Microeconomics Test 4

if a monopolist can sell 7 units when the price is $4 and 8 units when the price is $3) then marginal revenue of selling th eighth unit is equal to

$-4

Which of the following are necessary characteristics of a monopoly? (i)the firm is the sole seller of its product (ii) the firms product does not have close substitutes (iii) the firm generates a large economic profit (iv) the firm is located in a small geographic area

(i) and (ii)

which of the following statements is correct for a monopolist? (i) the firm maximizes profits by equating marginal revenue with marginal cost (ii) the firm maximizes profits by equating with marginal cost (iii) demand equals marginal revenue (iv) average revenue equals price

(i) and (iv)

monopolistically competitive markets differ from perfectly competitive markets due to (i) the number of sellers (ii) the barriers to entry (iii) the product differentiation among the sellers

(iii)

when a monopolist decreases the price of its good consumers

buy more

the prisoner's dilemma provides the insights into the

difficulty of maintaining cooperation

monopoly firms have what kind of slopes?

downward sloping demand curves, and they can sell only a limited quantity of output at each price

True or false: monopolists typically produce larger quantities of output than competitive firms

false

a monopoly is an inefficient way to produce a product because

it produces a smaller level of output than would be produced in a competitive market

when a natural monopoly exists it is

never cost effective for two or more private firms to produce the product

when oligopoly firms collude

they are behaving as a cartel

monopolies use their market power to

charge a price that is higher than marginal cost

a similarity between monopoly and monopolistic competition is that in both market structures

sellers are price makers rather than price takers

when oligopolistic firms interacting with one another each choose their best strategy given the strategies chosen by other firms in the market we have

a nash equilibrium

patent and copyright laws encourage

creative activity

one way in which monopolistic competition differs from oligopoly is that

in oligopoly markets there are only a few sellers

sizable economic profits can persist over time under monopoly if the monopolist

is protected by barriers to entry

a monopolistically competitie industry is characterized by

many firms selling products that are similar but not identical

if a profit maximizing monopolist faces a downward sloping market demand curve its

marginal revenue is less than the price of the product