econ examm 4
In the long run, firms in monopolistic competition do not attain efficiency because they
do not operate where price equals marginal cost
Monopoly is unlike perfect competition in that
a monopolist's price is greater than marginal cost
For a monopolist,
a. its demand curve is downward sloping. b. its marginal revenue is less than price. c. existing economic profits can be sustained over time
For a true, or pure, monopoly
a.there is only one seller of the product. b. no close substitutes are available .c. the firm and the industry are the same. d. it must be virtually impossible for other firms to overcome barriers to entry
Pure monopoly is defined as
an industry consisting of a single seller
A price-taking firm and a monopolist are alike in that
both maximize profits by choosing an output where marginal revenue equals marginal cost, provided that price exceeds average variable cost.
Which of the following characteristics do monopolistic competition and perfect competition have in common?
competing firms can enter the industry easily
Claire is considering buying the only Hungarian restaurant in Boise, Idaho. The restaurant's unique food means that it faces a negatively sloped demand curve and is currently earning an economic profit. Why shouldn't Claire assume that the current profits will continue when she makes her decision?
current economic profits will be eliminated by the entry of competitors
If a monopolist had a zero marginal cost of production, it would maximize profits by choosing to produce a quantity where
demand was unit elastic
Which of the following is not a source of product differentiation
differences in quantities
Firms in monopolistically competitive industries cannot earn economic profits in the long run because
economic profits will attract competitors whose presence will eliminate profits in the long run
Which of the following is true for a firm that is a monopolist?
firm will produce a smaller quantity of output than what would be best from the viewpoint of ideal economic efficiency
Which of the following is inconsistent with monopoly?
free entry and exit
Compared to perfect competition, firms in monopolist competition in the long run produce
less output at higher costs
Which of the following is true of perfect competition but not true of monopoly?
marginal revenue is equal to price
A profit-maximizing monopolist sets
output where marginal cost equals marginal revenue.
Which of the following is potentially a barrier to entry into a product market?
patent protection on the design of the product b. economies of scale in the product market c. government licensing of the product's producers d. the control of a crucial input necessary to produce the product
If a profit-maximizing monopolist is currently charging a price on the inelastic portion of its demand curve, it should
raise price and decrease output
Advertising about prices by firms in an industry will make an industry more competitive because it
reduces the cost of finding a substitute when one producer raises his price
Maria's West Side Bakery is the only bakery on the west side of the city. She is a monopolistic competitor and she is open for business. Which of the following cannot be true of Maria's profits?
she is making an economic loss that is greater than her fixed cost
If Rolf wants to use advertising to reduce the elasticity of demand for his chiropractic services, he must make sure the advertising
shows why his services are truly different from the other chiropractors in town.
Which of the following is not true about a profit-maximizing monopolist?
the monopolist always earns an economic profit
Objections to monopolies do not include which of the following?
they reduce the price below what would be charged in perfect competition.
Tom is the monopoly provider of a town's TV cable service, whose current subscription price is $20.00per month. In order to attract one more subscriber, he has to lower his price to $19.95. What is true of Tom's marginal revenue from that additional subscriber
tom's marginal revenue is less than $19.95