Microecon - Chapter 10 Concept Quiz

Which of the following is true regarding monopolies? A. They engage in rent seeking. B. Monopolies produce more output than would otherwise be produced in a perfectly competitive market. C. They provide an efficient outcome. D. They provide more choice than a perfectly competitive market.

A. They engage in rent seeking.

Microsoft likely has to spend billions of dollars building and developing an operating system, but once it is produced, the cost to get the software to each customer is almost zero. When Microsoft sells more units, their average total costs decrease. This means Microsoft is said to have ____________________. A. economies of scale B. constant returns to scale C. diseconomies of scale D. negative externalities

A. economies of scale

Compared to perfect competition, monopoly results in A. fewer units produced and sold B. more units produced and sold C. the same number of units produced and sold D. fewer, more, or the same number of units, depending on the monopoly

A. fewer units produced and sold

Monopoly power measures the ability to set the ___________ for a good. A. price B. output level C. quality D. demand

A. price

Compared to perfect competition, monopolies charge A. a lower price B. a higher price C. the same price D. a higher or lower price, depending on the monopoly

B. a higher price

Over the long run, a monopolist A. cannot continue to make profits and will earn a loss B. can continue to make economic profits if it can maintain a monopoly and keep competitors from entering the market C. will not make a profit or a loss but will operate at zero economic profit D. will always face government regulation

B. can continue to make economic profits if it can maintain a monopoly and keep competitors from entering the market

A natural monopoly exists when a single seller experiences ____________ average total costs than any potential competitor. A. higher B. lower C. equal D. sometimes higher and sometimes lower

B. lower

Suppose that at the current level of production, the price of a monopolist's product is equal to $15 per unit. Marginal revenue is equal to $10 per unit, and marginal cost is equal to $15 per unit. This monopoly A. has maximized profit and should keep production the same B. can increase its profit by producing and selling more units of its product C. can increase its profit by producing and selling fewer units of its product D. should shut down

C. can increase its profit by producing and selling fewer units of its product

Which of the following is considered a natural barrier? A. control of resources B. employment laws C. economies of scale D. licensing

C. economies of scale

Monopolies choose their profit maximizing A. output level B. price C. output level and price D. neither output level nor price

C. output level and price

Suppose there was only one producer of an expensive heart medication. The source of that producer's monopoly would most likely come from A. economies of scale B. advertising C. reputation D. a patent to produce the drug

D. a patent to produce the drug