ECON Ch. 12

Refer to the diagram. At the profit-maximizing level of output, total cost will be a) 0BHE b) 0AJE c) NM times 0M d) 0CGC

0BHE

Refer to the graph for a profit-maximizing monopolist. The firm will set its price at a) 0H b) 0K c) 0G d) 0J

0J

Which of the following is correct?

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

Confronted with the same unit cost data, a monopolistic producer will charge

a higher price and produce a smaller output than a competitive firm

Refer to the diagram. At the profit-maximizing level of output, the firm will realize a) an economic profit of ABHJ b) a loss of JH per unit c) a loss of GH per unit d) an economic profit of ACGJ

an economic profit of ABHJ

If a regulatory commission wants to provide a natural monopoly with a fair return, it should establish a price that is equal to

average total cost

A profit-maximizing firm should shut down in the short run if the average revenue it receives is less than

average variable cost

Barriers to entry

can result from government regulation

Natural monopolies result from

extensive economies of scale in production

X-inefficiency refers to a situation in which a firm

fails to achieve the minimum average total costs attainable at each level of output

Refer to the diagram for a non discriminating monopolist. Demand is elastic

for all levels of output less than q2

The demand curve faced by a pure monopolist

is less elastic than that faced by a single purely competitive firm

Pure monopolists may obtain economic profits in the long run because

of barriers to entry

A profit-maximizing monopolist facing the situation shown in the graph should

shut down in the short run

Price discrimination refers to

the selling of a given product to different customers at different prices that do not reflect cost differences