question
Many communities have granted monopoly rights to cable companies. This is an example of a monopoly created through:
answer
government licensing
question
A natural monopoly is likely to arise when:
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economies of scale exist over the relevant range of demand.
question
True or false: A monopoly firm is a price maker, and it will pick a price that is the highest point on its demand curve.
answer
false
question
Which of the following is NOT potentially a barrier to entry into a product market?
answer
the absence of economies of scale in the product market
question
Which of the following best explains why a monopolist's marginal revenue is less than the sale price?
answer
When a monopolist reduces price in order to sell more units, it must lower the price of some units that could otherwise have been sold at a higher price.
question
Graphically, the marginal revenue curve of a monopolist:
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lies below the demand curve of a monopolist.
question
The demand curve of a monopolist is:
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downward sloping and above the marginal revenue curve.
question
If marginal revenue on the tenth unit of output equals $4 for a non-discriminating, profit-maximizing monopolist, then price:
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is greater than 4
question
If a monopolist's marginal revenue is less than zero over a range of output, then price elasticity of demand must be:
answer
less than one
question
Say that a monopolist is currently operating on the inelastic region of its demand curve. To maximize its profits, it should:
answer
raise its prices
question
Which of the following is NOT generally true about a profit-maximizing monopolist?
answer
The monopolist faces a perfectly elastic demand curve.
question
If a profit-maximizing monopolist finds that marginal cost is increasing and exceeds marginal revenue, it will:
answer
increase price and decrease output
question
At his current level of output, a monopolist has a Marginal Revenue of $10, a Marginal Cost of $6, and an economic profit of zero. If the market demand curve is downward sloping and his marginal cost curve is upward sloping, the monopolist:
answer
could increase profit by increasing output.
question
A price-taking firm and a monopoly firm are alike in that:
answer
both maximize profits by choosing an output where marginal revenue equals marginal cost.
question
A monopoly firm is charging the price the market will bear at a level of output where MC equals $22 and is increasing, MR equals $20, and average variable cost equals $17. To maximize profits, the firm should:
answer
decrease output increase price
question
The consumer surplus lost because monopolists restrict the production of output represents a welfare loss because:
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society is not using its scarce resources in the best way possible.
question
Monopoly results in a welfare loss because:
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the monopolist restricts output below the socially efficient level.
question
If there is just one producer in an industry where the average total cost curve declines throughout the output range up to where it intersects the industry demand curve:
answer
-the industry will be a natural monopoly.
-charging a price equal to marginal cost would entail economic losses for the producer.
-charging a price equal to average cost would entail a welfare cost.
-if the producer was left free to choose its profit maximizing price, less than the efficient amount would be produced.
-charging a price equal to marginal cost would entail economic losses for the producer.
-charging a price equal to average cost would entail a welfare cost.
-if the producer was left free to choose its profit maximizing price, less than the efficient amount would be produced.
question
Which of the following is true of monopoly but not true of perfect competition?
answer
Firms can potentially earn economic profits in the long run.
question
A monopoly industry:
answer
-has very significant barriers to entry.
-faces a downward sloping demand curve.
-produces a product for which there are no close substitutes.
-may earn economic profits or losses in the short run.
-faces a downward sloping demand curve.
-produces a product for which there are no close substitutes.
-may earn economic profits or losses in the short run.
question
Which of the following is a problem with government regulation of natural monopolies?
answer
reduced incentives to cut cost
question
If a regulatory board wanted to make sure that a natural monopoly chose a price resulting in the efficient level of output, it should set a price equal to:
answer
marginal cost
question
Marginal cost regulation of a natural monopoly:
answer
-generates economic losses for the seller.
-necessitates a subsidy payment to the firm.
-creates incentives that tend to shift average total cost curves in an upward direction.
-imposes a price that is less than average total cost.
-necessitates a subsidy payment to the firm.
-creates incentives that tend to shift average total cost curves in an upward direction.
-imposes a price that is less than average total cost.
question
A price-discriminating monopolist will tend to charge a lower price to students if it believes that students:
answer
have a lower willingness to pay than other demanders.
question
Which of the following is true about price discrimination?
answer
-When there are a number of competing firms, price discrimination is less likely because competitors tend to undercut the high prices charged those discriminated against.
-A profit-maximizing seller will charge a higher price for those with a greater willingness to pay, and a lower price for demanders with a lower willingness to pay.
-Price differentials between groups will erode if reselling is easy.
-Quantity discounts are a form of price discrimination which allow a seller to charge a higher price for the first unit than for later units.
-A profit-maximizing seller will charge a higher price for those with a greater willingness to pay, and a lower price for demanders with a lower willingness to pay.
-Price differentials between groups will erode if reselling is easy.
-Quantity discounts are a form of price discrimination which allow a seller to charge a higher price for the first unit than for later units.
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