Pure Monopoly Quiz Econ 102

Which of the following statements is a major criticism of a pure monopoly as a source of allocative inefficiency?

A pure monopoly fails to expand output to the level where the price of an additional unit is just equal to its marginal cost

Which of the following is a barrier to entry?

Infrastructure costs

Use the following graph showing the demand and marginal revenue curves faced by a pure monopoly to answer the next question. If the pure monopoly wants to sell quantity Q1, it should charge

P 1

Use the following graph to answer the next question. If the government regulated the pure monopoly and made it set a normal profit price, what price and quantity of output levels would we observe in the short run? rev: 05_15_2018

P3 and Q2

The data below relates to a pure monopoly and the product it produces. Price Quantity Total Cost 22 0 20 20 1 24 18 2 27 16 3 34 14 4 40 12 5 49 10 6 59 What is the profit-maximizing output and price for this firm?

P=$14, Q=4

Which of the following best approximates a pure monopoly?

The only bank in a small town

Pure monopoly refers to_____.

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

Use the following graph to answer the next question. At its short-run equilibrium, this pure monopoly generates ____.

an economic profit

The economic incentive for third-degree price discrimination is based upon _____.

differences among buyers' elasticities of demand

The demand curve faced by a pure monopoly is _____.

downward sloping

Natural monopolies result from ____.

extensive economies of scale in production

Use the following graph for a pure monopoly operating in the short run to answer the next question. At the profit-maximizing level of output, this firm ___. rev: 05_15_2018

generates a loss per unit equal to DE

Use the following graphs to answer the next question. Which of the above shows the correct relationship between demand and marginal revenue for a pure monopoly?

graph 2

Suppose that a pure monopoly calculates that at its present output level, marginal revenue is $1 and marginal cost is $2. The monopoly could maximize profits or minimize losses by ____.

increasing price and decreasing output

The problem with adopting a normal profit pricing policy for a natural monopoly is that _____.

it is not allocatively efficient

In many large U.S. cities, taxicab companies operate as near monopolies because of_____.

licenses

With a natural monopoly, the normal profit price is _________________ and the competitive price is _________________.

not allocatively efficient; allocatively efficient

A pure monopoly may generate economic profits because _____.

of barriers to entry

Pure monopolies are said to be allocatively inefficient because ____.

price is greater than marginal cost

Which phrase would be most characteristic of pure monopoly?

single seller