Microeconomics Exam 3 - Chapter 12

X-inefficiency is said to occur when a firm's: A) Average costs of producing any output are greater than the minimum possible average costs B) Marginal costs of producing any output are greater than the minimum possible total costs C) Total costs of producing any output are greater than the minimum possible average costs D) Short-run costs of producing any output are greater than the long-run costs

A) Average costs of producing any output are greater than the minimum possible average costs

Assume the owners of the only gambling casino in Wisconsin spend large sums of money lobbying state government officials to protect their gambling monopoly. Economists refer to these expenditures as: A) Rent seeking B) Socially optimal pricing C) Perfect price discrimination D) Diseconomies of scale in production

A) Rent seeking

A profit-maximizing firm should shut down in the short run if the average revenue it receives is less than: A) average variable cost B) average total cost C) average fixed cost D) marginal cost

A) average variable cost

A monopolist can sell 20 toys per day for $8.00 each, To sell 21 toys per day, the price must be cut to $7.00. The marginal revenue of the 21st toy is: A) -$10 B) -$13 C) -$18 D) -$21

B) -$13

Under pure monopoly, a profit maximizing firm will produce: A) In the inelastic range of its demand curve B) In the elastic range of its demand curve C) Only where total costs are zero D) Only where marginal revenue is zero

B) In the elastic range of its demand curve

A monopolist will definitely discontinue production in the short run if: A) Price is less than average total cost B) Price is less than average variable cost C) Marginal revenue is less than average total cost D) Marginal revenue is less than average variable cost

B) Price is less than average variable cost

Which is most charactersitic of a pure monopoly? A) There is a dominant firm in a multifirm industry B) The firm produces a good or a service for which there are no close substitutes C) The firm has considerable control over the quantity of the output produced, but not over price D) Exit from the industry is blocked but entry into the industry is not relatively easy

B) The firm produces a good or a service for which there are no close substitutes

Suppose a monopolist produces output where total revenue is maximized. At that output, the price elasticity of demand for the monopolist's output is: A) greater or equal to one B) less than one C) equal to one D) impossible to determine

C) equal to one

The region of demand in which the monopolist will choose a price-output combination will be: A) Inelastic because as price declines and output increases, total revenue will increase B) Inelastic because as price declines and output increases, total revenue will decrease C) Elastic because as price declines and output increases, total revenue will decrease D) Elastic because as price declines and output increases, total revenue will increase

D) Elastic because as price declines and output increases, total revenue will increase

Under conditions of pure monopoly: A) There are close substitutes B) There is no advertising C) The firm is a price taker D) Entry is blocked

D) Entry is blocked

If a monopolist is operating at an output level where marginal revenue is positive, the firm: A) Has maximized total revenues B) Could raise revenues by raising prices C) Can always increase profits by lowering its price D) Is operating on the elastic portion of its demand curve

D) Is operating on the elastic portion of its demand curve

Many people believe that monopolies charge any price they want to without affecting sales. Instead, the output level for a profit-maximizing monopoly is determined by: A) Marginal cost = demand B) Marginal revenue = demand C) Average total cost = demand D) Marginal cost = marginal revenue

D) Marginal cost = marginal revenue

What type of barrier to entry was used by De Beers throughout much of its history to maintain its monopoly position? A) Patent protection B) Government regulation C) Economies of scale D) Ownership of an essentil resource

D) Ownership of an essentil resource

If a monopolized industry should become purely competitive without any change in the cost conditions: A) Both price and quantity produced will increase B) Both price and quantity produced will decrease C) Price will increase and quantity produced will decrease D) Price will decrease and quantity produced will increase

D) Price will decrease and quantity produced will increase

Which is a barrier to entry? A) Close substitutes B) Diseconomies of scale C) Government licensing D) Price-taking behavior

C) Government licensing

One feature of pure monopoly is that the demand curve: A) is vertical B) is horizontal C) slopes upward D) slopes downward

D) slopes downward

Other things equal, which reduces competition in an industry? A) Patent laws B) Freedom of entry for new firms C) An increase in the number of producers D) An increase in the number of buyers

A) Patent laws