EWU
p. 1 of 9
Briand
Econ 200 PRACTICE Chapter 10
Student: ___________________________________________________________________________
Figure: 10-1
1. What is the price charged by the monopolist for its profit maximizing output?
A. $95
B. $80
C. $60
D. $45
2. Which of the following statements is false for a firm operating in perfect competition, but will hold true for a
monopolist at its profit maximizing output?
A. Marginal revenue equals price
B. Price equals marginal cost
C. Marginal revenue equals marginal cost
D. The marginal revenue curve will be lower than the demand curve
EWU
p. 2 of 9
Briand
3. When a monopolist engages in imperfect price discrimination, which of the following does not occur?
A. Some, but not all, of the deadweight loss created by being a monopoly is eliminated
B. Customers who are more price sensitive pay a lower price for the good than those customers who are less
price sensitive
C. The monopolist makes higher profit than if it sells its product at a uniform price
D. Consumer surplus increases
Figure: 10-4
4. Which of the following is false about a monopoly?
A. A monopoly cannot lose money
B. A monopoly tends to produce lower output than an industry in perfect competition
C. A monopoly creates deadweight loss
D. A monopoly produces a quantity where MR = MC
5. A monopolist will maximize profits by producing where:
A. Marginal cost equals marginal revenue
B. Average total cost equals average revenue
C. The difference between average total cost and average revenue is greatest
D. The difference between marginal revenue and marginal cost is maximized
EWU
p. 3 of 9
Briand
6. A monopolist produces a quantity of output where:
A. Average total cost is at a minimum
B. Marginal revenue equals marginal cost
C. Marginal cost equals demand
D. Average total cost equals demand
7. Coupons are:
A. An ineffective method of price discrimination because the highest-income consumers who are willing to pay
the highest prices are also those consumers who are the most cost-conscious and are willing to take the time to
clip coupons
B. An effective method of price discrimination because people who have higher incomes and are willing to pay
more typically subscribe to more publications and thus have access to more coupons
C. An effective method of price discrimination because they get the most price-sensitive customers to reveal
themselves by taking the time to clip coupons, which price-insensitive customers would not do
D. An ineffective method of price discrimination because there is virtually no difference between the
willingness to pay of those who clip coupons and those who do not
8. A monopolist currently sells 5 units of a good. If marginal revenue on the fifth unit of the good is $20, what
must be true about the price of the good?
A. It must be equal to $20
B. Price must be less than $20
C. Price must be more than $20
D. No information can be concluded about the price
Nano Gene Inc. is a monopoly supplier of a very effective arthritis pill. Its demand schedule is shown in Table:
10-2.
Table: 10-2
EWU
p. 4 of 9
Briand
9. If the marginal cost of producing each pill is constant at $4, what is the amount of Nano Gene's profit?
A. Zero
B. $40
C. $36
D. $28
Figure: 10-5
10. In the diagram, the marginal cost curve is labeled:
A. A
B. B
C. C
D. D
Table: 10-3 shows information on four potential customers for a monopolist's product and their willingness to
pay for the product.
Table: 10-3
EWU
p. 5 of 9
Briand
11. If the marginal cost of producing each good is $20 and if the monopolist is not able to price discriminate,
how many units of the good will it sell to maximize profit and at what price?
A. 1 unit at $300
B. 2 units at $180
C. 3 units at $30
D. 4 units at $20
12. What is the amount of the deadweight loss created by Nano Gene's monopoly? (see Table 10.2 p.3)
A. $6
B. $8
C. $12
D. The answer cannot be determined without a graph
13. The profit-maximizing price and output level for this monopoly firm is: (see Figure 10.4 p.2)
A. P1, Q3
B. P2, Q2
C. P3, Q1
D. We must know the average total cost curve before an answer to this question can be given
14. Which of the following is not considered a barrier to entry?
A. Patents
B. Government licenses
C. Decreasing average total costs over large ranges of output
D. Increasing average total costs over large ranges of output
15. Many people are unwilling to switch away from Microsoft's operating system for fear that they will lose the
ability to share computer files with other people and also the ability to play their favorite video games. Identify
the general type of entry barrier that Microsoft has created.
A. Government patents or license
B. Ownership of superior technology
C. Large entry costs
D. Incompatibility with other systems
16. What is the monopolist's profit maximizing output? (see Figure 10.1 p.1)
A. 240 units
B. 500 units
C. 800 units
D. Less than 240 units
EWU
p. 6 of 9
Briand
Figure: 10-2
17. Total consumer surplus at the monopolist's profit maximizing level of output is represented by the area:
A. A
B. A + B
C. A + B + E
D. A + B + C
18. What is the area that represents producer surplus at the monopolist's profit maximizing level of output?
A. C + F + D
B. C + F + D + G
C. B + C
D. A + B + C + D
19. Which of the following statements is false about a monopoly which practices perfect price discrimination?
A. The deadweight loss created by the monopoly is completely eliminated
B. Customers earn a larger consumer surplus when there is perfect price discrimination as compared to a
situation with no price discrimination
C. Each consumer pays exactly what the good is worth to her
D. The monopoly produces the wealth maximizing output level
EWU
p. 7 of 9
Briand
20. Which of the following is not a way by which the deadweight loss of a monopoly can be reduced?
A. Competition from substitute goods: The development of man-made diamonds to compete with earth-made
diamonds
B. The threat of competition: A fitness center is considering charging very high membership dues and serving
only fitness buffs but fears that this strategy would leave a large market opening for a gym geared toward the
general public
C. The ability to practice price discrimination: A movie theatre charges $4 for matinee shows and $10 for
evening shows
D. Laws that create a minimum price for the good at a price higher than what the monopoly had been charging
21. What is the area that represents the deadweight loss incurred by society when the monopolist produces an
output below the level that maximizes the wealth of society?
A. E
B. E + F
C. E + F + G
D. D + G
22. The primary social cost of monopolists is that they:
A. Produce along the diseconomies of scale segment of the average total cost
B. Usually produce below the wealth maximizing output level
C. Charge a price which is less than marginal cost of production
D. Charge a price where marginal revenue equals marginal cost
23. Which of the following is an not an example of a business using self-selection to induce different groups of
customers to take different visible actions?
A. Aviva, an Italian restaurant, offers early-bird specials every Thursday evening where customers can purchase
a set meal at $10.95
B. A magazine offers an initial one-year subscription for $10; at the end of the year, renewing the subscription
for another year costs $18
C. Patrons at the Aurora theatre pay a standard price for theatre tickets, regardless of the desirability of the seat
D. Clean Whiz, a laundry detergent manufacturer, offers buyers a variety of options consisting of different
price-quantity bundles such as super size, large, medium and small boxes of detergent
24. What is the socially optimal output level? (see Figure 10.1 p.1)
A. 240 units
B. 500 units
C. 800 units
D. More than 800 units
EWU
p. 8 of 9
Briand
25. Which of the following conditions is not necessary for a firm to profitably price discriminate?
A. The firm must not be a price taker
B. The firm must have some ability to distinguish between different customers or between different groups of
customers and roughly determine the value each group places on the monopolist's product
C. The firm must be able to prevent the resale of the good among customers
D. The firm must create no deadweight loss
EWU
p. 9 of 9
EWU – ECON 200 - Introduction to Microeconomics - Briand
Chapter 10 PRACTICE QUESTIONS (Miller)
Student's first AND last name:__________________________________________________________
Enter your answers to the multiple-choice questions in the spaces below:
1. ____
11. ____
21. ____
2. ____
12. ____
22. ____
3. ____
13. ____
23. ____
4. ____
14. ____
24. ____
5. ____
15. ____
25. ____
6. ____
16. ____
7. ____
17. ____
8. ____
18. ____
9. ____
19. ____
10. ____
20. ____
Briand