Homework 8

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

The firm is the sole seller of its product

A natural monopoly occurs when

There are economics of scale over the relevant range of output

If government regulation sets the max price for a natural monopoly equal to its marginal cost, then the natural monopolist will

earn economic losses.

A benefit to society of the patent and copywrite laws is that those laws

encourage creative activity

When a monopolistically competitive market firm raises its price,

quantity demanded declines but not to zero.

A monopolist can sell 300 units of output for $50 per unit. Alternatively, it can sell 301 units of output for $49.60 per unit. The marginal revenue of the 301st unit of output is

-$70.40

Which of the following is not an example of price discrimination?

A bakery charges a higher price for brownies than for cookies.

Which of the following statements is correct?

Monopolistic competition is similar to the monopoly because both market structures are characterized by firms being price makers rather than price takers.

Which of the following is not a barrier to entry?

an entrepreneur opens a popular new hair salon

The breakfast cereal industry, with its concentration ratio of 80% would best be described as

an oligopy

A monopoly can earn positive profits because it

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

When a firm operates under the conditions of a monopoly, its price is

constrained by demand

The social cost of a monopoly is equal to its

dead weight loss

When a monopolist increases the amount of output that it produces and sells, average revenue

decreases, and marginal revenue decreases

For a firm to price discriminate,

it must have some market power

Suppose that most people regard alternative jewels as close substitutes for diamonds. Then DeBeers, a large diamond company, has

less market power that it would otherwise have

In the short run, a firm in a monopolistically competitive market operates much like a

monopolist

If a pharmaceutical company discovers a new drug and successfully patents it, patent law gives the firm

sole ownership of the right to sell the drug for a limited number of years.

In a market that is characterized by imperfect competition,

there are at least a few firms that compete with one another