Monopoly Homework

Which of the following is NOT likely to be the basis for a barrier that keeps firms from entering a​ monopoly?

A high ratio of variable costs to fixed costs. The ratio of variable to fixed costs may not matter in​ monopoly, and if it does matter a low ratio is more likely to be a barrier to entry.

Some of the major characteristics of pure monopoly are?

Single Seller - A pure monopoly is an industry in which a sole producer is the single supplier of a specific good or service in this market model. The presence of severe barriers that keep other firms out of the industry is an important characteristic of monopoly.

For a​ monopoly, price is equal to marginal revenue because a monopoly has the power to control price. This statement is? A. incorrect because price equals marginal revenue due to demand constraints. B. incorrect because price instead is set equal to marginal cost. C. Incorrect because price always equals marginal revenue regardless of market power. D. Incorrect because price is greater than marginal revenue. E. correct.

D. Incorrect because price is greater than marginal revenue.

Explain why the marginal revenue curve facing a competitive firm differs from the marginal revenue curve facing a monopolist. Unlike for perfectly competitive​ firms, whose marginal revenue curves are the same as their individual demand​ curves, a​ monopolist's marginal revenue curve differs from its demand curve because A. a​ monopoly's demand curve is horizontal-horizontal. B. a monopoly has no market power. C. a monopoly can sell all the output it wants without having any impact on market price. D. a monopoly must lower the price on all units to sell one more unit of output. E. the demand curve for a monopoly has twice-twice the slope of the market demand curve.

D. a monopoly must lower the price on all units to sell one more unit of output.

If a monopolist is at a point on its demand curve such that marginal revenue is greater than marginal​ cost, then it can increase profit by A. increasing price and decreasing output. B. increasing both price and output. C. decreasing both price and output. D. decreasing price and increasing output.

D. decreasing price and increasing output.

It is always true that when demand elasticity is equal to minus−​1, marginal revenue is equal to 0. This is? A. incorrect because when demand elasticity is equal to minus−​1, total revenue is equal to 0. B. incorrect because when demand elasticity is equal to minus−​1, marginal revenue is positive-positive. C. incorrect because when demand elasticity is equal to minus−​1, marginal revenue is at its maximum. D. incorrect because when demand elasticity is equal to minus−​1, marginal revenue decreases-decreases. E. correct.

E. correct.

A natural monopoly exists when A. a​ firm's long-run average cost curve is downward sloping at the point where it intersects the market demand curve. B. there is pure monopoly and the government grants an exclusive license to the firm. C. a firm is able to make​ long-run profits without inducing entry by other firms. D. a​ firm's demand curve is downward sloping.

A. a​ firm's long-run average cost curve is downward sloping at the point where it intersects the market demand curve.

If a monopolist is at a point on its demand curve such that marginal revenue is less than marginal​ cost, then it can increase profit by A. increasing price and decreasing output. B. decreasing both price and output. C. increasing both price and output. D. decreasing price and increasing output.

A. increasing price and decreasing output.

In order to maximize its​ profit, a monopolis A. first decides the output quantity and then decides what price to charge. B. decides price and output simultaneously. C. uses the demand curve to choose price but not to choose output. D. first decides what price to charge and then decides the output quantity. E. uses the demand curve to choose output but not to choose price.

B. decides price and output simultaneously.

Because a monopoly is the only firm in an​ industry, it can charge virtually any price for its product. The statement is? A. incorrect because new firms may enter a​ monopoly's industry. B. incorrect because a monopoly is constrained by consumer demand. C. incorrect because a monopoly is constrained by economies of scale-economies of scale. D. incorrect because a monopoly is not necessarily the only firm in an industry. E. correct

B. incorrect because a monopoly is constrained by consumer demand.

The term​ "rent seeking" refers to A. efforts to acquire ownership of real estate which will generate rental income. B. an organization of landlords who jointly raise the rents they charge. C. any actions taken to protect positive profits. D. a coalition of tenants who act together to reduce the rents they pay.

C. any actions taken to protect positive profits.

Actions to enforce the antitrust laws are initiated A. only by the FTC. B. by the Antitrust Division of the Justice Dept or by the​ FTC, but not by private firms or citizens C. by the Antitrust Division of the Justice​ Dept, the​ FTC, and private firms or citizens. D. only by the Antitrust Division of the Justice Dept.

C. by the Antitrust Division of the Justice​ Dept, the​ FTC, and private firms or citizens.