Week 6 (Chapter 8)
C
A firm will earn economic profits whenever: (Points : 1) Marginal revenue exceeds marginal costs Marginal revenue exceeds variable costs Average revenue exceeds average total costs Average revenue exceeds average variable costs
C
A nondiscriminating pure monopolist is generally viewed as: (Points : 1) Productively efficient, but allocatively inefficient Productively inefficient, but allocatively efficient Both productively and allocatively inefficient Both productively and allocatively efficient
A
If a monopolist produces 100 units of output at a market price of $5 per unit with marginal revenue per unit equaling $4, we would expect that if the monopolist's good was provided under pure competition, quantity would be: (Points : 1) Higher than 100 units, price lower than $5, and MR = price Lower than 100 units, price greater than $5, and MR = price Higher than 100 units, price greater than $5, and MR = price Lower than 100 units, price lower than $5, and MR = price
C
In response to a cost-reducing technological breakthrough in the production of its product, a profit-maximizing monopolist will normally: (Points : 1) Increase price and decrease production Not change its level of output or price Decrease the price it charges for its product Increase its output and practice price discrimination
D
Monopolists are said to be allocatively inefficient because: (Points : 1) They produce where MR > MC At the profit-maximizing output price is greater than AVC They produce only the type of product they desire and do not consider the consumer At the profit-maximizing output, the marginal benefit to society from increasing output is greater than the marginal cost to society
C
One defining characteristic of pure monopoly is that: (Points : 1) The monopolist is a price taker The monopolist uses advertising The monopolist produces a product with no close substitutes There is relatively easy entry into the industry, but exit is difficult
D
One feature of pure monopoly is that the demand curve: (Points : 1) Is vertical Is horizontal Slopes upward Slopes downward
B
Suppose that a monopolist calculates that at present output and sales, marginal cost is $1.00 and marginal revenue is $2.00. He or she could maximize profits by: (Points : 1) Decreasing price and increasing output Increasing price and decreasing output Decreasing price and leaving output unchanged Decreasing output and leaving prices unchanged
D
The economic incentive for price discrimination depends on: (Points : 1) Prejudices of business managers Differences among sellers' costs A desire to evade antitrust legislation Differences among buyers' demand elasticities
D
Under conditions of pure monopoly: (Points : 1) There are close substitutes There is no advertising The firm is a price taker Entry is blocked
C
When compared with the purely competitive industry with identical costs of production, a monopolist will produce: (Points : 1) More output and charge the same price More output and charge a higher price Less output and charge a higher price Less output and charge the same price
A
Which is a major criticism of a monopoly as a source of allocative inefficiency? (Points : 1) A monopolist fails to expand output to the level where the consumers' valuation of an additional unit is just equal to its opportunity cost A monopolist has no incentive to produce efficiently, because even the inefficient monopolist can be assured of economic profits A monopolist will always make profits and that means that prices are too high A monopolist has an unfair advantage because it can purchase labor at a lower price than competitive firms in other industries
B
Which statement is correct? (Points : 1) Monopolist firms tend to be more internally efficient than competitive firms because they have a single goal of profit maximization Monopolist firms are sheltered from competitive forces and such an environment makes them subject to X-inefficiency Monopolist firms are in industries with low barriers to entry that tend to lower the cost of producing products Competitive firms tend to be more efficient than monopolist firms because they maximize per unit profits, not total profits
