Microeconomics Chapter 24
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A natural monopoly A. has economies of scale over a very large range of output. B. has decreasing long-run average total costs over a very large range of output. C. has decreasing long-run marginal costs over a very large range of output. D. All of the above.
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D. All of the above.
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Monopoly producers are faced with A. only a few competitors producing the same product. B. at least one competitive producer of the same product. C. many competitors producing the same product. D. no competitive producers of the same product.
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D. no competitive producers of the same product.
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As the number of imperfect substitutes for a monopoly firm's product increases, the price elasticity of demand A. decreases. B. cannot be determined. C. increases. D. approaches zero.
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C. increases.
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Why is there a social cost of monopoly? A. The firm produces too much of the good. B. Too many resources are being used in a monopoly. C. The firm does not equate marginal cost to marginal revenue. D. Too few resources are being used in a monopoly.
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D. Too few resources are being used in a monopoly.
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The monopolist sets price by A. charging the price where average total cost equals marginal cost. B. charging the price where marginal cost equals price. C. producing the quantity where marginal cost equals marginal revenue and charging the price that corresponds to that quantity. D. charging the price where marginal revenue equals price.
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C. producing the quantity where marginal cost equals marginal revenue and charging the price that corresponds to that quantity.
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Charging different prices for similar products that have different marginal costs is called A. predatory pricing. B. price dumping. C. price discrimination. D. price differentiation.
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D. price differentiation.
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The demand curve of the monopolist A. is the same as the industry demand curve. B. is the same as a price-taking firm. C. is perfectly inelastic. D. is perfectly elastic.
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A. is the same as the industry demand curve.
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Which of the following is not necessary for price discrimination to exist? A. The ability to prevent resale of the product or service. B. The ability to separate markets at reasonable cost. C. A perfectly elastic demand curve. D. Buyers in various markets must have different price elasticities of demand.
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C. A perfectly elastic demand curve.
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The demand curve faced by the monopolist A. has greater price elasticity of demand as close substitutes for the monopoly product are developed. B. is always inelastic where MR = MC and profits are maximized. C. has lower price elasticity of demand as close substitutes for the monopoly product are developed. D. None of the above.
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A. has greater price elasticity of demand as close substitutes for the monopoly product are developed.
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A monopolist is defined as A. a producer of a good or service that is expensive to produce, requiring large amounts of capital equipment. B. a large firm, making substantial profits, that is able to make other firms do what it wants. C. a single supplier of a good or service for which there is no close substitute. D. a firm with annual sales over $10 million.
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C. a single supplier of a good or service for which there is no close substitute.
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Which of the following is not a barrier to entry into a market? A. Ownership of an important resource where there is no good substitute. B. Difficulty in raising adequate capital necessary to enter an industry. C. Governmental restrictions such as tariffs. D. Diseconomies of scale.
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D. Diseconomies of scale.
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Suppose a monopolist is producing where the marginal cost curve intersects the demand curve. The monopolist A. can increase profits by selling more units since marginal cost is less than marginal revenue. B. can increase profits by selling more units at a higher price. C. can increase profits by selling fewer units since marginal cost is greater than marginal revenue. D. is maximizing profits.
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C. can increase profits by selling fewer units since marginal cost is greater than marginal revenue
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If we were to compare the amount produced by firms in a competitive industry to the output produced by a monopoly, the monopolist will produce A. on the inelastic portion of the demand curve but at a higher price. B. on the elastic portion of the demand curve and charge a higher price. C. the same quantity but would make profits because of economies of scale. D. on the inelastic portion of the demand curve because the monopolist would make the entire demand curve inelastic.
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B. on the elastic portion of the demand curve and charge a higher price.
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For a monopoly, A. price equals both average revenue and marginal revenue. B. price equals average revenue only. C. price equals marginal revenue only. D. price differs from both average revenue and marginal revenue.
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B. price equals average revenue only
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A monopoly is socially inefficient because it A. makes profits even in the long run. B. makes consumers buy goods they really don't need. C. makes profits. D. charges a price greater than marginal cost.
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D. charges a price greater than marginal cost.
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In a monopoly market structure, the firm (the monopolist) A. is the whole industry. B. sells faulty products. C. gets unconscionably rich. D. gouges the consumer.
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A. is the whole industry.
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The better the substitutes for a monopoly firm's product, the A. greater the price elasticity of demand. B. smaller the price elasticity of demand. C. effect on the price elasticity of demand is indeterminate. D. faster the price elasticity of demand approaches zero.
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A. greater the price elasticity of demand.
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A firm can be the sole supplier of a good and still not be considered a monopoly if A. the good produced is not important to the economy. B. the firm is not large. C. the firm is making normal profits. D. there are very close substitutes for the good.
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D. there are very close substitutes for the good.
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Marginal revenue for a monopolist is A. horizontal, just like for the perfectly competitive firm. B. downward sloping and always greater than price. C. downward sloping and always less than price. D. downward sloping and always equal to price.
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C. downward sloping and always less than price.
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Monopoly has social costs because A. a monopoly produces less and charges a higher price than a perfectly competitive firm would producing the same product or service. B. too few resources are being used in the monopoly industry and too many are used elsewhere. C. P is greater than MC and this implies economic inefficiency. D. All of the above.
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D. All of the above.
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In order to price discriminate, a firm must A. face a downward-sloping demand curve. B. set price equal to marginal cost. C. have permission from the government. D. be sure the price-marginal cost ratio is the same for all its submarkets.
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A. face a downward-sloping demand curve.
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A monopolist that produces where ATC is greater than price A. will make economic losses. B. will not maximize profits where MC = MR. C. would make positive economic profits if it could price discriminate. D. should increase both price and output since both are under her control.
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A. will make economic losses.
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As opposed to other types of monopoly, a natural monopoly typically owes its monopoly position to A. economies of scale. B. ownership of a resource without close substitutes. C. tariffs. D. patents.
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A. economies of scale.
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The marginal revenue curve for a perfectly competitive firm is _________ while the marginal revenue curve of the monopolist is _________. A. horizontal, downward sloping B. downward sloping, upward sloping C. downward sloping, horizontal D. horizontal, upward sloping
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A. horizontal, downward sloping
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If a public utility company is considered a monopolist, which of the following is not true? A. The company's demand curve and supply curve are upward sloping. B. For the company to practice price discrimination, there should not be any resale of its product. C. Its price must be higher than its marginal revenue. D. Its profit maximizing quantity is determined where its marginal revenue equals its marginal cost.
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A. The company's demand curve and supply curve are upward sloping.
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The demand curve faced by the monopolist A. is perfectly inelastic. B. is perfectly elastic. C. has smaller price elasticity of demand as close substitutes for the monopoly product are developed. D. has greater price elasticity of demand as close substitutes for the monopoly product are developed.
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D. has greater price elasticity of demand as close substitutes for the monopoly product are developed.
