question
Pure monopoly refers to
A. any market in which the demand curve for the firm is downsloping.
B. a standardized product being produced by many firms.
C. a single firm producing a product for which there are no close substitutes.
D. a large number of firms producing a differentiated product.
A. any market in which the demand curve for the firm is downsloping.
B. a standardized product being produced by many firms.
C. a single firm producing a product for which there are no close substitutes.
D. a large number of firms producing a differentiated product.
answer
C. a single firm producing a product for which there are no close substitutes.
question
Pure monopolists may obtain economic profits in the long run because
A. of advertising.
B. marginal revenue is constant as sales increase.
C. of barriers to entry.
D. of rising average fixed costs.
A. of advertising.
B. marginal revenue is constant as sales increase.
C. of barriers to entry.
D. of rising average fixed costs.
answer
C. of barriers to entry.
question
1. Which of the following is not a barrier to entry?
A. patents
B. X-inefficiency
C. economies of scale
D. ownership of essential resources
A. patents
B. X-inefficiency
C. economies of scale
D. ownership of essential resources
answer
B. X-inefficiency
question
The nondiscriminating pure monopolist's demand curve
A. is the industry demand curve.
B. shows a direct or positive relationship between price and quantity demanded.
C. tends to be inelastic at high prices and elastic at low prices.
D. is identical to its marginal revenue curve.
A. is the industry demand curve.
B. shows a direct or positive relationship between price and quantity demanded.
C. tends to be inelastic at high prices and elastic at low prices.
D. is identical to its marginal revenue curve.
answer
A. is the industry demand curve.
question
1. The nondiscriminating monopolist's demand curve
A. is less elastic than a purely competitive firm's demand curve.
B. is perfectly elastic.
C. coincides with its marginal revenue curve.
D. is perfectly inelastic.
A. is less elastic than a purely competitive firm's demand curve.
B. is perfectly elastic.
C. coincides with its marginal revenue curve.
D. is perfectly inelastic.
answer
A. is less elastic than a purely competitive firm's demand curve
question
64. The MR = MC rule
A. applies only to pure competition.
B. applies only to pure monopoly.
C. does not apply to pure monopoly, because price exceeds marginal revenue.
D. applies both to pure monopoly and pure competition.
A. applies only to pure competition.
B. applies only to pure monopoly.
C. does not apply to pure monopoly, because price exceeds marginal revenue.
D. applies both to pure monopoly and pure competition.
answer
D. applies both to pure monopoly and pure competition.
question
Refer to the diagram. To maximize profits or minimize losses, this firm should produce
A. E units and charge price C.
B. E units and charge price A.
C. M units and charge price N.
Lunitsand chargepriceLK
A. E units and charge price C.
B. E units and charge price A.
C. M units and charge price N.
Lunitsand chargepriceLK
answer
B. E units and charge price A.
question
A pure monopolist will maximize profits by producing at that output where price and marginal cost are equal.
answer
False
question
193. One major barrier to entry under pure monopoly arises from
A. the availability of close substitutes for a product.
B. ownership of essential resources.
C. the price taking ability of the firm.
D. diseconomies of scale.
A. the availability of close substitutes for a product.
B. ownership of essential resources.
C. the price taking ability of the firm.
D. diseconomies of scale.
answer
B. ownership of essential resources.
question
Which is a major criticism of a monopoly as a source of allocative inefficiency?
A. A monopolist fails to expand output to the level where the consumers' valuation of an additional unit is just equal to its opportunity cost.
B. A monopolist has no incentive to produce efficiently, because even the inefficient monopolist can be assured of economic profits.
C. A monopolist will always earn profits, and that means that prices are too high.
D. A monopolist has an unfair advantage because it can purchase labor at a lower price than competitive firms can.
A. A monopolist fails to expand output to the level where the consumers' valuation of an additional unit is just equal to its opportunity cost.
B. A monopolist has no incentive to produce efficiently, because even the inefficient monopolist can be assured of economic profits.
C. A monopolist will always earn profits, and that means that prices are too high.
D. A monopolist has an unfair advantage because it can purchase labor at a lower price than competitive firms can.
answer
A. A monopolist fails to expand output to the level where the consumers' valuation of an additional unit is just equal to its opportunity cost.
question
Refer to the diagram for a pure monopolist. Monopoly price will be
answer
C
question
An important economic problem associated with pure monopoly is that, at the profit-maximizing outputs, resources are
A. overallocated because price exceeds marginal cost.
B. overallocated because marginal cost exceeds price.
C. underallocated because price exceeds marginal cost.
D. underallocated because marginal cost exceeds price.
A. overallocated because price exceeds marginal cost.
B. overallocated because marginal cost exceeds price.
C. underallocated because price exceeds marginal cost.
D. underallocated because marginal cost exceeds price.
answer
C. underallocated because price exceeds marginal cost.
question
In the accompanying diagrams, both firms are selling their products in purely competitive markets.
answer
False
question
106. Comparing a pure monopoly and a purely competitive firm with identical costs, we would find in long-run equilibrium that the pure monopolist's
A. price, output, and average total cost would all be higher.
B. price and average total cost would be higher, but output would be lower.
C. price, output, and average total cost would all be lower.
D. price and output would be lower, but average total cost would be higher.
A. price, output, and average total cost would all be higher.
B. price and average total cost would be higher, but output would be lower.
C. price, output, and average total cost would all be lower.
D. price and output would be lower, but average total cost would be higher.
answer
B. price and average total cost would be higher, but output would be lower.
question
1. What do economies of scale, the ownership of essential raw materials, and patents have in common?
A. They must all be present before price discrimination can be practiced.
B. They are all barriers to entry.
C. They all help explain why a monopolist's demand and marginal revenue curves coincide.
D. They all help explain why the long-run average cost curve is U-shaped.
A. They must all be present before price discrimination can be practiced.
B. They are all barriers to entry.
C. They all help explain why a monopolist's demand and marginal revenue curves coincide.
D. They all help explain why the long-run average cost curve is U-shaped.
answer
B. They are all barriers to entry.
question
In many large U.S. cities, taxicab companies operate as near monopolies because of
A. patents.
B. licenses.
C. economies of scale.
strategicpricing
A. patents.
B. licenses.
C. economies of scale.
strategicpricing
answer
B. licenses.
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