Monopoly Economics 🎈

A single-price monopolist's marginal revenue is

(B) less than its price

Which of the following government actions can correct the inefficiency caused by the existence of a monopoly?

(A) Granting a per-unit subsidy on the monopolist's output

Which of the following must be true for a firm that is a natural monopoly?

(A) It can produce and supply its product to an entire market at a lower cost than could a number of smaller firms.

A firm with market power engages in price discrimination to

(A) earn a higher profit

The profit-maximizing firm depicted in the graph above should

(A) exit if conditions do not improve in the long run

For an unregulated monopolist, the profit-maximizing quantity will always be

(A) in the elastic region of the demand curve

If SteveR Incorporated is a monopolistic producer of diamonds, the firm's demand curve is downward sloping because

(A) the number of diamonds SteveR Incorporated offers for sale affects the price of diamonds

A monopolist's demand curve is necessarily

(A) the same as the market demand curve

If the firm produces 10 units of output, its economic profits will equal

(B) $50

At the current production level of good X, price is greater than marginal cost. Which of the following actions would lead to greater efficiency?

(B) Increasing the production of good X

Which of the following is necessarily true at a monopolist's profit-maximizing level of output?

(B) Marginal revenue is equal to marginal cost, but less than price.

Antitrust policies are put in place to limit which of the following?

(B) Monopoly power

If the government wants to regulate this monopoly to produce the socially optimum level of output, it should set a price equal to

(B) P2

A single-price monopolist is currently producing in the inelastic portion of its market demand curve. In order to maximize profits, the monopolist should change the price and output in which of the following ways?

(B) Price = Increase ; Output = Decrease

If a perfectly competitive industry were monopolized without any changes in cost conditions, the price and quantity produced would change in which of the following ways?

(B) Price = Increase ; Quantity = Decrease

Which of the following is most likely to occur if a single-price monopolist is replaced by a perfectly competitive market?

(B) The deadweight loss will decrease

A monopolist is inefficient from society's point of view because

(B) it underproduces output and charges a price above marginal cost

Within the range of market demand, which of the following is consistent with the conditions of a natural monopoly?

(C) Long-run average total cost decreases as output increases.

Compared to a perfectly competitive industry with the same demand and cost curves, a monopoly's price and output will be which of the following?

(C) Price = Higher ; Output = Lower

If this monopolist chooses to maximize total revenue rather than total profit, it will choose which combination of price and output?

(C) Price = P3 ; Output = Q3

The profit-maximizing combination of output and price for this single-price monopoly is

(C) Q1 and P4

Which of the following is necessary for a firm to practice price discrimination?

(C) The firm can prevent resale of its goods.

Which of the following is most likely to occur if the firm increases production beyond 10 units?

(C) The firm would have to lower its price to sell more than 10 units.

If the monopolist produces the allocatively efficient level of output rather than the profit-maximizing level of output, consumer surplus will

(D) increase by the area P5JKP4

13. Antitrust policy is designed to

(D) maintain a competitive business environment

Which of the following can give a firm market power?

(E) Having economies of scale in production over the range of market output

Which of the following is always true of a monopoly that is producing a level of output such that marginal revenue is negative?

(E) It could decrease output to increase profits.

Price discrimination occurs when

(E) differences in a product's price do not reflect differences in costs of production

Generally, monopolies are considered inefficient because they

(E) lead to an allocation of resources in the affected market

If the government imposes a per-unit tax on the output of a monopoly with a downward-sloping demand curve, the burden of the tax will be

(E) shared by consumers and the monopolist

One difference between a firm in a perfectly competitive market and an unregulated monopoly is that the

(A) perfectly competitive firm can increase the quantity it sells at the market price, whereas the monopoly must lower its price to sell more

Antitrust legislation is designed to make it illegal for a firm to monopolize an industry. Which of the following best states the economic rationale for this legislation?

(B) A monopolist produces too little of the good, charging consumers a price that exceeds the marginal cost of production.

Antitrust policy seeks to prevent or eliminate which of the following practices?

(B) Collusion and price fixing

For the firm shown in this graph, the short-run, profit-maximizing strategy would be to set output at

(B) Q1, price at P3, and earn an economic profit

If the monopolist in this graph is unregulated, its profit-maximizing price and output level would lead to a deadweight loss equal to area

(B) RTV

Which of the following statements is true for a perfectly competitive firm but not true for a monopoly?

(B) The firm cannot affect the market price for its good.

If the goal of government regulators of a natural monopoly is to reduce deadweight loss without subsidizing the monopolist, government regulators would set a price equal to

(B) average total cost

Suppose that a firm is producing the profit-maximizing output under conditions of diminishing returns. Its output price is $25, and its marginal cost of production at its current output level is $25. Based on this information, it can be concluded that this firm must

(B) be a perfectly competitive firm

Most economists argue that a monopoly is inefficient because it

(B) produces too little output and sets a price above marginal cost

Which of the following is a source of monopoly power?

(C) Barriers to entry

Which of the following is true if a monopolist's marginal revenue is negative at the current level of output?

(C) Demand for its product is price inelastic.

In this diagram, the deadweight loss from a profit-maximizing monopolist is represented by area

(C) IJK

Which of the following is a necessary condition for price discrimination?

(C) The seller can separate consumers according to their elasticities of demand.

Assuming this firm is maximizing profit, total revenue is equal to

(C) area 0P3JQ1

A monopoly is different from a perfectly competitive firm in that a monopoly

(C) has a marginal revenue curve that lies below its demand curve

When the monopolist produces the socially optimal level of output, it is

(C) incurring economic losses and it requires a subsidy to continue in business

The primary purpose of antitrust laws is to

(C) prevent firms from monopolizing trade and to promote competition

The firm shown in this diagram qualifies as a natural monopoly because

(C) the average total cost is decreasing in the relevant range of market demand

If a per-unit tax is imposed on a monopolist, how will the monopolist's marginal cost curve, output, and the price paid by consumers be affected?

(D) Marginal Cost = Shift Up ; Output = Decrease ; Price = Increase

If the government regulates the monopolist in this graph to set price equal to average total cost, it will establish the price at

(D) P2

A monopolist introduces a technological innovation that lowers the marginal cost and average cost of production. The price of the good and the level of output are most likely to change in which of the following ways?

(D) Price = Decrease ; Level of Output = Increase

If this monopolist could engage in perfect price discrimination, the total output and the price charged for the last unit of output sold would be

(D) Q2 and P3

If government regulated the natural monopoly to produce the output resulting in zero economic profit, then the output would be

(D) Q4

Assuming a linear downward-sloping demand curve, as a monopoly firm sells additional units of output, its marginal revenue will

(D) decrease continuously

Compared with a perfectly competitive market, a single-price monopoly with the same market demand and cost curves will

(D) decrease output and increase price