question
Suppose that one taxi company in your city is granted a license by the city so that it is the only cab company that may operate within the city limits. Granting this license is an example of what?
answer
legal barrier to entry
question
Which of the following is a natural barrier to the entry of new firms in an industry?
a. Licensing
b. Economies of Scale
c. Issuing a patent
d. Granting a public franchise
a. Licensing
b. Economies of Scale
c. Issuing a patent
d. Granting a public franchise
answer
D. economies of scale; all the other possibilities are legal barriers to enter
question
In order to sell more output, a single price monopoly must ___ its price and a price discriminating monopoly must ____ its price.
answer
lower; lower: all monopolies must lower their price in order to sell more output
question
A monopolist finds that when it produces 20 units of output, its demand is elastic. At this level of output, its marginal revenue necessarily is...
answer
positive; when demand is elastic MR is positive; when demand is inelastic, MR is negative
question
A monopolist finds that the marginal revenue from producing another unit of output exceeds the marginal cost of the unit. To increase its profit the monopolist will do what?
answer
produce the unit; as long as MR exceeds Mc, producing the unit adds to the firms total profit because it adds more to revenue than to cost.
question
Which of the following is true for a single price monopoly?
a. Price always equals marginal cost, that is, P=MC at all levels of output
b. For all levels of output, price equals marginal revenue, that is P=MR
c. In the short run, the monopoly might make zero economic profit or incur an economic loss.
d. None of the above because all the statements are false.
a. Price always equals marginal cost, that is, P=MC at all levels of output
b. For all levels of output, price equals marginal revenue, that is P=MR
c. In the short run, the monopoly might make zero economic profit or incur an economic loss.
d. None of the above because all the statements are false.
answer
C. In the short run, the monopoly might make zero economic profit or incur an economic loss;if the demand for a monopoly's good declines or its cost rise, a monopoly, like any firm, might make zero economic profit or incur an economic loss.
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