will be less than in diagram (A).
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82. Refer to the above diagrams. The price will be _______ and the quantity will be _______ with the industry structure represented by diagram (B) compared to the one represented in (A).
higher; lower
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83. X-inefficiency refers to a situation in which a firm:
fails to achieve the minimum average total costs attainable at each level of output.
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84. There is some evidence to suggest that X-inefficiency is:
more likely to occur in monopolistic firms than in competitive firms.
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85. Price discrimination refers to:
the selling of a given product at different prices that do not reflect cost differences.
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86. The practice of price discrimination is associated with pure monopoly because:
monopolists have considerable ability to control output and price.
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87. Which of the following is not a precondition for price discrimination?
The commodity involved must be a durable good.
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88. A price discriminating pure monopolist will attempt to charge each buyer (or group of buyers):
the maximum price each would be willing to pay.
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89. Other things equal, in which of the following cases would economic profit be the greatest?
an unregulated monopolist which is able to engage in price discrimination
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90. If a monopolist engages in price discrimination, it will:
charge a higher price where individual demand is inelastic and a lower price where individual demand is elastic.
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91. Price discrimination is:
only illegal if used to lessen or eliminate competition.
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93. The above nondiscriminating monopolist should set its price at:
\$200
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94. At its profit-maximizing output, the above nondiscriminating monopolist:
earns an economic profit of \$250
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95. If the above profit-maximizing monopolist is able to price discriminate, charging each customer the price associated with each given level of output, how many units will the firm produce?
4
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96. If the above profit-maximizing monopolist is able to price discriminate, charging each customer the price associated with each given level of output, how much profit will the firm earn?
\$420
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97. Refer to the figure above. Suppose the graphs represent the demand for use of a local golf course for which there is no significant competition (it has a local monopoly); P denotes the price of a round of golf; Q is the quantity of rounds "sold" each day. If the left graph represents the demand during weekdays, and the right graph the weekend demand, this profit-maximizing golf course should:
charge \$7 for each round on weekdays, and \$10 during the weekend.
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98. Refer to the figure above. Suppose the graphs represent the demand for use of a local golf course for which there is no significant competition (it has a local monopoly); P denotes the price of a round of golf; Q is the quantity of rounds "sold" each day. If the left graph represents the demand during weekdays, and the right graph the weekend demand, then over the course of a full seven-day week this price-discriminating, profit-maximizing golf course should sell at total of:
1,200 rounds.
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99. Refer to the figure above. Suppose the graphs represent the demand for use of a local golf course for which there is no significant competition (it has a local monopoly); P denotes the price of a round of golf; Q is the quantity of rounds "sold" each day. If the left graph represents the demand during weekdays, and the right graph the weekend demand, this profit-maximizing golf course will earn how much economic profit over the course of a full seven-day week?
\$4,200
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100. Other things equal, a price discriminating monopolist will:
produce a larger output than a nondiscriminating monopolist.
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101. Refer to the above diagram for a pure monopolist. If the monopolist is unregulated, it will maximize profits by charging:
price P3 and producing output Q3.
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102. Refer to the above diagram for a pure monopolist. Suppose a regulatory commission is created to determine a legal price for the monopoly. If the commission seeks to provide the monopolist with a "fair return," it will set price at:
P1.
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103. Refer to the above diagram for a pure monopolist. If a regulatory commission seeks to achieve the socially optimal allocation of resources to this line of production, it will set a price of:
P2.
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104. Refer to the above diagram for a pure monopolist. If a regulatory commission sets the price to achieve the socially optimal allocation of resources, it will have to:
subsidize the monopolist or the monopolist will go bankrupt in the long run.
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105. A dilemma of regulation is that:
the regulated price that achieves allocative efficiency is also likely to result in losses.
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106. If a regulatory commission wants to provide a natural monopoly with a fair return, it should establish a price that is equal to:
average total cost.
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107. If a regulatory commission wants to establish a socially optimal price for a natural monopoly, it should select a price:
at which the marginal cost curve intersects the demand curve.
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108. Suppose for a regulated monopoly that price equals minimum ATC but price exceeds MC. This means that:
productive efficiency is being achieved, but not allocative efficiency.
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109. If a regulatory commission imposes upon a nondiscriminating natural monopoly a price that is equal to marginal cost and below average total cost at the resulting output, then:
the firm must be subsidized or it will go bankrupt.
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110. Refer to the above diagram for a natural monopolist. If a regulatory commission were to set a maximum price of P3, the monopolist would:
maximize profits
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111. Refer to the above diagram for a natural monopolist. If a regulatory commission set a maximum price of P2, the monopolist would: