Microeconomics Chapter 8 – Flashcards
Unlock all answers in this set
Unlock answersquestion
Pure monopolists may obtain economic profits in the long run because
answer
of barriers to entry
question
A natural monopoly occurs when
answer
long-run average costs decline continuously through the range of demand.
question
What do economies of scale, the ownership of essential raw materials, and patents have in common?
answer
They are all barriers to entry.
question
The nondiscriminating pure monopolist's demand curve:
answer
is the industry demand curve.
question
The marginal revenue curve for a monopolist:
answer
becomes negative when output increases beyond some particular level.
question
The pure monopolist's demand curve is relatively elastic:
answer
in the price range where marginal revenue is positive.
question
A pure monopolist should never produce in the
answer
inelastic segment of its demand curve because it can increase total revenue and reduce total cost by increasing price.
question
A pure monopolist is selling six units at a price of $12. If the marginal revenue of the seventh unit is $5, then the
answer
price of the seventh unit is $11.
question
The MR = MC rule:
answer
applies both to pure monopoly and pure competition.
question
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:
answer
$.75 or less.
question
A pure monopolist is producing an output such that ATC = $4, P = $5, MC = $2, and MR = $3. This firm is realizing:
answer
an economic profit that could be increased by producing more output
question
If a monopolist's marginal revenue is $3.00 and its marginal cost is $4.50, it will increase its profits by:
answer
reducing output and raising price.
question
A pure monopolist:
answer
will realize an economic profit if price exceeds ATC at the profit-maximizing/loss-minimizing level of output.
question
If a pure monopolist is producing at that output where P = ATC, then:
answer
its economic profits will be zero.
question
The supply curve of a pure monopolist:
answer
does not exist because prices are not "given" to a monopolist.
question
An important economic problem associated with pure monopoly is that, at the profit-maximizing outputs, resources are:
answer
underallocated because price exceeds marginal cost.
