Chapter 12 Questions
A monopolistic firm has a sales schedule such that it can sell 10 prefabricated garages per week at $10,000 each, but if it restricts its output to 9 per week it can sell these at $11,000 each. The marginal revenue of the 10th unit sales per week is
$1,000
Which of the following is correct?
A purely competitive firm is a "price taker", while a monopolist is a "price maker".
Which of the following characteristic of a pure monopolist's demand curve?
It is the same as the market demand curve.
What do economies of scale, the ownership of essential raw materials and patents have in common?
They are all barriers to entry.
Which of the following is not a barrier to entry?
X-inefficiency.
Pure monopoly refers to
a single firm producing a product for which there are no close substitutes.
Barriers to entering an industry
are the basis of monopoly.
Which of the following is a characteristic of pure monopoly?
barriers to entry.
The marginal revenue curve for a monopolist
becomes negative when output increases beyond some particular level.
A purely monopolistic firm
faces a downsloping demand curve.
The pure monopolist's demand curve is relatively elastic
in the price range where marginal revenue is positive.
When a firm is on the inelastic segment of its demand curve, it can
increase profits by increasing price.
The nondiscrimination monopolist's demand curve
is less elastic than a purely competitive firm's demand curve.
The demand curve faced by a pure monopolist
is less elastic than that faced by a single purely competitive firm.
The nondiscrimination pure monopolist's demand curve
is the industry demand curve.
A natural monopoly occurs when
long-run average costs decline continuously through the range of demand.
Large minimum efficient scale of plant combined with limited market demand may lead to
natural monopoly.
Pure monopolists may obtain economic profits in the long run because
of barriers to entry.
With respect to the pure monopolist's demand curve, it can be said that
price exceeds marginal revenue at all outputs greater than 1.
Because the monopolist's demand curve is downsloping,
price must be lowered to sell more output.
For an imperfectly competitive firm,
the marginal revenue curve lies below the demand curve because any reduction in price applies to all units sold.
Which of the following best approximates a pure monopoly?
the only grocery store in a small isolated town.
If a nondiscriminating imperfectly competitive firm is selling its 100th unit of output for $35, its marginal revenue
will be less than $35.
A nondiscrimination profit-maximizing monopolist
will never produce in the output range where demand is inelastic.
