Quiz #10

Which of the following is correct?

A purely competitive firm is a "price taker" while a monopolist is a "price maker"

Pure monopoly refers to

A single firm producing a product for which there are no close substitutes

If a regulatory commission wants to provide a natural monopoly with fair return, it should establish a price that is equal to

Average total cost

Which of the above diagrams correctly portrays a nondiscriminating pure monopolist's demand and marginal revenue curves?

B

Pure monopolist may obtain economic profit in the long run because

Barriers to entry

Refer to the above diagram for pure monopolist. Monopoly price will be

C

Which of the above diagrams portrays demand and marginal revenue curves of a purely competitive seller?

C

Refer to the above diagram, To maximize profits of minimize losses this firm should produce

E units charging price C

Refer to the above diagram for pure monopolist. Monopoly output will be

F

An unregulated pure monopolist will maximize profits by producing that output at which

MR=MC

As its profit maximizing output, a pure non discriminating monopolist achieves

Neither productive or allocative efficiency

Economic profit in the long run is:

Possible for a pure monopoly, but not for a pure competitor

Comparing a pure monopoly and a purely competitive firm with identical costs, we would find in the long run equilibrium that the pure monopolist's -

Price would be higher, but output would be lower

Which of the following best approximates a pure monopoly

The only bank in a small town

A dilemma of regulation is that

The regulated price that achieves allocative efficiency is also likely to result in losses

Price discrimination refers to:

The selling of a given product at different prices that do not reflect cost differences

What do economies of scale, the ownership of essential raw materials, and patents have in common?

They are all barriers to entry

The MR=MC rule applies

To both pure monopoly and pure competition

If a regulatory commission wants to provide a natural monopoly it should establish a price that is equal to

Where the marginal cost intersects demand curve

Which of the following is not a barrier to entry?

X-efficiency