HW3 - Monopolies

Which of the following firms is most likely to be a​ monopoly? A. clothing store B. local distributor of natural gas C. local bank D. local restaurant E. local book store

local distributor of natural gas

A monopoly A. must determine the price it will charge. B. cannot price discriminate because such a pricing strategy is illegal in the United States. C. faces extensive competition from firms making close substitutes. D. has no control over the price it can charge. E. Both answers B and C are correct.

must determine the price it will charge.

We define a monopoly as a market with A. a few suppliers and barriers to entry. B. one supplier and no barriers to entry. C. many suppliers with no barriers to entry. D. many suppliers with barriers to entry. E. one supplier with barriers to entry.

one supplier with barriers to entry.

A natural barrier to entry is defined as a barrier that arises because of A. anticompetitive practices by a firm that keep other firms from producing. B. one firm owning a key natural resource. C. many firms producing the good and thereby allowing choice for all consumers. D. patents or licenses that exclude others from producing a good or service. E. technology that allows one firm to meet the entire market demand at lower average total cost than could two or more firms.

technology that allows one firm to meet the entire market demand at lower average total cost than could two or more firms.

Suppose the grocery store market in Kansas City is perfectly competitive. Then one store buys all the others and becomes a​ single-price monopoly. The figure above shows the relevant demand and cost curves. When the market is perfectly​ competitive, the price of a pound of steak is A. $4. B. $8. C. $2. D. $20. E. $12.

$8.

A barrier to entry is A. the economic term for diseconomies of scale. B. anything that protects a firm from the arrival of new competitors. C. a factor that increases competition because firms must continue to operate in the market in which they were founded. D. illegal in most markets. E. the same as rent seeking.

anything that protects a firm from the arrival of new competitors.

Which of the following can be a barrier to​ entry? i. ownership of a necessary input ii. requiring a government license iii. large diseconomies of scale A. i and ii B. i, ii, and iii C. i only D. i and iii E. ii only

i and ii

Patents i. encourage the invention of new products and production methods. ii. generally discourage innovation iii. are exclusive rights granted to the inventor of a product or service. A. i only B. ii only C. i and iii D. i, ii, and iii E. ii and iii

i and iii

Which of the following is true regarding price​ discrimination? i. It converts consumer surplus to economic profit. ii. A price discriminator must be a monopoly. iii. To be able to price​ discriminate, the firm must be able to identify different types of buyers. A. ii and iii B. i and iii C. ​i, ii, and iii D. ii only E. i and ii

i and iii