Micro Exam 3 Mult Choice 10

. Which of the following is an assumption of the theory of monopoly? a. There are extremely high barriers to entry. b. There are many sellers. c. The product has a number of close substitutes. d. The product is of extremely high quality.

a. There are extremely high barriers to entry.

Which of the following is the best example of a monopoly? a. a local public utility b. a fast-food restaurant c. a department store d. a wheat farmer

a. a local public utility

Suppose firm X is a monopolist and is receiving positive economic profits. What prevents other firms from directly competing away the profits? a. high barriers to entry b. antitrust laws c. low barriers to entry d. diseconomies of scale e. none of the above

a. high barriers to entry

. Which of the following statements is false? a. A price searcher must lower price to sell an additional unit of its product. b. For a price searcher, price equals marginal revenue for all units except the first. c. For a price searcher, price is greater than marginal revenue for all units except the first. d. A price searcher, like a price taker, produces that quantity of output for which marginal revenue equals marginal cost.

b. For a price searcher, price equals marginal revenue for all units except the first.

A natural monopoly exists when a. a monopolist produces a product, the main component of which is a natural resource. b. economies of scale are so large that only one firm can survive and achieve low unit costs. c. a firm is the exclusive owner of a key resource necessary to produce the firm's product. d. there are no close substitutes for a firm's product.

b. economies of scale are so large that only one firm can survive and achieve low unit costs.

. The theory of monopoly assumes that the monopoly firm a. faces a downward-sloping supply curve that is the same as its marginal revenue curve. b. faces a downward-sloping demand curve. c. produces more than the perfectly competitive firm under identical demand and cost conditions. d. produces a product for which there are many close substitutes. e. none of the above

b. faces a downward-sloping demand curve.

. Firm X is a single seller of good X. There are, however, two substitutes for good X. Given this, a. firm X cannot be a monopolist because the theory of monopoly assumes there are no substitutes for the good the single seller sells. b. firm X may be a monopolist because the two substitutes may be close substitutes. c. firm X cannot be a monopolist because if substitutes exist for the good it produces, its demand curve is horizontal but monopolists face downward-sloping demand curves. d. none of the above

b. firm X may be a monopolist because the two substitutes may be close substitutes.

A monopoly may exist because a. government has refused to grant a public franchise. b. one firm has the exclusive ownership of a necessary resource. c. the firm is so large and is currently experiencing such vast diseconomies of scale that it can out-compete all newcomers. d. a and b e. a, b, and c

b. one firm has the exclusive ownership of a necessary resource.

A public franchise is a right granted a. to one firm by another firm; for example, McDonald's Corporation grants restaurant owners a franchise to make its hamburgers. b. to a firm by government that prevents other firms from producing the same product or service. c. to a cooperative of buyers that allows the group to purchase goods at wholesale prices. d. by government that enables a person to engage in arbitrage.

b. to a firm by government that prevents other firms from producing the same product or service.

Which of the following is not an example of a legal barrier to entry? a. a public franchise b. economies of scale c. a government license d. a patent

b. economies of scale

Public franchises, patents, and government licenses are examples of __________ barriers to entry. a. social b. legal c. cultural d. geographic

b. legal

If economies of scale are so pronounced in an industry that only one firm can survive in the industry, this firm is called a(n) __________ monopoly. a. financial b. natural c. structured d. independent

b. natural

. A seller that has the ability (to some degree) to control the price of the product it sells is called a price a. taker. b. searcher. c. breaker. d. twister.

b. searcher

Which of the following is not an example of a legal barrier to entry? a. a beautician's license b. a patent c. exclusive ownership of raw materials d. a public franchise e. a copyright

c. exclusive ownership of raw materials

In the United States, patents are granted to inventors of a product or process for a period of a. unlimited time. b. 10 years. c. 20 years. d. 25 years.

c. 20 years

Which of the following is the best example of a barrier to entry into a monopolistic industry? a. diminishing returns b. comparative advantage c. high price elasticity of demand d. a public franchise

d. a public franchise

A price searcher a. faces a horizontal demand curve. b. is a seller that searches for good employees and pays them a low wage. c. is a seller that searches for the best location to sell its product. d. is a seller that has the ability to control to some degree the price of the product it sells. e. none of the above

d. is a seller that has the ability to control to some degree the price of the product it sells.

Which of the following is an example of a legal barrier to entry? a. a public franchise b. a patent c. exclusive ownership of a scarce resource d. a and b e. a, b, and c

d. a and b

A right granted to a firm by government that permits the firm to provide a particular good or service and excludes others from doing the same is called a. a natural monopoly. b. a comparative advantage. c. an economy of scale. d. a public franchise.

d. a public franchise

Which of the following statements is true? a. A monopolist can charge whatever price it wants without losing any customers, by virtue of its monopoly position. b. A monopolist can always increase its profits by increasing its price. c. In the monopoly market structure, there are low barriers to entry. d. A monopolist is assured of positive economic profits. e. none of the above

e. none of the above