CH 24
Which of the following is not a characteristic of a monopoly?
Free entry and exit.
For a monopolist, price is ________ marginal revenue.
greater than
The better the substitutes for a monopoly firm's product, the
greater the price elasticity of demand.
A natural monopoly
has decreasing long-run average total costs over a very large range of output. has economies of scale over a very large range of output. has decreasing long-run marginal costs over a very large range of output.
The demand curve faced by the monopolist
has greater price elasticity of demand as close substitutes for the monopoly product are developed.
As compared to a perfectly competitive industry, a monopoly industry with identical cost curves will
produce less and set a higher price.
The monopolist sets price by
producing the quantity where marginal cost equals marginal revenue and charging the price that corresponds to that quantity.
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
on the elastic portion of the demand curve and charge a higher price.
Charging different prices for similar products that have different marginal costs is called
price differentiation.
When grocery stores issue special discount membership cards for shoppers effectively offering different prices based on quantities consumed, this is an example of
price discrimination.
For a monopoly,
price equals average revenue only.
The marginal revenue curve for a perfectly competitive firm is _________ while the marginal revenue curve of the monopolist is _________.
horizontal, downward sloping
A manager of a monopoly firm notices that the firm is producing output at a rate at which average total cost is falling but is not at its minimum feasible point. The manager argues that surely the firm must not be maximizing its economic profits. The manager's argument is
incorrect, since profit maximization requires that marginal revenue equals marginal cost but does not require the average total cost to be at any particular level.
Which of the following is not a barrier to entry into a market?
Diseconomies of scale.
In order to price discriminate, a firm must
face a downward-sloping demand curve.
Why is there a social cost of monopoly?
Too few resources are being used in a monopoly.
Which of the following statements is FALSE?
Typically there are numerous very close substitutes for the product of a monopolist.
The demand curve of the monopolist
is the same as the industry demand curve.
Monopoly has social costs because
a monopoly produces less and charges a higher price than a perfectly competitive firm would producing the same product or service. P is greater than MC and this implies economic inefficiency.too few resources are being used in the monopoly industry and too many are used elsewhere.
A monopolist is defined as
a single supplier of a good or service for which there is no close substitute. Your answer is correct.
In a monopoly market structure, the firm (the monopolist)
is the whole industry.
A monopoly is socially inefficient because it
charges a price greater than marginal cost. Your answer is correct.
Marginal revenue for a monopolist is
downward sloping and always less than price.
As opposed to other types of monopoly, a natural monopoly typically owes its monopoly position to
economies of scale.
To sell one more unit of a good, a monopolist must
lower the price on all units.
Price discrimination refers to
selling a product at different prices, with the price difference being unrelated to differences in marginal cost.
The demand curve faced by the monopolist
slopes downward.
A monopolist's demand curve is
the industry demand curve.
A firm can be the sole supplier of a good and still not be considered a monopoly if
there are very close substitutes for the good.
A major difference between a monopolist and a perfectly competitive firm is that
the monopolist's marginal revenue curve lies below its demand curve.