ECON 300 EXAM 3 QUESTIONS WITH
COMPLETE SOLUTIONS
Which |of |the |following |is |the |best |measure |of |a |firm's |market |power? |- |CORRECT |
ANSWER✔✔-D. |the |firm's |ability |to |price |above |marginal |cost
A |monopolist's |supply |curve: |- |CORRECT |ANSWER✔✔-C. |does |not |exist
If |a |firm |has |market |power |and |marginal |cost |is |constant |relative |to |perfect |competition: |- |
CORRECT |ANSWER✔✔-C. |consumer |surplus |is |lower, |producer |surplus |is |higher, |and |total |
surplus |is |lower
In |order |to |maximize |profit, |a |monopolist: |- |CORRECT |ANSWER✔✔-B. |produces |the |quantity |
where |marginal |revenue |equals |marginal |cost
If |market |demand |is |perfectly |elastic, |then |a |monopolist: |- |CORRECT |ANSWER✔✔-D. |has |no |
market |power
If |the |market |demand |equation |is |Q |= |20 |- |2P, |the |monopolist's |marginal |revenue |equation |is:
|- |CORRECT |ANSWER✔✔-B. |MR |= |10 |- |Q
If |the |total |cost |function |of |a |monopolist |is |TC |= |200 |+ |20Q, |then |the |primary |barrier |to |entry |
that |supports |the |firm's |position |is |likely: |- |CORRECT |ANSWER✔✔-B. |natural |monopoly
If |the |government |imposed |a |direct |price |regulation |that |did |not |allow |a |natural |monopoly |
with |constant |marginal |cost |to |charge |a |price |higher |than |under |perfect |competition: |- |
CORRECT |ANSWER✔✔-A. |the |regulation |could |cause |the |firm |to |shut |down |production
, If |demand |becomes |more |price |elastic |but |the |quantity |demanded |at |the |current |price |does |
not |change: |- |CORRECT |ANSWER✔✔-A. |the |price |and |quantity |are |unchanged |in |perfect |
competition |but |different |if |the |firms |have |market |power.
If |market |demand |is |P |= |1,000 |- |5Q |and |a |monopolist |has |a |constant |marginal |cost |of |$200, |
then |the |deadweight |loss |resulting |from |monopoly |is: |- |CORRECT |ANSWER✔✔-A. |$16
If |demand |becomes |more |price |elastic |and |marginal |cost |is |constant, |the |gain |in |producer |
surplus |a |firm |receives |from |having |market |power: |- |CORRECT |ANSWER✔✔-B. |is |smaller
If |market |demand |is |perfectly |inelastic, |then |a |monopolist: |- |CORRECT |ANSWER✔✔-C. |has |the
|greatest |possible |amount |of |market |power
The |key |feature |of |monopoly |that |drives |the |differences |between |it |and |other |market |
structures |is |that: |- |CORRECT |ANSWER✔✔-C. |there |are |barriers |to |entry |into |the |market
A |monopolist's |percentage |markup |of |price |over |marginal |cost |is |higher |when: |- |CORRECT |
ANSWER✔✔-D. |market |demand |is |less |elastic
A |reduction |in |a |monopolist's |marginal |cost |will |cause |it |to: |- |CORRECT |ANSWER✔✔-C. |
decrease |price |and |increase |quantity
Sally |sells |seashells |by |the |seashore. |When |Sally |prices |her |shells |at |$7 |each, |she |sells |five. |
When |she |prices |her |shells |at |$6, |she |sells |six. |What |is |her |marginal |revenue |from |selling |a |
sixth |seashell? |- |CORRECT |ANSWER✔✔-A. |$1
GRAPH |- |Consider |this |graph |of |a |monopolist's |marginal |cost, |average |total |cost, |demand |and |
marginal |revenue |curves |in |this |situation, |the |price |the |monopolist |would |charge |is: |- |
CORRECT |ANSWER✔✔-C. |$70
COMPLETE SOLUTIONS
Which |of |the |following |is |the |best |measure |of |a |firm's |market |power? |- |CORRECT |
ANSWER✔✔-D. |the |firm's |ability |to |price |above |marginal |cost
A |monopolist's |supply |curve: |- |CORRECT |ANSWER✔✔-C. |does |not |exist
If |a |firm |has |market |power |and |marginal |cost |is |constant |relative |to |perfect |competition: |- |
CORRECT |ANSWER✔✔-C. |consumer |surplus |is |lower, |producer |surplus |is |higher, |and |total |
surplus |is |lower
In |order |to |maximize |profit, |a |monopolist: |- |CORRECT |ANSWER✔✔-B. |produces |the |quantity |
where |marginal |revenue |equals |marginal |cost
If |market |demand |is |perfectly |elastic, |then |a |monopolist: |- |CORRECT |ANSWER✔✔-D. |has |no |
market |power
If |the |market |demand |equation |is |Q |= |20 |- |2P, |the |monopolist's |marginal |revenue |equation |is:
|- |CORRECT |ANSWER✔✔-B. |MR |= |10 |- |Q
If |the |total |cost |function |of |a |monopolist |is |TC |= |200 |+ |20Q, |then |the |primary |barrier |to |entry |
that |supports |the |firm's |position |is |likely: |- |CORRECT |ANSWER✔✔-B. |natural |monopoly
If |the |government |imposed |a |direct |price |regulation |that |did |not |allow |a |natural |monopoly |
with |constant |marginal |cost |to |charge |a |price |higher |than |under |perfect |competition: |- |
CORRECT |ANSWER✔✔-A. |the |regulation |could |cause |the |firm |to |shut |down |production
, If |demand |becomes |more |price |elastic |but |the |quantity |demanded |at |the |current |price |does |
not |change: |- |CORRECT |ANSWER✔✔-A. |the |price |and |quantity |are |unchanged |in |perfect |
competition |but |different |if |the |firms |have |market |power.
If |market |demand |is |P |= |1,000 |- |5Q |and |a |monopolist |has |a |constant |marginal |cost |of |$200, |
then |the |deadweight |loss |resulting |from |monopoly |is: |- |CORRECT |ANSWER✔✔-A. |$16
If |demand |becomes |more |price |elastic |and |marginal |cost |is |constant, |the |gain |in |producer |
surplus |a |firm |receives |from |having |market |power: |- |CORRECT |ANSWER✔✔-B. |is |smaller
If |market |demand |is |perfectly |inelastic, |then |a |monopolist: |- |CORRECT |ANSWER✔✔-C. |has |the
|greatest |possible |amount |of |market |power
The |key |feature |of |monopoly |that |drives |the |differences |between |it |and |other |market |
structures |is |that: |- |CORRECT |ANSWER✔✔-C. |there |are |barriers |to |entry |into |the |market
A |monopolist's |percentage |markup |of |price |over |marginal |cost |is |higher |when: |- |CORRECT |
ANSWER✔✔-D. |market |demand |is |less |elastic
A |reduction |in |a |monopolist's |marginal |cost |will |cause |it |to: |- |CORRECT |ANSWER✔✔-C. |
decrease |price |and |increase |quantity
Sally |sells |seashells |by |the |seashore. |When |Sally |prices |her |shells |at |$7 |each, |she |sells |five. |
When |she |prices |her |shells |at |$6, |she |sells |six. |What |is |her |marginal |revenue |from |selling |a |
sixth |seashell? |- |CORRECT |ANSWER✔✔-A. |$1
GRAPH |- |Consider |this |graph |of |a |monopolist's |marginal |cost, |average |total |cost, |demand |and |
marginal |revenue |curves |in |this |situation, |the |price |the |monopolist |would |charge |is: |- |
CORRECT |ANSWER✔✔-C. |$70
