econ monopoly midterm3

The profit-maximization problem for a monopolist differs from that of a competitive firm in which of the following ways?

A competitive firm maximizes profit at the point where average revenue equals marginal cost; a monopolist maximizes profit at the point where average revenue exceeds marginal cost.

Which of the following is not an example of a barrier to entry?

An entrepreneur opens a popular new restaurant.

Which of the following is a necessary characteristic of a monopoly?

The firm is the sole seller of its product.

Bob's Butcher Shop is the only place within 250 miles that sells bison burgers. Assuming that Bob is a monopolist and maximizing his profit, which of the following statements is true?

The price of Bob's bison burgers will exceed Bob's marginal cost.

When an industry is a natural monopoly,

a larger number of firms will lead to a higher average total cost.

Monopolies are socially inefficient because the price they charge is

above marginal cost.

Average total cost is very high when a small amount of output is produced because

average fixed cost is high

When a firm has a natural monopoly, the firm's

average total cost curve is downward sloping

A monopoly can earn positive profits because it

can maintain a price such that total revenues will exceed total costs.

The social cost of a monopoly is equal to its

deadweight loss.

Monopoly firms face

downward-sloping demand curves (the law of demand), so they can sell only the specific price-quantity combinations that lie on the demand curve.

A benefit to society of patent and copyright laws is that those laws

encourage creative activity

If the distribution of water is a natural monopoly, then

multiple firms would likely to pay large fixed costs to develop their own network of pipes.

The deadweight loss associated with a monopoly occurs because the monopolist

produces an output level less than the socially optimal level.

If there is an increase in market demand in a perfectly competitive market, then in the short run

profits will rise.

A government-created monopoly arises when

the government gives a firm the exclusive right to sell some good or service.

For a monopolist, an increase in output sold causes marginal revenue to be negative when

the price effect is greater than the output effect.

A natural monopoly occurs when

there are economies of scale over the relevant range of output