Chapter 12
Compared to the purely competitive industry, a pure monopoly: Is able to use barriers to entry and maintain positive economic profits in the long run Produces an equal amount of output, but charges higher prices to cover all costs in the market Is often more efficient from society's perspective because it has big plants and it uses the newest technology Will always become competitive in the long run because positive economic profits will induce competitors into the market
A
The demand curve confronting a non-discriminating pure monopolist is: The same as the industry's demand curve More elastic than the demand curve confronting a competitive firm Derived by vertically summing the individual demand curves for the buyers Horizontal
A
Which of the following does not necessarily apply to a pure monopoly? The firm will charge the highest price possible The firm must be the sole producer of a product Entry must be blocked The product the firm produces must have no close substitutes
A
http://ezto.mheducation.com/13252705293502695323.tp4?REQUEST=SHOWmedia&conId=13252704366087453&media=image021.png Which of the above shows the correct relationship between demand and marginal revenue? B D A C
A
The non-discriminating pure monopolist must decrease price on all units of a product sold in order to sell more units. This explains why: Total revenues are greater than total costs at the profit maximizing level of output Marginal revenue is less than average revenue A monopoly has a perfectly elastic demand curve There are barriers to entry in pure monopoly
B
http://ezto.mheducation.com/13252705293502695323.tp4?REQUEST=SHOWmedia&conId=13252705119505174&media=1image004.png Refer to the above graph showing the revenue curves for a monopolist. If it wants to sell quantity Q1, it must charge a price: Not labeled on the graph P1 0 P2
B
A non-discriminating pure monopolist is generally viewed as: Both productively and allocatively efficient Productively inefficient, but allocatively efficient Both productively and allocatively inefficient Productively efficient, but allocatively inefficient
C
A profit-maximizing firm should shut down in the short run if the average revenue it receives is less than: Average total cost Average fixed cost Marginal cost Average variable cost
D
One defining characteristic of pure monopoly is that: The monopolist is a price taker The monopolist uses advertising There is relatively easy entry into the industry, but exit is difficult The monopolist produces a product with no close substitutes
D
One feature of pure monopoly is that the firm is: A price taker One of several producers of a product A producer of products with close substitutes A price maker
D
A firm will earn economic profits whenever: Average revenue exceeds average total costs Marginal revenue exceeds variable costs Average revenue exceeds average variable costs Marginal revenue exceeds marginal costs
A
Allocative inefficiency happens in a monopoly because at the profit-maximizing output level: P > MC P > AVC P > ATC P > MR
A
In many large U.S. cities, taxicab companies operate as near monopolies because of: Licenses Economies of scale Strategic pricing Patents
A
Under pure monopoly, a profit-maximizing firm will produce: Only where marginal costs are decreasing In the elastic range of its demand curve Only where marginal revenue is increasing In the inelastic range of its demand curve
B
http://ezto.mheducation.com/13252705293502695323.tp4?REQUEST=SHOWmedia&conId=13252704059525275&media=image029.png Refer to the above graph for a profit-maximizing monopolist. The firm will produce the quantity: 0X 0V 0Y 0T
B
http://ezto.mheducation.com/13252705293502695323.tp4?REQUEST=SHOWmedia&conId=13252704308440477&media=2image004.png Refer to the above graph showing the revenue curves for a monopolist. What price should be charged in order to maximize total revenue? P1 P3 P4 P2
B
http://ezto.mheducation.com/13252705293502695323.tp4?REQUEST=SHOWmedia&conId=13252704312049923&media=image005.png Refer to the above graph showing the revenue curves for a monopolist. Total revenue will be greatest at what output level? Q4 Q3 Q1 Q2
B
http://ezto.mheducation.com/13252705293502695323.tp4?REQUEST=SHOWmedia&conId=13252704366087490&media=image034.png A profit-maximizing monopolist facing the situation shown in the graph above should: Continue producing to minimize losses Shut down in the short run Continue producing as long as price is greater than marginal cost Continue producing to make economic profits
B
A non-discriminating monopolist will find that marginal revenue: Exceeds average revenue or price Is sometimes greater and sometimes less than price Is less than average revenue or price Is identical to price
C
http://ezto.mheducation.com/13252705293502695323.tp4?REQUEST=SHOWmedia&conId=13252704366087427&media=image004.png Refer to the above graph showing the revenue curves for a monopolist. The elastic portion of the demand curve ranges from quantity: Q2 to Q4 Q3 to Q4 0 to Q3 0 to Q4
C
An exclusive legal right as sole producer for 20 years granted to an inventor of a product is called a: Franchise License Copyright Patent
D
Any activity designed to transfer income or wealth to a particular individual or firm at society's expense is called: X-inefficiency Patent protection Price discrimination Rent-seeking
D
One major barrier to entry under pure monopoly arises from: The price taking ability of the firm Diseconomies of scale The availability of close substitutes for a product Ownership of essential resources
D
When the value of a product to each user, including existing users, increases due to an increase in the total number of users, we refer to this as: Income transfer Simultaneous consumption Price discrimination Network effects
D
Which is true of a price discriminating pure monopolist? Profit will be higher than in the nondiscriminating case Allocative inefficiency will be greater than in the nondiscriminating case P > MR for the last unit sold The average price will be higher than in the nondiscriminating case
D
