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Name: Class: Date:
Chapter 09: Monopoly

True / False
1. Anything that prevents new firms from competing on an equal basis with existing firms in an industry is called a barrier
to entry.
a. True
b. False
ANSWER: True
2. A natural monopoly emerges from legal restrictions imposed by a government.

a. True
b. False
ANSWER: False
3. DeBeers Consolidated Mines is a natural monopoly.

a. True
b. False
ANSWER: False
4. A profit-maximizing monopolist will always operate where demand is unit elastic.

a. True
b. False
ANSWER: False
5. Average revenue, demand, and price are all depicted by the same curve for a monopoly.
a. True
b. False
ANSWER: True
6. A monopolist's marginal revenue curve is flatter than its demand curve.

a. True
b. False
ANSWER: False
7. Monopolists always earn positive short-run economic profit.

a. True
b. False
ANSWER: False
8. A profit-maximizing monopoly will always produce at the minimum point of its average total cost (ATC) curve.
a. True
b. False
ANSWER: False
9. A monopolist maximizes profit at the output rate where its total revenue equals total cost.
a. True
Copyright Cengage Learning. Powered by Cognero. Page 1

Name: Class: Date:
b. False
ANSWER: False
10. A monopolist maximizes profit at the quantity where the slope of its total revenue curve equals the slope of its total
cost curve.
a. True
b. False
ANSWER: True
11. A monopolist that earns a profit in the short run will always earn a profit in the long run.
a. True
b. False
ANSWER: False
12. A monopolist that fails to recover a short-run loss in the long run generally leaves the market.
a. True
b. False
ANSWER: True
13. A monopolist's supply curve is the portion of its marginal cost curve that lies above its average variable cost curve.
a. True
b. False
ANSWER: False
14. Assuming a constant cost industry, consumer surplus would be greater under monopoly than if the industry were
perfectly competitive.
a. True
b. False
ANSWER: False
15. Monopolists can earn positive economic profits in the long run because they are more productively efficient than
perfectly competitive firms.
a. True
b. False
ANSWER: False
16. Total deadweight loss in society is reduced through rent seeking by monopolists.
a. True
b. False
ANSWER: False
17. Rent-seeking activities are socially wasteful because they use scarce resources but do not add to society's output.
a. True
b. False
ANSWER: True
Name: Class: Date:
18. Price discrimination will occur whenever a firm faces an upward-sloping demand curve.
a. True
b. False
ANSWER: False
19. Price-discriminating, profit-maximizing monopolists charge higher prices to buyers who have more elastic demand
curves.
a. True
b. False
ANSWER: False
Multiple Choice
20. Identify a distinguishing feature of monopoly.

a. There are no barriers to entry in a monopolized market.
b. A monopolist is a price taker.
c. There are no close substitutes for a monopolist's product.
d. There are many firms in a monopolized industry.
e. A monopolist faces a horizontal demand curve.
ANSWER: c
21. Which of these is likely to be true of perfect competition but not of monopoly?
a. A firm can produce a good only if government licenses authorize it to produce the good.
b. A firm can sell a good in the market only if the government grants a patent to the firm.
c. A firm can earn economic profit in the long run.
d. A firm can shut down in the short run only if the price charged by it exceeds the average variable cost of
production.
e. A firm can face competition from new entrants into the market in the long run.
ANSWER: e
22. Which of the following is true of a patent?

a. It reduces a firm's incentive to develop new products.
b. It is issued in recognition of new works of art or literature.
c. It gives a firm a permanent exclusive right to produce a new good.
d. It gives a firm a temporary exclusive right to produce a new good.
e. It guarantees economic profits to a firm in the long run.
ANSWER: d
23. Patents stimulate investment:

a. by giving inventors an incentive to incur up-front costs of developing new products.
b. by giving tax breaks to inventors and researchers.
c. by guaranteeing an economic profit to a firm from the sale of a new product.
d. by lowering interest rates on loans taken for developing a new product.

Name: Class: Date:
e. by covering the total cost of research and development incurred by a start-up firm.
ANSWER: a
24. Which of the following prevents potential competitors from entering a monopolized market?
a. Legal restrictions
b. Diseconomies of scale
c. Product differentiation
d. Stable market demand
e. An abundant supply of resources
ANSWER: a
25. Which of the following describes a monopolized market structure?

a. A market structure with a single buyer
b. Many firms with no control over price producing identical products with no differentiation
c. A few firms with some control over price producing similar products which are close substitutes
d. A few firms with no control over price producing highly differentiated products
e. A single firm producing a highly differentiated product and serving the entire market
ANSWER: e
26. A natural monopoly forms when:

a. small firms merge to form larger firms.
b. one firm has control over the entire supply of a basic input required to produce the product.
c. one firm's monopoly position is created and enforced by the government.
d. one firm receives patent protection for certain basic production processes.
e. the long-run average cost incurred by a firm declines as the firm expands output.
ANSWER: e
27. Which of the following is most likely to be considered a natural monopoly?

a. A municipal water company
b. The mobile telephone industry
c. The baby care product industry
d. The cotton textile industry
e. The automobile industry
ANSWER: a
28. A natural monopoly forms when a firm has:

a. a license.
b. a patent.
c. a U-shaped long-run average cost curve.
d. a downward-sloping long-run average cost curve.
e. a right to exclusively use a natural resource.
ANSWER: d
29. The demand curve a monopolist uses in making an output decision is:
Name: Class: Date:
a. the same as the demand curve facing a perfectly competitive firm.

b. positively sloped as it produces a highly differentiated product.
c. vertical as there are no close substitutes for its product.
d. the same as the market demand curve.
e. perfectly price inelastic.
ANSWER: d
30. A monopolist's demand curve is:

a. its marginal cost curve.
b. its marginal revenue curve.
c. identical to its market demand curve.
d. the same as the demand curve faced by a firm in perfect competition.
e. the same as its average cost curve.
ANSWER: c
31. Which of the following is true of marginal revenue earned by a non price-discriminating monopolist that charges a
single price?
a. Marginal revenue earned by a monopolist is equal to the average cost incurred by it.
b. Marginal revenue earned by a monopolist is more than the price of its product.
c. Marginal revenue earned by a monopolist is less than the price of its product.
d. Marginal revenue earned by a monopolist is equal to the average revenue earned by it.
e. Marginal revenue earned by a monopolist is equal to price of its product.
ANSWER: c
32. For a monopolist, average revenue is:

a. equal to marginal revenue at all output levels.
b. greater than price at all output levels.
c. less than price at all output levels.
d. represented by a horizontal curve at all output levels.
e. more than marginal revenue at all output levels.
ANSWER: e
33. According to the information provided in the table below, total revenue from selling 5 units is:
Table 9.1
Price ($) Quantity Demanded
50 2
40 3
30 4
20 5
10 6
a. $20.
b. $140.
c. $100.

Name: Class: Date:
d. $10.
e. $5.
ANSWER: c
34. According to the information provided in the table below, marginal revenue from the third unit of output is:
Table 9.1

50 2
40 3
30 4
20 5
10 6
a. $20.
b. $120.
c. $100.
d. $40.
e. $0.
ANSWER: a
35. According to the information provided in the table below, marginal revenue from the sixth unit of output is:
Table 9.1
50 2
40 3
30 4
20 5
10
a. $10.
b. $60.
c. $100.
d. $40.
e. ‒$40.
ANSWER: e
36. Based on the information given in the table below, identify the range of output for which demand is unit elastic.
Table 9.2
Quantity Price ($)
0 7
1 6
2 5
3 4
4 3
5 2
Name: Class: Date:

6 1
a. 1 unit to 2 units
b. 2 units to 3 units
c. 3units to 4 units
d. 4 units to 5 units
e. 5 units to 6 units
ANSWER: a
37. $0.Given the information in the table below, the average revenue earned by the firm from four units of output is:
Table 9.2
Quantity Price ($)
0 7
1 6
2 5
3 4
4 3
5 2
6 1
a. $12.
b. $3.
c. $4.
d. −$4.
e. $0.
ANSWER: b
38. Given the information in the table below, marginal revenue from the fourth unit of output is:
Table 9.2
Quantity Price ($)
0 7
1 6
2 5
3 4
4 3
5 2
6 1
a. $12.
b. $3.
c. $4.
d. −$4.
e. $0.
ANSWER: e
39. The table below shows the demand schedule for a monopolist. Marginal revenue associated with the sale of the fourth
unit of output is _____.
Name: Class: Date:
Table 9.3
Price ($) Quantity
90 1
80 2
70 3
60 4
50 5
a. $10
b. $30
c. $60
d. $240
e. $210
ANSWER: b
40. As a monopolist increases the quantity of output produced, _____.

a. both price and marginal revenue remain constant
b. price remains constant, but marginal revenue decreases
c. price decreases, but marginal revenue remains constant
d. both price and marginal revenue decrease, but price falls faster than marginal revenue
e. both price and marginal revenue decrease, but marginal revenue falls faster than price
ANSWER: e
41. The demand curve facing a non-discriminating monopolist:

a. is the same as its average revenue curve.
b. is perfectly price elastic.
c. is perfectly price inelastic.
d. lies above its average revenue curve.
e. lies below its marginal revenue curve.
ANSWER: a
42. A monopolist can either sell 100 units for $3 each or sell 160 units for $2 each. This implies that, for the given range
of output, elasticity of demand for the monopolist’s product is:
a. greater than one but not infinite.
b. one.
c. zero.
d. less than zero.
e. infinite.
ANSWER: a
43. Suppose a monopolist must choose between two points on its demand curve. It can either sell 100 units for $3 each or
sell 140 units for $2 each. Which of the following is true?
a. The demand for the monopolist’s product is price elastic for the given range of output.
b. The demand for the monopolist’s product is unit elastic for the given range of output.
c. The demand for the monopolist’s product is price inelastic for the given range of output.
Name: Class: Date:
d. The monopolist is facing a horizontal supply curve.

e. The monopolist is facing an upward-rising demand curve.
ANSWER: c
44. A monopolist must choose between two points on its demand curve. It can either sell 100 units for $3 each, or sell 150
units for $2 each. This implies that, for the given range of output, elasticity of demand for the monopolist’s product is:
a. zero.
b. one.
c. more than one but less than two.
d. infinite.
e. between zero and one.
ANSWER: b
45. Suppose the marginal revenue for a particular level of a monopolist’s output is $40. This implies that:
a. total revenue is increasing for this output range.
b. total revenue is decreasing, but positive, for this output range.
c. total revenue is zero for this output range.
d. total revenue remains constant for this output range.
e. total revenue is negative for this output range.
ANSWER: a
46. Which of the following is true for a monopolist?

a. Marginal revenue is maximized where demand is unit elastic.
b. Total revenue is maximized where demand is inelastic.
c. Marginal revenue is negative where demand is inelastic.
d. Total revenue is negative where demand is elastic.
e. Marginal revenue is lowest where demand is unit elastic.
ANSWER: c
47. A firm facing a downward-sloping demand curve sells 50 units of output at $10 each. The firm's average revenue is:
a. $500.
b. more than $10 but less than $500.
c. $10.
d. less than $10 but more than zero.
e. zero.
ANSWER: c
48. A firm facing a downward-sloping demand curve sells 50 units of output at $10 each. Which of the following can be
concluded about the firm's marginal revenue for this output level?
a. Marginal revenue is equal to $500.
b. Marginal revenue is more than $10.
c. Marginal revenue is equal to $10.
d. Marginal revenue is less than $10 but more than zero.
e. Marginal revenue is zero.
Name: Class: Date:
ANSWER: d
49. Which of the following can be concluded about a monopolist whose marginal revenue is zero for a particular output
level?
a. The economic profit earned by the monopolist by producing that output level is zero.
b. Total revenue earned by the monopolist is maximum at that output level.
c. Total revenue earned by the monopolist increases at an increasing rate as output increases beyond that output
level.
d. Total revenue earned by the monopolist increases at a decreasing rate as output increases beyond that output
level.
e. Average revenue earned by the firm for that output level is less than marginal revenue for that output level.
ANSWER: b
50. For a monopolist producing a level of output at which market demand is inelastic, _____.
a. short-run profit is maximum.
b. a decrease in price increases total revenue.
c. a decrease in price decreases total cost.
d. a decrease in price decreases total revenue.
e. an increase in output increases short-run economic profit.
ANSWER: d
51. Which of the following equations describes the relationship between market price (P), average revenue (AR), and
marginal revenue (MR) for a non-discriminating monopolist?
a. P = AR = MR
b. P > AR = MR
c. P = AR > MR
d. P > AR > MR
e. P = AR < MR
ANSWER: c
52. Suppose a single firm supplies all the ceramic windlasses in the U.S. The demand curve that the firm faces is:
a. elastic everywhere.
b. unit elastic everywhere.
c. inelastic only at the profit-maximizing output.
d. perfectly inelastic everywhere.
e. elastic only at the profit-maximizing output.
ANSWER: e
53. The figure below shows the cost and revenue curves faced by a monopolist. The demand curve faced by the
monopolist at the profit-maximizing output is:
Figure 9.1

Name: Class: Date:
a. perfectly price elastic.

b. price elastic.
c. price inelastic.
d. unit price elastic.
e. perfectly price inelastic.
ANSWER: b
54. The figure below shows the cost and revenue curves faced by a monopolist. At the profit-maximizing output level for
the monopolist, _____.
Figure 9.1

Name: Class: Date:
a. marginal revenue is zero

b. marginal revenue is equal to marginal cost
c. marginal cost is less than marginal revenue
d. marginal cost is equal to average total cost
e. price is equal to marginal cost
ANSWER: b
55. The figure below shows the cost and revenue curves faced by a monopolist. The profit-maximizing output and price
for the monopolist are:
Figure 9.1

Name: Class: Date:
a. 117 units and $14, respectively.

b. 150 units and $22, respectively.
c. 150 units and $14, respectively.
d. 117 units and $22, respectively.
e. 117 units and $24, respectively.
ANSWER: e
56. Given the figure below, a non-discriminating, profit-maximizing monopolist will earn a profit of _____ per unit of
output.
Figure 9.1

Name: Class: Date:
a. $10
b. $5
c. $4
d. $0
e. $15
ANSWER: c
57. The figure below shows a non-discriminating monopolist. The total revenue earned by the monopolist at the profit-
maximizing output is _____.
Figure 9.1

Name: Class: Date:
a. $2,574
b. $2,808
c. $2,100
d. $1,638
e. $3,300
ANSWER: b
58. The figure below shows the cost and revenue curves for a non-discriminating monopolist. The total cost incurred by
the monopolist at the profit-maximizing output is _____.
Figure 9.1

Name: Class: Date:
a. $3,300
b. $3,400
c. $2,808
d. $2,340
e. $1,638
ANSWER: d
59. The revenue-maximizing output for a non-discriminating monopolist represented in the table given below is _____.
Table 9.4
Quantity Price ($) Total cost ($)
0 10 10
1 9 12
2 8 19
3 7 23
4 6 31
5 5 46
6 4 69
7 3 99
a. 0 units
b. 2 units

Name: Class: Date:
c. 3 units
d. 4 units
e. 5 units
ANSWER: e
60. The loss-minimizing output for a non-discriminating monopolist represented on the table given below is _____.
Table 9.4
Quantity Price ($) Total cost ($)
0 10 10
1 9 12
2 8 19
3 7 23
4 6 31
5 5 46
6 4 69
7 3 99
a. 0 units
b. 2 units
c. 3 units
d. 4 units
e. 5 units
ANSWER: c
61. A profit-maximizing monopolist supplies the quantity at which:

a. average revenue exceeds average cost by the greatest amount.
b. marginal revenue exceeds marginal cost by the smallest amount.
c. marginal revenue exceeds marginal cost by the greatest amount.
d. total revenue exceeds total cost by the greatest amount.
e. total revenue exceeds total cost by the smallest amount.
ANSWER: d
62. A non-price discriminating monopolist's demand curve:

a. is horizontal at the market price.
b. lies to the right of 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.
ANSWER: b
63. A profit-maximizing monopolist never produces along the:

a. elastic portion of the demand curve because marginal revenue is positive there.
b. elastic portion of the demand curve because marginal revenue is negative there.
c. inelastic portion of the demand curve because marginal revenue is negative there.

Name: Class: Date:
d. inelastic portion of the demand curve because marginal revenue is positive there.
e. inelastic portion of the demand curve because marginal revenue is zero there.
ANSWER: c
64. Which of the following does a monopoly control that a perfectly competitive firm does not control?
a. Total production
b. Production technology
c. Price
d. Input usage
e. Plant size
ANSWER: c
65. Which of the following conditions is true at the profit-maximizing output for both a perfectly competitive firm and a
monopoly?
a. Price equals marginal cost
b. Price is greater than marginal cost
c. Marginal revenue equals marginal cost
d. Marginal revenue is less than marginal cost
e. Marginal revenue is greater than average revenue
ANSWER: c
66. Which of the following is true of a monopolist in the short run?

a. It can charge whatever price it wants.
b. It charges more than what consumers are willing to pay.
c. It is constrained by marginal cost in setting price.
d. It is constrained by consumer demand in setting price.
e. It always earns an economic profit.
ANSWER: d
67. The figure below shows the cost and revenue curves for a non-discriminating monopolist. The profit-maximizing
output and price for a monopolist are:
Figure 9.2

Name: Class: Date:
a. 90 units and $18, respectively.

b. 1,500 units and $24, respectively.
c. 1,700 units and $22, respectively.
d. 1,100 units and $28, respectively.
e. 1,500 units and $22, respectively.
ANSWER: d
68. The figure below shows the cost and revenue curves for a non-discriminating monopolist. The total revenue earned by
the profit-maximizing monopolist at the profit-maximizing output is:
Figure 9.2
a. $16,200.
b. $36,000.
c. $39,600.
d. $30,800.
e. $31,000.
ANSWER: d
69. The figure below shows the cost and revenue curves for a non-discriminating monopolist. The total cost incurred by
the monopolist for producing the profit-maximizing output is:
Name: Class: Date:

Figure 9.2
a. $16,500.
b. $24,200.
c. $16,200.
d. $19,800.
e. $30,800.
ANSWER: d
70. The figure below shows the cost and revenue curves for a non price-discriminating monopolist. At the profit-
maximizing output, the non price-discriminating monopolist is earning a profit of _____.
Figure 9.2
a. $6,200
b. $13,320
c. $11,000
d. $15,200
e. $0
ANSWER: c
71. A non-discriminating monopolist observes that marginal revenue is $23 and marginal cost is $30 at its present output
Name: Class: Date:

level. In order to maximize profit it should:
a. raise price and lower output.
b. lower both price and output.
c. raise both price and output.
d. lower price and raise output.
e. lower output but leave price unchanged.
ANSWER: a
72. For a monopolist that does not price discriminate, economic profit is maximized in the short run at a price of $140.
Marginal revenue at that output level is:
a. equal to $140.
b. greater than $140.
c. less than $140.
d. less than marginal cost.
e. greater than average revenue.
ANSWER: c
73. The table below shows the demand schedule faced by a monopolist and the total cost incurred by it in producing each
output level. The profit-maximizing price for the monopolist is _____.
Table 9.5
Price ($) Quantity Total cost ($)

16 0 5.00
15 1 7.00
14 2 8.80
13 3 10.40
12 4 12.20
11 5 14.20
10 6 16.40
9 7 18.80
8 8 21.40
7 9 24.20
a. $14
b. $11
c. $10
d. $9
e. $8
ANSWER: d
74. The table below shows the demand schedule faced by a monopolist and the total cost incurred by it in producing each
output level. The maximum profit earned by the monopolist is _____.
Table 9.5
Price ($) Quantity Total cost ($)

16 0 5.00
Name: Class: Date:

15 1 7.00
14 2 8.80
13 3 10.40
12 4 12.20
11 5 14.20
10 6 16.40
9 7 18.80
8 8 21.40
7 9 24.20
a. $5
b. $40.80
c. $43.60
d. $44.20
e. $42.60
ANSWER: d
75. Irving R. Associates is granted a patent for a new product for which there are no close substitutes. Which of the
following conditions must be true at the profit-maximizing output produced by this firm?
a. Price is equal to marginal cost.
b. Average cost is less than marginal cost.
c. Marginal revenue is equal to marginal cost.
d. Marginal revenue is less than average variable cost.
e. Price is greater than average revenue.
ANSWER: c
76. The profit-maximizing quantity for a monopolist that faces an upward-sloping marginal cost curve will:
a. occur at the minimum point of the marginal cost curve.
b. be less than the revenue-maximizing quantity.
c. be equal to the revenue-maximizing quantity.
d. occur along the unit elastic segment of the demand curve.
e. occur along the inelastic segment of the demand curve.
ANSWER: b
77. A monopolist is said to have market power because:

a. it faces an upward-sloping marginal cost curve.
b. it faces a downward-sloping demand curve.
c. it always earns positive profit both in the short run and the long run.
d. it charges a fixed price for its products.
e. it faces a high marginal cost of production.
ANSWER: b
78. The table below shows the price and output combinations at different output levels for a non price-discriminating
monopolist. The profit-maximizing output for this monopolist is _____.
Table 9.6
Name: Class: Date:
Quantity Price ($) Total Cost ($)

1 36 20
2 32 32
3 28 50
4 24 80
5 20 120
a. 1 unit
b. 2 units
c. 3 units
d. 4 units
e. 5 units
ANSWER: c
monopolist. The profit-maximizing price charged by this monopolist is _____.
Table 9.6

1 36 20
2 32 32
3 28 50
4 24 80
5 20 120
a. $36
b. $32
c. $28
d. $24
e. $20
ANSWER: c
monopolist. The total profit earned by this monopolist at the profit-maximizing output is _____.
Table 9.6

1 36 20
2 32 32
3 28 50
4 24 80
5 20 120
a. $16
b. −$20
c. $32
d. $34

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e. -$16
ANSWER: d
81. The figure below shows the total cost and total revenue curves for a monopolist. The profit-maximizing output for the
monopolist is:
Figure 9.3
a. 1 unit
b. 2 units
c. 3 units
d. 4 units
e. 5 units
ANSWER: c
82. The figure below shows the total cost and total revenue curves for a monopolist. The profit-maximizing price charged
by the monopolist is:
Figure 9.3

Name: Class: Date:
a. $70.
b. $80.
c. $23.33.
d. $20.
e. $40.
ANSWER: c
83. The figure below shows the total cost and total revenue curves for a monopolist. The total profit earned by the
monopolist at the profit-maximizing output is _____.
Figure 9.3

Name: Class: Date:
a. $20
b. $30
c. $0
d. $70
e. $40
ANSWER: b
84. Which of the following is true of the profit earned by a monopolist?

a. Profit is maximized where marginal cost equals marginal revenue.
b. Normal profit is ensured where price is equal to average total cost.
c. Normal profit is ensured where marginal cost exceeds average revenue.
d. Profit is maximized along the inelastic portion of the demand curve.
e. Economic profit is made where average variable cost equals marginal revenue.
ANSWER: b
85. The figure below shows the cost and revenue curves for a monopolist. Assume that the monopolist does not shut down
production in the short run. The profit-maximizing price and output for this non-price discriminating monopolist are:
Figure 9.4

Name: Class: Date:
a. $4 and 7 units, respectively.

b. $3.50 and 10 units, respectively.
c. $2 and 7 units, respectively.
d. $1 and 7 units, respectively.
e. $1 and 10 units, respectively.
ANSWER: a
86. The figure below shows the cost and revenue curves for a monopolist. Assume that the marginal cost of production is
equal to the average total cost at the profit maximizing output level. The maximum profit for this monopolist if he does
not practice price discrimination is _____.
Figure 9.4
a. $4
b. $14
c. $3.50
d. $21
e. $4
ANSWER: b
87. The figure below shows the cost and revenue curves for a monopolist. The maximum profit earned by the non-
discriminating monopolist is _____.
Figure 9.5

Name: Class: Date:
a. $14
b. −$8
c. $0
d. $46.62
e. $54
ANSWER: a
88. The figure below shows the cost and revenue curves for a monopolist. The profit-maximizing output for this non-
discriminating monopolist is:
Figure 9.5
a. 0.
b. 7 units.
c. 10 units.
d. more than 10 units.
e. less than 7 units but more than 0.
ANSWER: b
89. The figure below shows the cost and revenue curves for a monopolist. The profit-maximizing price for a non-
Figure 9.5
Name: Class: Date:
a. 0.
b. $2.
c. $4.60.
d. $6.66.
e. $8.66.
ANSWER: e
90. A profit-maximizing monopolist that produces in the short run will:

a. choose the output level where marginal revenue exceeds marginal cost by the largest amount.
b. increase output as long as the marginal revenue exceeds the marginal cost of producing that unit.
c. choose the output level where average total cost is at its minimum.
d. increase price as long as average revenue exceeds average total cost.
e. choose the output level where average revenue exceeds average total cost by the largest amount.
ANSWER: b
91. If the marginal cost of production for a profit-maximizing monopolist increases suddenly in the short run, it will:
a. lower price to expand revenue possibilities.
b. restrict output to extract a higher price from customers.
c. continue to charge the same price.
d. increase plant size to lower marginal cost.
e. decrease plant size to lower marginal cost.
ANSWER: b
92. Suppose a restaurant has a monopoly in a certain small town. Its rent, which is one of the several fixed costs it incurs
whether it sells food or not, has gone up. In the short run, the restaurant should:
a. pay the higher rent and increase menu prices.
b. pay the higher rent and leave menu prices unchanged.
c. pay the higher rent and lower menu prices.
d. open another restaurant in the same town.
e. shut down.
ANSWER: b
93. Gilligan runs the only dry-cleaning business on a desert isle. If the cost of cleaning fluid falls, he can increase profit
Name: Class: Date:

by:
a. accepting less dry-clean orders.
b. charging the highest price he can.
c. using less cleaning fluid.
d. lowering price.
e. charging a price that is equal to marginal cost.
ANSWER: d
94. The figure below shows the cost and revenue curves for a monopolist. The output level that maximizes profit for the
non-price discriminating monopolist is _____.
Figure 9.6
a. 700 units
b. 810 units
c. 884 units
d. 976 units
e. 1,000 units
ANSWER: a
95. The figure below shows the cost and revenue curves for a monopolist. The profit-maximizing price for the non-
discriminating monopolist is _____.
Figure 9.6

Name: Class: Date:
a. $60
b. $76
c. $110
d. $120
e. $136
ANSWER: e
96. The figure below shows the cost and revenue curves for a monopolist. Total revenue earned by the monopolist by
producing the profit-maximizing output is:
Figure 9.6
a. $95,200.
b. $84,000.
c. $79,000.
d. $52,000.
e. $42,000.
Name: Class: Date:
ANSWER: a
97. The figure below shows the cost and revenue curves for a monopolist. The total cost of producing the profit-
maximizing output for the monopolist is _____.
Figure 9.6
a. $95,200
b. $84,000
c. $77,000
d. $53,200
e. $42,000
ANSWER: c
98. The figure below shows the cost and revenue curves for a monopolist. The maximum profit earned by the non-
Figure 9.6

Name: Class: Date:
a. $95,200.
b. $84,000.
c. $53,200.
d. $42,000.
e. $18,200.
ANSWER: e
99. The figure below shows the cost and revenue curves for a monopolist. If the monopolist does not price discriminate
among its customers, the total amount consumers will spend on its profit-maximizing output is _____.
Figure 9.6
a. $95,200
b. $84,000
c. $79,000
d. $53,200
e. $42,000
Name: Class: Date:
ANSWER: a
100. The figure below shows the cost and revenue curves for a monopolist. If the monopolist chooses to produce 1,000
units and does not discriminate among its customers, its total profit will be _____.
Figure 9.6
a. $0
b. $104,000
c. $212,000
d. maximized
e. negative
ANSWER: a
101. Suppose the marginal cost for the 1,000th unit of a monopolist’s output is $40, marginal revenue is $30, the average
variable cost of producing 1,000 units is $30, and the average total cost is $50. In order to maximize profit or minimize
loss in the short run, the firm should:
a. shut down.
b. continue to produce 1,000 units.
c. produce fewer than 1,000 units but still operate.
d. produce more than 1,000 units.
e. increase its plant size to gain economies of scale.
ANSWER: c
102. A monopolist is likely to overcome a short-run economic loss in the long run by:
a. allowing other firms to enter the market.
b. employing lesser number of inputs.
c. increasing the price of its output.
d. advertising for its product.
e. reducing its total output.
ANSWER: d
Name: Class: Date:
103. McDonald’s makes its unique McRib sandwich "available for a limited time only," usually in the fall. Such a strategy
is likely to:
a. increase its marginal value to the consumer.
b. decrease its average cost of production.
c. restrict the entry of competitors in the long run.
d. decrease its demand.
e. result in a short-run economic loss.
ANSWER: a
104. If the marginal cost curve shifts upward, a profit-maximizing monopolist that does not practice price discrimination
is likely to respond in the short run by:
a. raising price and increasing output.
b. raising price and decreasing output.
c. keeping price constant and increasing output.
d. reducing price and increasing output.
e. shutting down.
ANSWER: b
105. The figure below shows the cost and revenue curves for a monopolist. The profit-maximizing level of output and
price for the monopolist are:
Figure 9.7
a. f units and $a.

b. g units and $c.
c. f units and $b.
d. f units and $d.
e. f units and $e.
ANSWER: d
106. The figure below shows the cost and revenue curves for a monopolist. Total revenue earned by the monopolist for
the profit-maximizing output is:
Figure 9.7
Name: Class: Date:
a. e × f
b. d × f
c. c × g
d. a × f
e. b × g
ANSWER: b
107. If a monopolist that does not practice price discrimination is operating at an output level where price equals average
total cost, we can conclude that:
a. its economic profit is $0.
b. it is not maximizing profit.
c. it should go out of business in the long run.
d. it is not earning a normal profit.
e. it should shut down in the short run.
ANSWER: a
108. In the short run, a monopolist will always shut down when:
a. total cost is greater than total revenue at all output levels.
b. total variable cost is greater than fixed cost.
c. total revenue is greater than total variable cost at all output levels.
d. total revenue is greater than fixed cost at all output levels.
e. total variable cost is greater than total revenue at all output levels.
ANSWER: e
109. The supply curve for a monopolist:

a. is its marginal cost curve.
b. is vertical because there are no close substitutes for its product.
c. is horizontal because there are no close substitutes for its product.
d. slopes upward.
e. does not exist.
ANSWER: e

Name: Class: Date:

110. Which of the following factors explain the difference in long-run profits earned by a monopolist and a perfectly
competitive firm?
a. Monopolists experience economies of scale.
b. Perfectly competitive firms have high opportunity costs.
c. The demand for the monopolist's output is inelastic.
d. The demand for the monopolist's output is elastic.
e. There are no barriers to entry in perfect competition.
ANSWER: e
111. Which of the following is most likely to be true of a monopoly in long-run equilibrium if it enjoys a patent and earns
economic profit in the short run?
a. It will earn only a normal profit in the long run.
b. It will suffer an economic loss and stop producing in the long run.
c. It will earn a positive economic profit in the long run.
d. It will achieve productive efficiency in the long run.
e. It will achieve allocative efficiency in the long run.
ANSWER: c
112. Barriers to entry:

a. cause monopolies to experience diseconomies of scale in the long run.
b. prevent monopolies from earning profit in the short run.
c. may allow monopolies to earn profit in the long run.
d. prevent government from regulating a monopoly.
e. prevent a natural monopoly from raising its price.
ANSWER: c
113. The figure below shows the cost and revenue curves for a monopolist that does not practice price discrimination. The
consumer surplus at the profit-maximizing level of output is:
Figure 9.6

Name: Class: Date:
a. represented by the area under the demand curve and above the price line corresponding to $136.
b. represented by the area under the demand curve and above the line corresponding to an average total cost of
$110.
c. represented by the area under the marginal revenue curve and the line corresponding to a marginal revenue of
$60.
d. $0.
e. equal to total consumer expenditure.
ANSWER: a
114. The figure below shows the cost and revenue curves for a monopolist. The output level that is most likely to achieve
allocative efficiency in this market is _____.
Figure 9.6
a. 700 units
b. 810 units
c. 884 units
d. 976 units
e. 1,000 units
ANSWER: c
115. Which of the following is true for both perfect competition and monopoly?
a. Firms produce a differentiated product.
b. Firms cannot earn economic profit in the long run.
c. Individual firms have no ability to control the price of their output but must accept the market price.
d. Firms go out of business in the long run if total revenue cannot cover total cost.
e. Firms usually earn economic profit in the long run.
ANSWER: d
116. Unlike perfectly competitive firms, monopolists:

a. earn positive short-run economic profit even if price is less than average variable cost at all rates of output.
Name: Class: Date:
b. sell any quantity of output at any price they choose.

c. earn long-run economic profits.
d. reduce the sales of firms in other industries through advertising.
e. face a perfectly elastic demand curve.
ANSWER: c
117. Which of the following is true when a perfectly competitive firm is in short-run equilibrium but not when a non-
discriminating monopolist is in equilibrium?
a. Price equals marginal cost.
b. Price is greater than marginal cost.
c. Marginal revenue equals marginal cost.
d. Marginal revenue is less than marginal cost.
e. Marginal revenue is greater than average revenue.
ANSWER: a
118. Which of these is a key difference between a perfectly competitive firm and a monopolist that does not practice price
discrimination?
a. The marginal cost curve is U-shaped for a perfectly competitive firm but not for a monopolist.
b. Price is equal to average revenue for a perfectly competitive firm in equilibrium but not for a monopolist.
c. Price is equal to marginal revenue for a perfectly competitive firm in equilibrium but not for a monopolist.
d. The average revenue curve is the demand curve for a perfectly competitive firm but not for a monopolist.
e. A monopolist aims to maximize profits, while a perfectly competitive firm tries to maximize total revenue.
ANSWER: c
119. When compared to firms in perfect competition, monopolists tend to charge:

a. lower prices and offer lower quantities of output.
b. higher prices and offer lower quantities of output.
c. lower prices and offer higher quantities of output.
d. higher prices and offer higher quantities of output.
e. higher prices but offer the same quantity of output.
ANSWER: b
120. Which of the following would distinguish a competitive firm from a monopolist?
a. The slope of the marginal cost curve faced by the firm
b. The slope of the demand curve faced by the firm
c. The rule of profit maximization followed by the firm
d. The relationship between the firm’s marginal revenue and total revenue
e. The existence of diseconomies of scale in production
ANSWER: b
121. If the government breaks up a monopoly that does not practice discrimination and faces a horizontal marginal cost
curve into a perfectly competitive market, _____.
a. output and price will decrease
b. output will increase and price will decrease
Name: Class: Date:
c. output and price will increase

d. output will decrease and price will increase
e. output and price will remain unchanged
ANSWER: b
122. The figure given below depicts a monopoly market in the absence of price discrimination. Consumer surplus in this
market is represented by the area:
Figure 9.8
a. eda.
b. ecf.
c. dacb.
d. dafc.
e. abf.
ANSWER: a
123. The figure below shows the cost and revenue curves for a monopolist. The deadweight loss arising under the
monopoly is represented by the area:
Figure 9.8
a. ecf.
b. eda.
c. dabc.
Name: Class: Date:
d. dafc.
e. abf.
ANSWER: e
124. Which of these is a similarity between a monopolist that does not practice price discrimination and a perfectly
competitive firm?
a. The firms face the same amount of competition from new entrants into the market.
b. The firms have an equal number of rivals.
c. The firms face perfectly price elastic demand curves.
d. Price equals marginal revenue at all output rates for both types of firms.
e. Price equals average revenue at all output rates for both types of firms.
ANSWER: e
125. Perfectly competitive firms and monopolistic firms determine their respective profit-maximizing output levels where:
a. price equals marginal cost.
b. total revenue is maximized.
c. average total cost is minimized.
d. marginal cost equals marginal revenue.
e. price is at the maximum possible level.
ANSWER: d
126. Empirical estimates indicate that the annual deadweight loss of monopoly in the United States:
a. ranges from about 1 percent to 5 percent of national income.
b. ranges from about 10 percent to 20 percent of national income.
c. is approximately 10 percent of national income.
d. is approximately $1 billion.
e. is approximately $1 trillion.
ANSWER: a
127. The figure given below depicts the cost and revenue curves facing a profit-maximizing monopolist that does not
discriminate among its customers. Given the figure, which of the following is true?
Figure 9.9

Name: Class: Date:
a. An output of 50 units is allocatively efficient, but the monopolist is likely to produce 100 units.
b. An output of 50 units is allocatively efficient, but the monopolist is likely to produce 75 units.
c. An output of 75 units is allocatively efficient, but the monopolist is likely to produce 100 units.
d. An output of 100 units is allocatively efficient, but the monopolist is likely to produce 50 units.
e. An output of 100 units is allocatively efficient, but the monopolist is likely to produce 75 units.
ANSWER: d
128. The figure given below depicts the cost and demand conditions facing a profit-maximizing monopolist that does not
discriminate among its customers. The deadweight loss of monopoly equals _____.
Figure 9.9
a. $5
b. $250
c. $125
d. $500
e. $10
ANSWER: c
129. The figure below shows the cost and revenue curves faced by a profit-maximizing monopolist. Which of the
following areas shown in the figure given below represents consumer surplus under monopoly?
Figure 9.10
a. Area a
Name: Class: Date:
b. Area b
c. Area c
d. Area f
e. Area e
ANSWER: a
130. The figure below shows the cost and revenue curves faced by a profit-maximizing monopolist. _____ on the figure
represents the deadweight loss of monopoly.
Figure 9.10
a. Area a
b. Area b
c. Area c
d. Area f
e. Area e
ANSWER: e
131. If a perfectly competitive industry is monopolized, consumer surplus:

a. can be expected to decrease.
b. usually remains constant.
c. becomes equal to producer surplus.
d. becomes double of producer surplus.
e. increases from zero to a high value.
ANSWER: a
132. The true deadweight loss created by a monopolist that does not practice discrimination is most likely to be less than
the loss indicated by the shaded area in the figure below, when:
Figure 9.11

Name: Class: Date:
a. the monopolist experiences diseconomies of scale.

b. the monopolist charges lower prices to discourage competition.
c. the monopolist engages in rent seeking.
d. the monopolist advertises more to maintain its position.
e. the monopolist faces diminishing marginal returns.
ANSWER: b
133. The actual deadweight loss from monopoly in the United States is likely to be greater than the calculated estimates
because some:
a. monopolies experience strong economies of scale.
b. monopolists spend resources to secure and maintain their monopoly.
c. monopolists often keep price lower than their profit-maximizing level in order to increase barriers to entry.
d. monopolists' markets are contestable.
e. monopolists' prices and profits are regulated by the government.
ANSWER: b
134. The figure below shows the cost and revenue curves faced by a profit-maximizing monopolist. If the monopolist
engages in perfect price discrimination, its profit-maximizing output will be _____.
Figure 9.6

Name: Class: Date:
a. 700 units
b. 810 units
c. 884 units
d. 976 units
e. 1,000 units
ANSWER: c
engages in perfect price discrimination, the price of the monopolist’s good will be:
Figure 9.6
a. $120 for the 884th unit.

b. $212 for the 884th unit.
c. $120 for all units.
d. $136 for all units.
e. $104 for all units.
Name: Class: Date:
ANSWER: a
engages in perfect price discrimination, the price of the monopolist’s good will:
Figure 9.6
a. vary between $212 and $120.

b. vary between $212 and $104.
c. be $136 for all units.
d. be $110 for all units.
e. be $104 for all units.
ANSWER: a
137. Which of the following is true for a monopolist that engages in perfect price discrimination?
a. Perfect price discrimination restricts the total output produced by the monopolist.
b. Perfect price discrimination allows the monopolist to just break even and transfers the gain to consumers.
c. Perfect price discrimination results in the maximization of consumer surplus.
d. Perfect price discrimination creates a deadweight loss.
e. Perfect price discrimination allows the monopolist to reap the entire gains from production.
ANSWER: e
138. The practice of charging different prices to different consumers for the same product is called:
a. arbitration.
b. unit pricing.
c. price discrimination.
d. predatory pricing.
e. marginal cost pricing.
ANSWER: c
139. A monopolist practices price discrimination by:

Name: Class: Date:
a. charging different buyers different prices for different products.

b. charging different buyers different prices for the same product.
c. selling at a price below average total cost.
d. selling at a price below marginal cost.
e. selling at a price above marginal revenue.
ANSWER: b
140. A major fruit juice manufacturer fails in its attempt to engage in price discrimination between students and all other
consumers of fruit juice. Which of the following explanations is most likely to account for this failure?
a. The students resold the juice to other consumers.
b. The market for fruit juice was monopolistically competitive.
c. The price elasticity of demand for fruit juice was different for each group.
d. The cost of producing the fruit juice was extremely high.
e. The students preferred to purchase juice from other small juice manufacturers.
ANSWER: a
141. For which of the following products would price discrimination be easiest?
a. Orange juice
b. Diamonds
c. Compact disks
d. Haircuts
e. Gasoline
ANSWER: d
142. Which of the following is not a condition for price discrimination?

a. A downward-sloping demand curve for products
b. The presence of strong diseconomies of scale
c. The presence of different groups of buyers with different price elasticity of demand
d. The absence of a scope for reselling a product
e. The presence of some amount of market power with a producer
ANSWER: b
143. A price-discriminating monopolist divides its customers into two segments based on price elasticity of demand. If it
sells its product for a price of $42 in the market segment where demand is relatively less price elastic, the price in the
market segment where demand is more price elastic will be:
a. $42.
b. greater than $42.
c. less than $42.
d. less than the marginal revenue in that market segment.
e. equal to the marginal revenue in that market segment.
ANSWER: c
144. When a price-discriminating monopolist divides its customers into two market segments, the price in each segment is
determined by finding the level of output where that market's:
Name: Class: Date:
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.
ANSWER: d
145. A monopolist that engages in perfect price discrimination:

a. divides all buyers into two mutually exclusive groups.
b. refuses to sell its output to consumers of rival brands.
c. charges the same price for every unit sold.
d. charges a different price for every unit sold.
e. charges a high price to bulk consumers of its product.
ANSWER: d
146. Which of the following is observed when perfect price discrimination is practiced by a monopolist?
a. Profit is lower than it would be without discrimination.
b. Total revenue is lower than it would be without discrimination.
c. Average revenue is less than average cost.
d. Consumer surplus is zero.
e. Profit is zero.
ANSWER: d
147. When a monopolist practices perfect price discrimination, _____.

a. the equilibrium quantity traded in the market and the consumer surplus are the same as under perfect
competition
b. the equilibrium quantity traded in the market is greater but the consumer surplus is the same as under perfect
competition
c. the equilibrium quantity traded in the market and the consumer surplus are both lower than under perfect
competition
d. the equilibrium quantity traded in the market is the same but consumer surplus is lower than under perfect
competition
e. the equilibrium quantity traded in the market is lower but consumer surplus is the same as under perfect
competition
ANSWER: d
148. The figure below shows the cost and revenue curves faced by a monopolist. If the monopolist practices perfect price
discrimination, deadweight loss will be _____.
Figure 9.10

Name: Class: Date:
a. equal to area a
b. equal to area b
c. equal to area c + area a
d. zero
e. equal to area e
ANSWER: d
149. The figure below shows the cost and revenue curves faced by a monopolist. The area _____ represents monopoly
profit with perfect price discrimination.
Figure 9.12
a. f
b. c
c. a + b + e
d. g
e. h + a
ANSWER: c
150. The figure below shows the cost and revenue curves faced by a monopolist. If this monopolist practices perfect price
discrimination, the consumer surplus is:
Figure 9.10

Name: Class: Date:
a. equal to area a + b + c.
b. equal to area b + e.
c. equal to area b.
d. equal to zero.
e. equal to area e.
ANSWER: d

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Chapter 09: Monopoly

2. A natural monopoly emerges from legal restrictions imposed by a government.

3. DeBeers Consolidated Mines is a natural monopoly.

4. A profit-maximizing monopolist will always operate where demand is unit elastic.

6. A monopolist's marginal revenue curve is flatter than its demand curve.

7. Monopolists always earn positive short-run economic profit.

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Chapter 09: Monopoly

Chapter 09: Monopoly

20. Identify a distinguishing feature of monopoly.

22. Which of the following is true of a patent?

23. Patents stimulate investment:

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Chapter 09: Monopoly

25. Which of the following describes a monopolized market structure?

26. A natural monopoly forms when:

27. Which of the following is most likely to be considered a natural monopoly?

28. A natural monopoly forms when a firm has:

Chapter 09: Monopoly

a. the same as the demand curve facing a perfectly competitive firm.

30. A monopolist's demand curve is:

32. For a monopolist, average revenue is:

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Chapter 09: Monopoly

Price ($) Quantity Demanded

Chapter 09: Monopoly

Chapter 09: Monopoly

40. As a monopolist increases the quantity of output produced, _____.

41. The demand curve facing a non-discriminating monopolist:

Chapter 09: Monopoly

d. The monopolist is facing a horizontal supply curve.

46. Which of the following is true for a monopolist?

Chapter 09: Monopoly

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Chapter 09: Monopoly

a. perfectly price elastic.

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Chapter 09: Monopoly

a. marginal revenue is zero

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Chapter 09: Monopoly

a. 117 units and $14, respectively.

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Chapter 09: Monopoly

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Chapter 09: Monopoly

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Chapter 09: Monopoly

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Chapter 09: Monopoly

61. A profit-maximizing monopolist supplies the quantity at which:

62. A non-price discriminating monopolist's demand curve:

63. A profit-maximizing monopolist never produces along the:

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