Test 3 Practice Questions
D
A monopolist faces: A) A perfectly elastic demand curve. B) A perfectly inelastic demand curve. C) A horizontal demand curve. D) A downward-sloping demand curve.
C
A monopolist's profit-maximizing price and output correspond to the point on a graph: A) Where average total cost is maximized. B) Where total costs are the smallest relative to price. C) Where marginal revenue equals marginal cost and charging the price on the market demand curve for that output. D) Where price is as high as possible.
A
A monopoly firm's demand curve: A) Is the same as the market demand curve. B) Is perfectly inelastic. C) Is more inelastic than the demand curve for the product. D) Is inelastic at high prices and elastic at lower prices.
A
A monopoly is characterized by all of the following except: A) There are only a few sellers, each selling a unique product. B) Entry barriers are high. C) There are no close substitutes to the firm's product. D) The firm has market power.
C
A profit maximizing monopoly's price is: A) The same as the price that would prevail if the industry was perfectly competitive. B) Less than the price that would prevail if the industry was perfectly competitive. C) Greater than the price that would prevail if the industry was perfectly competitive. D) Not consistently related to price that would prevail if the market was perfectly competitive.
B
Economic efficiency requires that a natural monopoly's price be: A) Equal to average total cost where it intersects the demand curve. B) Equal to marginal cost where it intersects the demand curve. C) Equal to average variable cost where it intersects the demand curve. D) Equal to the lowest price the firm can charge and still make a normal profit.
C
For a natural monopoly to exist: A) A firm must continually buy up its rivals. B) A firm's long-run average cost curve must exhibit diseconomies of scale beyond the economically efficient output level. C) A firm's long-run average cost curve must exhibit economies of scale throughout the relevant range of market demand. D) A firm must have a government-imposed barrier.
C
In a natural monopoly, throughout the range of market demand: A) Marginal cost is above average total cost and pulls average total cost upward. B) Average total cost is above marginal cost and pulls marginal cost upward. C) Marginal cost is below average total cost and pulls average total cost downward. D) There are diseconomies of scale.
A
In regulating a natural monopoly, the price strategy that ensures the highest possible output and zero profit is one that sets price: A) Equal to average total cost where it intersects the demand curve. B) Equal to marginal cost where it intersects the demand curve. C) Equal to average variable cost where it intersects the demand curve. D) Corresponding to the demand curve where marginal revenue equals zero.
C
Refer to figure 15-3. Suppose the monopolist represented in the diagram above produces positive output. What is the price charged at the profit-maximizing/loss-minimizing output level? A) $38 B) $54 C) $68 D) $75
A
Refer to figure 15-3. Suppose the monopolist represented in the diagram above produces positive output. What is the profit-maximizing/loss-minimizing output level? A) 630 units B) 800 units C) 850 units D) 880 units
A
Refer to figure 15-3. Suppose the monopolist represented in the diagram above produces positive output. What is the profit/loss per unit? A) Loss of $7 per unit B) Profit of $30 per unit C) Loss of $21 per unit D) Profit of $14 per unit
B
Refer to figure 15-3. What happens to the monopolist represented in the diagram in the long run? A) It will raise its price at least until it breaks even. B) If the cost and demand curves remain the same, it will exit the market. C) The government will subsidize the monopoly to enable it to break even. D) It will be forced out of business by more efficient producers.
A
Refer to figure above. Which of the following statements about the firm depicted in the diagram is true? A) the fact that this firm is a natural monopoly is shows by the long-run average total cost curve still falling when it crosses the demand curve. B) Te fact that this firm is a natural monopoly is shown by the continually declining market demand curve as output rises. C) The fact that this firm is a natural monopoly is shown by the continually declining marginal revenue curve as output rises. D) The fact that this firm is a natural monopoly is shown by the fact that marginal cost lies below the long-run average total cost where the firm maximized its profits.
D
The 10-year protection period from generic competition for drug manufacturers is a form of: A) Copyright. B) Trademark. C) Hallmark. D) Patent.
A
The demand curve for a monopoly's product is: A) The market demand for the product. B) More elastic than the market demand for the product. C) More inelastic than the market demand for the product. D) Undefined.
C
Which of the following is a characteristic shared by a perfectly competitive firm and a monopoly? A) Each must lower its price to sell more output. B) Each sets a price for its product that will maximize its revenue. C) Each maximizes profits by producing a quantity for which marginal revenue equals marginal cost. D) Each maximizes profits by producing a quantity for which price equals marginal cost.
A
Why does a monopoly cause a deadweight loss? A) Because it does not produce some output for which marginal benefit exceeds marginal cost. B) Because it appropriates a portion of consumer surplus for itself. C) Because it increases producer surplus at the expense of consumer surplus. D) Because it does not produce some output for which demand exceeds supply.
