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