Economics Ch.9
An industry is said to be a natural monopoly when:
long-run average cost continues to decline as the quantity of output increases.
Under both perfect competition and monopoly, a firm:
maximizes profit by setting marginal cost equal to marginal revenue.
Under monopoly, a firm:
maximizes profit by setting marginal cost equal to marginal revenue.
A monopoly:
must lower price in order to increase output.
An industry in which total costs are kept to a minimum because only one firm serves the whole market is called a:
natural monopoly.
There is only one gas station within hundreds of miles. The owner finds that when she charges $3 a gallon, she sells 199 gallons a day, and when she charges $2.99 a gallon, she sells 200 gallons a day. The marginal revenue of the 200th gallon of gas is:
$1.
____ is the act of buying a commodity in one market at a lower price and selling it in another market at a higher price.
Arbitrage.
Which barrier to entry results in the creation of a natural monopoly?
Economies of scale.
Which of the following firms best fits the definition of a monopoly?
Local electric utility
Which of the following best explains an economic criticism of unregulated monopolists?
Monopolists restrict output, and as a result, they fail to produce units that are valued more than the marginal cost of producing them.
Alcoa had a monopoly in the U.S. aluminum market from the late nineteenth century until the end of World War II. Which barrier to entry was the source of Alcoa's monopoly power?
Ownership of a vital resource.
Which of the following is a market structure of monopoly?
Single firm that is a price maker.
Which of the following firms operates in a natural monopoly?
Telephone company. Electric company. Water company.
Which of the following is a difference between a monopolist and a firm in perfect competition?
The marginal revenue curve is downward-sloping.
Which of the following is a necessary condition for price discrimination?
The seller must be able to divide the markets according to the different price elasticities of demand. It must be difficult for one buyer to resell to another buyer.
Price discrimination requires:
a firm to be able to segment its customers based on different price elasticities of demand.
Price discrimination occurs when:
a seller charges different prices to different consumers of the same product or service.
A natural monopoly is a market where:
a single large firm can produce the entire market output at a lower per-unit cost than a group of smaller firms.
An example of price discrimination is the price charged for:
college admission.
One necessary condition for effective price discrimination is:
difference in the price elasticity of demand among buyers.
The goal of any monopolist is to maximize:
economic profits.
A monopoly:
faces the market demand curve which is downward sloping. has a marginal revenue curve which slopes downward and lies below its demand curve. will maximize profits by producing an output level where MR = MC.
If marginal costs increase, a monopolist will:
increase price and decrease output.
A monopoly sets a market price that is higher than the marginal cost of production. This fact implies that a monopoly's allocation of resources is:
inefficient.
Under both perfect competition and monopoly, a firm:
sets marginal cost equal to marginal revenue.
Monopoly is a market structure characterized by a:
single firm that is not a price taker.
The monopolist faces:
the entire market demand curve.
A monopoly is:
the only seller of a good for which there are no good substitutes in a market with high barriers to entry.
An example of price discrimination is the price charged for:
theater tickets that offer lower prices for children.