question
A pure monopoly exists when a single firm is the sole producer of a product for which there are no close ___.
answer
substitutes
question
Which of the following are the main characteristics of a pure monopoly?
answer
Presence of a single seller
Control over the price
Blocked entry for other firms
Unavailability of close substitutes for its products
Control over the price
Blocked entry for other firms
Unavailability of close substitutes for its products
question
The firm and ______ are synonymous in pure monopoly.
answer
the industry
question
Which of the following describes what "no close substitutes" means as it relates to consumers and a pure monopoly?
answer
A consumer must either buy the monopolized product or do without it entirely.
question
How does a monopolist change the price of its product?
answer
By changing the quantity of the product it produces.
question
Which of the following exists when a single firm is the sole producer of a product for which there are no close substitutes?
answer
Pure monopoly
question
The main characteristics of a pure are a single seller, no close substitutes, a price maker, blocked entry, and non-price competition.
answer
monopoly
question
Which of the following two terms are synonymous in a pure monopoly?
answer
Firm and industry
question
Which characteristic of pure monopoly requires a consumer to buy the monopolized product or do without it entirely?
answer
No close substitutes
question
Which of the following are reasons that a monopolist is considered a price maker?
answer
The monopolist controls the total quantity supplied.
The monopolist exerts control over the price.
The monopolist exerts control over the price.
question
What is the shape of the product demand curve for a pure monopolist?
answer
Downward sloping
question
utilities are government owned or regulated.
answer
public
question
A -monopoly occurs when a single firm has the bulk of sales in a specific market.
answer
near
question
The strongest barriers to entry effectively block all ______.
answer
potential competition
question
A pure monopolist must face a downward-sloping product curve.
answer
demand
question
Which of the following are characteristics of public utilities?
answer
Monopolies or near monopolies
Government owned or regulated
Government owned or regulated
question
A firm's long-run average total costs may decline over a wide range of output due to of scale.
answer
economies
question
What is the term used to describe a situation where a single firm has the bulk of sales in a specific market?
answer
Near-monopoly
question
What is the term for factors that prohibit firms from entering an industry?
answer
Barriers to entry
question
What term is used to describe declining average total costs with added firm size?
answer
Economies of scale
question
Modern technology can be a cause of extensive ______.
answer
economies of scale
question
How do economies of scale affect long-run average total costs for a firm?
answer
Long-run average total costs decline over a wide range of output.
question
Monopolists use economies of scale to block the entry of new firms into an industry by ______.
answer
lowering prices so that another firm cannot compete
question
Economies of scale refer to ______ average total costs with added firm size.
answer
declining
question
Which of the following can be a cause of extensive economies of scale?
answer
Modern technology
question
A natural monopoly occurs when the market demand curve crosses the long-run average total cost (ATC) curve where average total costs are still ______.
answer
declining
question
Monopolists use economies of scale to block the entry of new firms into an industry by reducing ______ so that other firms cannot compete.
answer
prices
question
______ create(s) legal barriers to entry.
answer
government
question
Two legal to entry are patents and licenses.
answer
barriers, blocks, or obstacles
question
When the market demand curve crosses the long-run average total cost curve where average total costs are declining, the firm is called a(n)
answer
natural monopoly
question
A (one word) is the exclusive right of an inventor to use, or allow another to use, her or his invention.
answer
patent
question
Government creates barriers to entry.
answer
legal
question
Why does an inventor need to have her or his invention protected from rivals?
answer
Rivals will use the invention without having shared in the effort and expense of developing it.
question
What are the two legal barriers to entry created by the government?
answer
Licenses
Patents
Patents
question
What leads to most patentable inventions and products?
answer
Research and development
question
As an example of ______, the Federal Communications Commission licenses only so many radio and television stations in each geographic area.
answer
barriers to entry
question
The exclusive right of an inventor to use, or to allow another to use, her or his invention is called:
answer
a patent
question
It is difficult to start up a major league sports team because existing professional teams have contracts with the best players and long-term leases on stadiums. Which barrier to entry does this illustrate?
answer
Control of a key resource
question
Which of the following is considered a barrier to entry protecting an inventor from its rivals?
answer
Patents
question
Which of the following are entry barriers created by monopolists?
answer
Increased advertising
Price reductions
Price reductions
question
Patents, economies of scale, and resource ownership are all assumptions of the pure model.
answer
monopoly or monopolist
question
and development leads to most patentable inventions and products.
answer
research
question
Which of the following describes why marginal revenue is less than price for monopolists?
answer
Because the lower price of the extra unit of output also applies to all prior units of output
question
In many large cities, the number of taxicabs allowed to operate is limited by the local government through the ______.
answer
issuing of licenses
question
Marginal revenue is the change in ______ revenue associated with a single-unit change in output.
answer
total
question
Which of the following is considered a barrier to entry into an industry?
answer
Ownership of essential property
question
With a fixed downward-sloping demand curve, how can a monopolist increase sales?
answer
By charging a lower price
question
Slashing prices is an example of an entry barrier created by a(n)
answer
monopolist or monopoly
question
In a pure monopoly, marginal revenue is less than price for every unit of output except which one?
answer
The first
question
Which of the following are assumptions made in the model of pure monopoly?
answer
Patents, economies of scale, and resource ownership secure the firm's monopoly.
No unit of government regulates the firm.
The firm is a single-price monopolist and charges the same price for all units of output.
No unit of government regulates the firm.
The firm is a single-price monopolist and charges the same price for all units of output.
question
Price makers are firms with:
answer
downward-sloping demand curves
question
Marginal revenue is less than price at every unit of output because the monopolist
answer
could have sold these prior units at a higher price if it had not produced and sold the extra output.
question
The change in total revenue associated with a one-unit change in output is called revenue.
answer
Marginal
question
The monopolist wants a price-quantity combination to fall in the _____ section of its demand curve, where a lower price means _____ total revenue.
answer
elastic; greater
question
With a fixed downward sloping demand curve, the pure monopolist can only increase sales by charging a ______ price.
answer
lower
question
A firm's manager is given the following information: To sell 4 units of output, a price of $132 must be charged; this level of output reflects marginal revenue of $102 and marginal costs of $60. If the firm wants to sell 5 units of output, a price of $122 must be charged; this reflects marginal revenue of $82 and marginal costs of $70. To sell 6 units of output, a price of $112 must be charged; at this level of output, marginal revenue will be $62 and marginal costs $80. What should the manager do?
answer
Produce 5 units of output and charge $122.
question
In a pure monopoly, ______ is less than the price for every unit of output except the first.
answer
marginal revenue
question
How much will a profit-seeking monopolist produce if producing is preferable to shutting down?
answer
Up to the output at which marginal revenue equals marginal cost
question
Firms with downward-sloping product demand curves are called price .
answer
makers, setters, or maker
question
Which of the following steps are necessary to determine the profit-maximizing level of output, profit-maximizing price, and economic profit in pure monopoly?
answer
Identify the profit-maximizing price and output by finding the price/output combination at MR=MC.
Employ the profit-maximizing rule of MR=MC.
Employ the profit-maximizing rule of MR=MC.
question
Which of the following does the monopolist not have?
answer
A supply curve
question
A monopolist will never choose a price-quantity combination where price reductions cause:
answer
a decrease in total revenue
question
Why might a monopolist accept a less-than-maximum per-unit profit?
answer
Additional sales more than compensate for the lower profit per unit.
question
True or false: A firm is producing 24 units of output. At the 24th unit of output, marginal revenue is $5, and marginal cost is $4; at the 25th unit of output, marginal revenue is $4.50, and marginal cost is $4.50; at the 26th unit of output, marginal revenue is $4, and marginal cost is $5. This firm made the correct choice by producing only 24 units of output and then stopping.
answer
False -> MR = MC means maximum profit
question
Which of the following explains why a pure monopolist is able to maintain an economic profit in the long run?
answer
There are no new entrants to increase supply, drive down price, and eliminate profit.
question
If producing is preferable to shutting down, a profit-seeking monopolist will produce up to the output at which _______.
answer
MR = MC
question
Which of the following is a reason for a monopoly's loss of economic profit?
answer
Changes in tastes that reduce demand for a product
question
Drawing a vertical line from the profit-maximizing output on the horizontal axis to the demand curve represents the ______.
answer
price
question
The monopolist's level of output is not at the minimum point of ______, meaning it will not be productively efficient.
answer
average total cost
question
A monopolist does not have a supply curve because:
answer
it does not equate price with marginal cost
there is no single, unique price associated with each level of output
there is no single, unique price associated with each level of output
question
Monopoly yields neither efficiency nor allocative efficiency.
answer
productive
question
The monopolist seeks maximum profit, not maximum unit profit.
answer
total
question
Because a monopoly is a price maker and prices its products in the elastic portion of the demand curve, its output is less than that required to achieve minimum average total cost. In addition, the monopoly's price will exceed its marginal cost at this level of output. Monopoly therefore creates
answer
an efficiency loss.
question
A(n) ______ is able to maintain an economic profit in the long run because there are no new entrants to increase supply, drive down price, and eliminate economic profit.
answer
monopoly
question
At a pure monopolist's profit-maximizing output (Qm), its exceeds marginal cost, resulting in allocative inefficiency.
answer
price
question
Which of the following are reasons for a monopoly's loss of economic profit?
answer
Upward-shifting cost curves caused by escalating resource prices
Change in tastes reducing demand
Change in tastes reducing demand
question
A monopolist does not achieve productive efficiency because it produces a level of output that does not correspond to the minimum point of the cost curve. (Enter only one word per blank.)
answer
average total
question
Monopoly yields neither productive nor efficiency.
answer
allocative
question
How does a monopoly generally transfer income?
answer
From consumers to the owners of the monopoly
question
When efficiency and allocative efficiency are not achieved in a market, it is known as an efficiency loss.
answer
Productive
question
Which statement is true about costs for purely competitive and monopolistic producers?
answer
Costs for purely competitive and monopolistic producers may not be the same.
question
At the profit-maximizing output (Qm), a monopolist's ______ is higher than marginal cost; therefore, a monopolist has allocative inefficiency.
answer
price (Pm)
question
A natural monopoly's economies of scale refers to one firm's ability to achieve the lowest long-run average total cost, also known as
answer
the minimum efficient scale at a high level of output.
question
What is the term used to refer to a product's ability to satisfy a large number of consumers at the same time?
answer
Simultaneous consumption
question
Network effects may drive a market toward , because consumers tend to choose standard products that everyone else is using.
answer
monopoly
question
When a monopolist charges a higher price than a purely competitive firm would, the monopolist essentially ______.
answer
levies a "private tax" on consumers
question
X-inefficiency occurs when a firm operates at a cost that is (higher/lower) than the lowest cost for a particular level of output.
answer
higher
question
Why do costs differ between a purely competitive firm and a pure monopoly?
answer
Economies of scale
A factor called "X-inefficiency"
A factor called "X-inefficiency"
question
What may occur when only a single firm can achieve the economies of scale necessary to compete in an industry?
answer
Natural monopoly
question
Hiring incompetent relatives and poor supervision of workers can result in ______.
answer
X-inefficiency
question
Simultaneous is a product's ability to satisfy a large number of consumers at the same time.
answer
consumption
question
effects exist if the value of a product to each user increases as the total number of users increase.
answer
network
question
If a firm is found guilty of achieving a monopoly through anticompetitive actions, then which of the following may occur?
answer
The firm may be expressly prohibited from engaging in certain business activities.
The firm may be broken into two or more competing firms.
The firm may be broken into two or more competing firms.
question
What is it called when a firm spends significant money to maintain a monopoly through government legislation?
answer
rent-seeking expenditures
question
When a firm produces a specific output level at a higher cost than the necessary cost for that level of output, it is called ______.
answer
X-inefficiency
question
Which are reasons that costs differ between a purely competitive firm and a pure monopoly?
answer
Monopoly-preserving expenditures
The "very long run" perspective
The "very long run" perspective
question
Which of the following can cause X-inefficiency?
answer
Hiring incompetent relatives
Avoiding business risk
Maintaining a poorly motivated work force
Avoiding business risk
Maintaining a poorly motivated work force
question
A firm can be expressly prohibited from engaging in certain business activities or can be broken into two or more competing firms when it
answer
is found guilty of monopoly abuse.
question
The government broke up Standard Oil in 1911 due to its breach of (one word) laws.
answer
antitrust
question
For which of the following market structures does government policy allow for expansion and only eventual regulation of prices and operations?
answer
natural monopoly
question
Which of the following add nothing to the firm's output, but increase the firm's costs?
answer
Rent-seeking expenditures
question
What is the term used to refer to charging different prices to different buyers of a specific product?
answer
Price discrimination
question
Which of the following are conditions necessary for price discrimination?
answer
Monopoly power
Market segregation
No resale
Market segregation
No resale
question
As an example of price discrimination, airlines charge higher fares to business travelers whose demand for travel is and offer lower, more restricted fares to vacationers and others with more demand.
answer
inelastic
elastic
elastic
question
Price , or charging different prices to different consumers, is widely practiced in the US economy.
answer
discrimination
question
One option for dealing with an unsustainable monopoly due to emerging new technology is to _____ the monopoly and allow ______ to take place.
answer
ignore; creative destruction
question
The demand curve intersects the natural monopolist's long-run average total cost curve at a point where long-run average total costs are still falling, due to ______.
answer
economies of scale
question
The practice of charging different prices to different buyers for a specific product is known as price .
answer
discrimination
question
An unregulated monopolist uses the marginal revenue equals marginal cost (MR = MC) rule to determine the ______.
answer
profit-maximizing output and price
question
Market segregation must exist in order for a monopolist to ______.
answer
price discriminate
question
If the objective of government is to achieve allocative efficiency, what kind of price should government establish for the monopolist?
answer
One that is equal to its marginal cost.
question
Baseball ticket sellers charge a different price for adults and children. Ballpark concession stands charge the same prices for products sold to any customer. The baseball ticket sellers are providing a successful example of
answer
price discrimination.
question
Which of the following are potential solutions to the economic losses incurred by a regulated monopoly caused by socially optimal pricing?
answer
Price discrimination
Public subsidies
Public subsidies
question
True or false: Price discrimination is not practiced very often in the US economy.
answer
false
question
A regulated monopoly is likely to suffer losses when ______.
answer
price is set to marginal cost (P = MC)
price is set to achieve the most efficient allocation of resources
price is set to achieve the most efficient allocation of resources
question
With a natural monopoly the demand curve intersects the long-run average total cost curve where the long-run average total cost curve is still .
answer
declining
question
Higher-than-competitive wages, nicer-than-typical office buildings, and more managers and staff than are necessary are all examples of X-inefficiency found in firms.
answer
regulated
question
A monopolist uses the profit-maximizing rule of marginal revenue equals marginal cost to determine the profit-maximizing and .
answer
output
price
price
question
If the objective of government is to achieve efficiency, it should establish a legal price for the monopolist that is equal to its marginal cost.
answer
Allocative
question
Two solutions to the economic losses caused by socially optimal pricing are providing public and condoning price discrimination.
answer
subsidies or subsidy
question
In general, as shown in the figure, a fair return price will lead to ______ and a socially optimal price will lead to ______.
answer
normal profit; economic loss
question
Which of the following are examples of X-inefficiencies that may be found in regulated firms?
answer
Nicer-than-typical office buildings
More managers and staff than necessary
Higher-than-competitive wages
More managers and staff than necessary
Higher-than-competitive wages
question
Which of the following are potential solutions to the economic losses incurred by a regulated monopoly caused by socially optimal pricing?
answer
...
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