ESFM2-L9 Score:
1.    Monopoly is inefficient because it
A does not produce at minimum average costs.
B does not spend enough money on innovations.
C has positive profit.
D produces a quantity that is too low.
2.    Which of the following four factors IS NOT a possible cause of a monopoly?
A patents
B large minimum efficient scale (MES)
C exclusive ownership of an essential input
D differentiated product
3.    Monopoly markup above marginal costs
A depends only on elasticity of demand. The lower the elasticity, the higher is the markup.
B depends only on elasticity of demand. The higher the elasticity, the higher is the markup.
C depends on other factors besides elasticity of demand.
4.    If a monopoly faces a linear demand function, it will always set its price as a
constant markup to its marginal costs (e.g. always p/MC = 2 for different MC curves).
A True
B False
5.    A monopoly produces a quantity at which the price elasticity of demand is -0,7
and marginal cost equals $2. If you wanted to increase the monopoly's profit, you
need to
A produce more.
B produce less
C produce a quantity at which price equals to marginal costs.
D invest more in adds.
6.    If a monopoly has a downward sloping average cost curve, the regulated price
set at the level of MC will lead to a loss.
A True
B False
Page 1 of 2
7.    If a monopoly sells its products at different prices for different consumers, then
it practices
A the first-degree price discrimination.
B the second-degree price discrimination.
C the third-degree price discrimination.
8.    In contrast to the third-degree price discrimination, monopoly practicing the
second-degree price discrimination
A has market power.
B has to be able to prevent arbitrage (reselling) by the consumers.
C maximizes profit.
D knows that consumers differ in their willingness to pay, but cannot tell which consumer is which.
9.    If a monopoly uses the fist-degree price discrimination, the net consumers'
surplus equals to
A the producers' surplus.
B the profit of monopoly.
C zero.
10.    Select the statement that IS NOT true. A monopoly using the third-degree price
discrimination divides quantity of product among different markets so that
A marginal revenues in different markets are equal.
B average revenues in individual markets equal to marginal revenues of the entire monopoly.
C it maximizes profit.
D marginal revenues in individual market equal to marginal costs of the entire monopoly.
Page 2 of 2