Econ Ch 12 Quiz

a... will use its power over product quantity and price whenever it is advantageous to do so

price maker

Why do costs differ between a purely competitive firm and a pure monopoly?

- allowing technological advance - economies of sale - x-inefficiency - monopoly preserving expenditures

which of the following are reasons monopoly is not widespread in the United States

- barrier to entry are seldom completely successful - patents eventually expire

which of the following are the main characteristics of a pure monopoly

- blocked entry for other firms - presence of a single seller - unavailability of close substitutes for its products - control over the price

monopolies that have ... products engage mainly in advertising their products attributes while those that have ... products engage primarily in public relations advertising

- differentiated - standardized

a firms positions itself in the best profit- maximizing level of production when the amount of output reflects the point at which the last units marginal revenue is equal to its marginal cost. why?

- each unit prior to the MR=MC rule earns more revenue for the firm than its costs -each unit of output after MR=MC amount will earn less revenue than its costs

which of the following steps are necessary to determine the profit-maximizing level of output, profit -maximizing price, and economic profit in pure monopoly

- empty the profit-maximizing rule of MR=MC -Identify the profit-maximizing price and output by finding the price/output combination at MR=MC

which of the following are characteristics of public utilities

- government owned or regulated - monopolies or near monopolies

A firm can be expressly prohibited from engaging in certain business activities or can be broken into two or more competing firms when it

- is found guilty of monopoly abuse

Comparing total revenue and total cost at each possible level of production and choosing the output with the greatest possible difference is another way to determine:

- loss-minimizing output - profit- maximizing output

monopolists use economies of scale to block the entry of new firms into an industry by

- lowering prices so that another firm cannot compete

if a firm is found guilty of achieving a monopoly through anticompetitive actions, then which of the following may occur

- may be expressly prohibited from engaging in certain business activities - may be broken into two or more competing firms

Which of the following are reasons that a monopolist is considered a price maker

- monopolist exerts control over the price - monopolist controls the total quantity supplied

which of the following are examples of X-inefficiencies that may be found in regulated firms

- more managers and staff than necessary - nicer than typical office buildings - higher than competitive wages

which of the following are legal barriers to entry

- patents - government licensing

which of the following are assumptions made in the model of pure monopoly

- patents, economies of scale, and resource ownership secure the firms monopoly - the firm is a single- priced monopolist and chargers the same price for all units of output - no unit of government regulates the firm

which of the following can cause x-inefficiency

- poorly motivated work force - hiring incompetent relatives - desire for easier work life

which of the following are potential solutions to the economic losses incurred by a regulated monopoly caused by socially optimal pricing

- price discrimination -public subsidies

Monopolists may create and entry barrier when confronted with a new entrant into the industry by

- reducing product price -incurring advertising costs

at output levels prior to MR=MC marginal... is higher in comparison to marginal ...

- revenue - cost

which of the following lead to declines in the long-run average total costs

- spreading of product development cost -greater use of specialized inputs - network effects

which of the following contributes to the complexities involved in fair-return pricing

- the difficulty of determining what the fair return price should be - large rate setting bureaucracies - rate decisions that require extensive public input though letters and hearings

a monopolist does not have a supply curve because ...

- there is no single, unique price associated with each level of output - it does not equate price with marginal cost

how can imperfect competitors influence total supply

- they can make their own output decisions

which of the following are reasons for a monopoly's loss of economic profit

-change in tastes reducing demand -upward- shifting cost curves caused by escalating resource prices

What allows a natural monopoly to produce efficiently?

-declining long-run average total cost curve - extensive economies of scale

what is the shape of the product demand curve for a pure monopolist

-downward sloping

which of the following competitors are imperfect

-oligopolists - pure monopolists - monopolistic competitors

which of the following is a good example to network effects

-people with similar software can share pictures - the internet allows people to send and receive emails

a regulated monopoly is likely to suffer losses when

-price is set to marginal cost (P=MC) -price is set to achieve the most efficient allocation of resources

barriers created by monopolist

-price reductions - increased advertising

For a monopolist, marginal revenue is lower than... for every unit of output except the first

-revenue - price

natural gas and electricity are both examples of which type of monopoly

=standardized

T or F: For a pure monopolist, total revenue increases at an increasing rate

False

Monopoly yields neither ... nor allocative efficiency.

productive

if producing is preferable to shutting down a profit seeking monopolist will produce up to the output of ...

MR=MC

when... efficiency and allocative efficiency are not achieved in a market, it is known as an efficiency loss

productive

What are the two legal barriers to entry created by the government

Patents, licences

which is more likely to experience an economic profit in the long run

a pure monopolist

:single seller" refers to

a sole producer of a specific good or service

which of the following does the monopolist not have

a supply curve

which of the following can be a cause of extensive economies of scale

modern technology

if the objective of government is to achieve... efficiency, it should establish a legal price for the monopolist that is equal to its marginal cost

allocative

a monopolist does not achieve productive efficiency because it produces a level of output that does not correspond to the minimum point of the ... .... cost curve

average total

what does the characteristic of monopoly called "blocked entry' refer to

barriers

what is the term for factors that prohibit firms from entering and industry

barriers to entry

With a fixed downward-sloping demand curve, how can a monopolist increase sales?

by charging a lower price

how is economic profit determined

by multiplying per unit profit by the total quantity produced

comparing total revenue and total cost at each possible level of production and choosing the output with the greatest possible difference is another was to determine...

the profit maximizing output

which of the following is a reason for a monopoly's loss of economic profit

changes in taste that reduce demand for a product

how does a monopolist change the price of its products

changing the quantity of the product it produces

simultaneous... is a products ability to satisfy a large number of consumers at the same time

consumption

What might monopolists do when confronted with a new entrant into their industry?

create an entry barrier

efficiency loss is also known as ... loss

deadweight

marginal revenue for the monopolist compared to that of a pure competitor

declines and is lower than product price

economies of scale refer to ... average total costs with added firm size

declining

with a natural monopoly the demand curve intersects the long-run average total cost curve where the long run average total cost curve is still

declining

the key difference between a pure monopolist and a purely competitive seller lies on the ... side of the market

demand

what is the difference in demand between a purely competitive seller and a monopolist

demand for the purely competitive seller is perfectly elastic, and demand for the monopolist is not

price makers are firms with

downward sloping demand curves

total ... profit is found by multiplying per-unit profit by the profit maximizing output

economic

total ... is found by multiplying per- unit profit but the profit- maximizing output

economic profit

which of the following is more likely for a pure monopolist than for a pure competitor

economic profit

a firms long-run average total costs may decline over a wide range of output due to ... of scale

economies

a natural monopoly may occur when only a single firm can achieve the ... of scale necessary to compete in an industry

economies

what term is used to describe declining average total costs with added firm size

economies of sale

T or F: in the United States most regulatory agencies do not establish a fair return price

false

a lone barbershop in a small community is an example of not only a pure monopoly but also a ... monopoly

geographic

x- inefficiency occurs when a firm operates at a cost that is ... than the lowest cost for a particular level of output

higher

which of the following steps are necessary to determine the profit- maximizing level of output, profit- maximizing price, and economic profit in pure monopoly

identify the profit- maximizing price and output by finding the price/output combination at MR=MC

... competitors include pure monopolists, oligopolists and monopolistic competitors

imperfect

... competitors includes pure monopolists, oligopolists, and monopolistic competitions

imperfect

all of the following are examples of barriers to entry except

income

in a pure monopoly the demand curve for the firm is also the demand curve for the ...

industry

the firm and ... are synonymous in pure monopoly

industry

the profit maximizing monopolist will always want to avoid the

inelastic

the economic profit per unit is the amount that the product price ... the average total cost at the profit- maximizing output

is greater than

when marginal revenue is negative, what is happening to total revenue

it is diminishing

what is true of total revenue when marginal revenue is positive

its increasing

government creates ... barriers to entry

legal

a socially optimal price may result in a short-run economic ... for the monopoly if average total costs are not covered

loss

monopolists use economies of scale to block the entry of new firms into an industry by...

lowering prices so that another firm cannot compete

A monopolist is a price ... because it controls the total quantity produced and thus has control over the price

maker

the change in total revenue is called ... revenue

marginal

slashing prices is an example of an entry barrier created by a

monopolist

which of the following combine characteristics of pure competition and pure monopoly

monopolistic competition and oligopoly

network effects may drive a market toward... because consumers tend to choose standard products that everyone else is using

monopoly

When the market demand curve crosses the long-run average total cost curve where average total costs are declining, it is called a/n

natural monopoly

a ... monopoly occurs when a single firm has the bulk of sales in a specific market

near

a ... monopoly when a single firm has the bulk of sales in specific market

near

... effects exist if the value of a product to each user increases as the total number of users increase

network

which characteristic of pure monopoly requires a consumer to buy the monopolized product or do without entirely

no close substitutes

a monopolist must obtain a minimum of a ... profit in the long run or it will go out of business

normal

a monopolist uses the profit-maximizing rule of marginal revenue equals marginal cost to determine the profit-maximizing ... and ...

output and price

... laws aim to protect an inventor from rivals who would use the invention without having shared in the effort and expense of developing it

patent

which of the following is considered a barrier to entry protecting an inventor from its rivals

patents

the spread or difference that results when product price exceeds average total cost determines

per unit economic profit

at a pure monopolist profit-maximizing output its ... exceeds marginal cost, resulting in allocative inefficiency

price

for the pure monopolist there is no relationship between ... and quantity supplied and therefore no supply curve

price

imperfect competitors, by changing market supply, can influence product

price

rate regulation is also known as ... regulation

price

an unregulated monopolist uses MR=MC rule to determine the

profit maximizing output and price

considering the industry structures of pure competition and pure monopoly a firm will experience a more inelastic demand curve in which form of industry

pure monopoly

which of the following exists when a single firm is the sole producer of a product for which there are no close substitutes

pure monopoly

what is it called when a firm spends significant money to maintain a monopoly through government legislation

rent- seeking expenditures

which of the following add nothing to the firms output but increase the firms costs

rent-seeking expenditures

... and developmental leads to most patentable inventions and products

research

the ... price is where a monopoly's price is equal to marginal cost

socially optimal

Monopolies that have ____ products engage mainly in public relations advertising.

standardized

monopolists may have products that are ... or differentiated

standardized

a pure monopolist has no ... curve

supply

what aspect of the market defines the crucial difference between a pure monopolist and purely competitive seller

the demand curve

in a pure monopoly marginal revenue is less than price for every unit of output except which one

the first

which of the following is a reason for a monopolist to block entry in a market

to restrict potential competitors from entering the market

a monopolist will never chose a pricy-quantity combination that causes a decrease in

total

when a firm produces a specific output level at a high cost than the necessary cost for that level of output it is called ...

x-inefficiency