CHAPTER 10: MONOPOLY

In the above situation, is business demand is elastic or inelastic? A Elastic B Inelastic

A

A profit-maximizing monopoly will produce where which of the following is true? Multiple answers: You can select more than one option A Marginal revenue is less than the price B Marginal revenue is equal to the marginal cost C Marginal revenue is positive

ALL THE ANSWERS

The monopoly and perfectly competitive firm are allocatively efficient. A True B False

B

A monopolist deciding to engage in price discrimination wants to keep the quantity produced the same (or close to the same) because which of the following is true? A Revenue will automatically go down with price discrimination. B Marginal revenue will be greater than price at that point. C Costs will decrease with an increase in quantity. D Costs will increase with an increase in quantity.

D

In the long run, a monopolist facing the same cost curves as a perfectly competitive firm will charge a ______________ price than the competitive market and produce a ______________ output. A Lower; higher B Lower; lower C Higher; higher D Higher; lower

D

What is a reason that monopolies exist? A A firm owns a resource that no one else has B A firm is given legal protection that prevents another firm from entering C A firm naturally drives out competitors through lower prices. D All of the above are reasons

D

Is the marginal utility / marginal cost = marginal utility / price for the perfectly competitive firms? A Yes B No

a

Is the marginal utility / marginal cost = marginal utility / price for the monopoly? A Yes B No

b

A decrease in variable costs will cause the monopoly to do what? A Decrease the price B Decrease the economic profits C Lower the level of output D Increase the marginal revenue

A

Given your answers to the previous questions, a monopolist will produce on the portion of the demand curve that is _______. A Elastic B Inelastic C Perfectly elastic D Either elastic or inelastic

A

If a monopoly faces a demand curve that is downward-sloping, then marginal revenue will be which of the following? A Must be less than price B Must be equal to price C Must be greater than price D Is not related to the price

A

In the figure above, the firm's profit would be ______. A Positive B Negative C Zero D Cannot be determined

A

Marginal revenue is only positive when demand is _______. A Elastic B Inelastic C Neither elastic nor inelastic

A

The monopolist's economic profits will be ______________ than the total of the competitive firms' profits. A Higher B Lower C The same

A

If a monopoly increases the quantity above the profit-maximizing level which of the following will be true? Multiple answers: You can select more than one option A Marginal revenue will be lower than before B Marginal cost will be greater than marginal revenue C Price would decrease

A B AND C

In the figure above, if a monopoly charged the price of F and produced the monopoly quantity, then there would be a(n) ________. A Equilibrium B Shortage C Surplus D None of the above

B

A monopoly producing where marginal revenue equals marginal cost will do which of the following? Multiple answers: You can select more than one option A It will make positive profits B It cannot increase quantity and make a greater profit C It is producing at the highest profit possible in their market D It is producing where the additional revenue is just equal to the additional cost for each output

B C D

The Coca-Cola Company is the only producer of Coca-Cola. Is it considered a monopoly? A Yes, it is the only firm with the recipe for a real Coca-Cola. B Yes, because Coca-Cola has no close substitutes. C No, because Coca-Cola has many close substitutes.

C

The firm should produce at what quantity so that marginal revenue is not less than marginal cost and profits are at their maximum point? A 0 B 1 C 2 D3 E4

C

All firms that are profit-maximizing, regardless of whether the demand curve is horizontal or downward-sloping, will produce where which of the following is true? A Marginal revenue is greater than price B Demand is elastic along the whole curve C Marginal cost is equal to price D Marginal cost is equal to marginal revenue

D

If a monopoly is not producing at the profit-maximizing quantity, then it must be the case that which of the following is true? A Marginal cost is greater than marginal revenue B Marginal revenue is greater than marginal cost C Marginal revenue is negative D All of the above are possible

D

Given the following data, what price will a monopolist most likely charge? Average cost and marginal cost are equal to $10 at all levels of output. answerable question reference A Less than $8 B $8 C $10 D $12 E More than $12

E

In the long run, the monopolist ______________ (will/will not) produce a quantity where average cost is at a minimum, whereas the perfectly competitive firm ______________ (will/will not) produce that quantity. A Will; will B Will; will not C Will not; will D Will not; will not

c

A monopoly would never produce where marginal revenue is negative because which of the following is true? A Marginal cost is always positive B Profits would automatically be negative C A firm is always trying to maximize revenue

A

Assume that a market is operating in equilibrium. What would happen if the monopoly increased quantity produced but the price did not change? A A surplus B A shortage C People would stop buying from the monopoly all together D None of the above

A

A profit-maximizing monopolist produces where marginal cost is equal to ________. A Price B Marginal revenue C 0 D The minimum

B

In the above situation, is individual demand is elastic or inelastic? A Elastic B Inelastic

B

Marginal cost is always positive; therefore, marginal revenue at the profit-maximizing output will have to be ________. A Negative B Positive C Equal to 0

B

Markets of perfectly competitive firms and monopolies both _________. A Have barriers to entry B Have downward sloping demand curves C Are easy to enter and exit

B

Why do barriers to entry allow a monopolist to make positive economic profits? A It causes the monopoly to have lower costs. B Otherwise, firms would enter the market, resulting in a decrease in price and profits. C It allows the monopoly to be price-takers. D It does not need a barrier to entry because of the market demand.

B

A monopolist will engage in price discrimination, if it can, in order to increase profits by doing which of the following? A By selling more of its goods B By reducing costs for some of its products C While continuing to produce the same amount D While increasing prices for all consumers and producing less

C

A natural monopolist will face which of the following? A The same costs a competitive industry faces B Ownership of all of the sources of a natural resource C Economies of scale D Prices that are higher than average costs, while other monopolists will have average costs that are higher than prices

C

Copyrights on movies, books, and music act as a barrier to entry in order to give people what? A Guaranteed profits B Starter money for to pay for research and development C Incentives to create D Unfair advantages

C

Imagine two firms with identical cost structures that do not exhibit economies of scale at high levels of production. One is competing in a perfectly competitive market and one is a monopoly. In the long run which of the following is true? A The monopoly and the perfectly competitive firm will produce the same quantity B The monopoly and the perfectly competitive firm will charge the same price C The monopoly will charge a higher price than the perfectly competitive firm D The monopoly will sell a higher quantity than the perfectly competitive firm

C