Econ 120 Ch.16 Review – Flashcards
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A firm is a natural monopoly if it exhibits the following as its output increases:
a.) decreasing marginal revenue.
b.) increasing marginal cost.
c.) decreasing average revenue.
d.) decreasing average total cost
answer
decreasing average total cost
question
An industry is a natural monopoly when
answer
a single firm can supply a good or service to an entire market at a lower cost than could two or more firms due to average total cost decreasing as output increases. (More firms would lead to less output and a higher average total cost).
question
For a profit-maximizing monopoly that charges the same price to all consumers, what is the relationship between price P , marginal revenue MR , and marginal cost MC ?
answer
P>MR and MR=MC
question
If a monopoly's fixed costs increase, its price will _____, and its profit will _____.
increase, decrease
decrease, increase
increase, stay the same
stay the same, decrease
answer
stay the same, decrease
question
Compared to the social optimum, a monopoly firm chooses
a.) a quantity that is too low and a price that is too high
b.) a quantity that is too high and a price that is too low.
c.) a quantity and a price that are both too high.
d,) a quantity and a price that are both too low.
answer
a.) a quantity that is too low and a price that is too high
