MICRO EXAM 3: Part 3

The demand curve for a monopoly is

downward sloping.

The good produced by a monopoly

has no close substitutes.

A price‐discriminating monopoly is a monopoly that

sells different units of a good or service at different prices.

A perfectly competitive market is in equilibrium and then demand decreases. The decrease in demand means the market price will ________ and eventually there will be ________.

FALL; EXIT by existing firms

Assume someone organizes all farms in the nation into a monopoly. What is the monopolyʹs marginal cost curve?

It is a VERTICAL line at the FORMERLY competitive industryʹs quantity.

Which of the following is always true for a single‐price monopolist?

P > MR

When compared to a perfectly competitive market, a single‐price monopoly with the same costs produces ________ output and charges ________ price.

a smaller; a higher

A single‐price monopoly transfers

consumer surplus to producers.

If a perfectly competitive seller is maximizing profit and is making zero economic profit, which of the following will this seller do?

continue at the current output, making zero economic profit

Which of the following is a legal barrier to entry?

i) public franchise ii) government license iii) patent i, ii, and iii

If a perfectly competitive firm is maximizing its profit and is making an economic profit, which of the following is correct?

i. Price equals marginal revenue. ii. Marginal revenue equals marginal cost. iii. Price is greater than average total cost. i, ii, and iii

Technology reduces the average cost of production, so in the long run

i. perfectly competitive firms produce at a lower average cost. ii. the market price of the good falls. iii. firms with older plants either exit the market or adopt the new technology. i, ii, and iii.

In the long run, perfectly competitive firms will exit the market if the price is

less than average total cost.

Which of the following firms is most likely to be a monopoly?

local distributor of natural gas

For a perfectly competitive syrup producer whose average total cost curve does not change, an economic profit could turn into an economic loss if the

market demand for syrup DECREASE

When new firms enter the perfectly competitive Miami bagel market, the market

supply curve shifts rightward.

A natural barrier to entry is defined as a barrier that arises because of

technology that allows one firm to meet the entire market demand at lower average total cost than could two or more firms.

A single‐price monopoly faces a linear demand curve. If the marginal revenue for the second unit is $20, then the marginal revenue for the

third unit is LESS than $20.