ECO 2123 - Chapter 10 Quiz

Under which of the following situations would a monopolist increase profits by lowering price (and increasing output):

if it discovered that it was producing where MC < MR

A pure monopolist is selling 6 units at a price of $12. If the marginal revenue of the seventh unit is $5, then:

price of the seventh unit is $11.

Answer the next question(s) on the basis of the demand schedule shown below:

$3.

Answer the next question on the basis of the following table showing the demand schedule facing a nondiscriminating monopolist:

$5.

Refer to the above data for a nondiscriminating monopolist. This firm will maximize its profit by producing:

4 units.

(Last Word) DeBeers Consolidated Mines markets about:

55 percent of the world's rough-cut diamonds.

Which of the following is correct?

A purely competitive firm is a "price taker," while a monopolist is a "price maker."

If a monopolist's marginal revenue is $3.00 and its marginal cost is $4.50, it will increase its profits by:

If a monopolist's marginal revenue is $3.00 and its marginal cost is $4.50, it will increase its profits by:

(Consider This) Children are charged less than adults for admission to professional baseball games but are charged the same prices as adults at the concession stands. Which of the following conditions of price discrimination explain why this occurs?

The items cannot be bought by people in the low-price group and transferred to members of the high-price group.

What do economies of scale, the ownership of essential raw materials, and patents have in common?

They are all barriers to entry.

Which of the following is not a barrier to entry?

X-inefficiency

Pure monopoly refers to:

a single firm producing a product for which there are no close substitutes.

The MR = MC rule:

applies both to pure monopoly and pure competition.

The higher prices charged by monopolists:

are like a private tax that redistributes income from consumers to monopoly sellers.

Assume a pure monopolist is currently operating at a price-quantity combination on the inelastic segment of its demand curve. If the monopolist is seeking maximum profits, it should:

charge a higher price.

In the long run a pure monopolist will maximize profits by producing that output at which marginal cost is equal to:

marginal revenue.

In the short run, a monopolist's economic profits:

may be positive or negative depending on market demand and cost conditions.

Pure monopolists may obtain economic profits in the long run because:

of barriers to entry.

With respect to the pure monopolist's demand curve it can be said that:

price exceeds marginal revenue at all outputs greater than 1.

Because the monopolist's demand curve is downsloping:

price must be lowered to sell more output.

(Last Word) In a recent policy change, DeBeers has decided to:

promote "premium diamonds" and other luxury goods as preferable to synthetics.

If a regulatory commission imposes upon a nondiscriminating natural monopoly a price that is equal to marginal cost and below average total cost at the resulting output, then:

the firm must be subsidized or it will go bankrupt.

Which of the following best approximates a pure monopoly?

the only bank in a small town

For a pure monopolist marginal revenue is less than price because:

when a monopolist lowers price to sell more output, the lower price applies to all units sold.

A nondiscriminating profit-maximizing monopolist:

will never produce in the output range where demand is inelastic.