Ch.12 Test Bank (1-62)

Barriers to entering an industry:

are the basis for monopoly.

Refer to the above diagram for a pure monopolist. Monopoly price will be:

c

Assume a pure monopolist is currently operating at a price-quantity combination on the inelastic segment of its demand curve. If the monopolist is seeking maximum profits, it should:

charge a higher price.

Refer to the above two diagrams for individual firms. In Figure 1 line B represents the firm's:

demand and marginal revenue curves.

A natural monopoly occurs when:

long-run average costs decline continuously through the range of demand.

In the long run a pure monopolist will maximize profits by producing that output at which marginal cost is equal to:

marginal revenue.

Large minimum efficient scale of plant combined with limited market demand may lead to:

natural monopoly.

Pure monopolists may obtain economic profits in the long run because:

of barriers to entry.

With respect to the pure monopolist's demand curve it can be said that:

price exceeds marginal revenue at all outputs greater than 1.

A pure monopolist is selling 6 units at a price of $12. If the marginal revenue of the seventh unit is $5, then:

price of the seventh unit is $11.

If a monopolist's marginal revenue is $3.00 and its marginal cost is $4.50, it will increase its profits by:

reducing output and raising price.

If a monopolist were to produce in the inelastic segment of its demand curve:

the firm would not be maximizing profits.

Suppose a pure monopolist is charging a price of $12 and the associated marginal revenue is $9. We thus know that:

total revenue is increasing.

For a pure monopolist marginal revenue is less than price because:

when a monopolist lowers price to sell more output, the lower price applies to all units sold.

A nondiscriminating profit-maximizing monopolist:

will never produce in the output range where demand is inelastic.

A pure monopolist's short-run profit-maximizing or loss-minimizing position is such that price:

will vertically intersect demand where MR = MC.

price: 7 6 5 4 3 quantity demanded: 1 2 3 4 5 Refer to the above data. The marginal revenue obtained from selling the third unit of output is:

$3

Which of the following is correct?

A purely competitive firm is a "price taker," while a monopolist is a "price maker."

Refer to the above diagram. To maximize profits or minimize losses this firm should produce:

E units and charge price A.

Which of the following is characteristic of a pure monopolist's demand curve?

It is the same as the market demand curve.

What do economies of scale, the ownership of essential raw materials, and patents have in common?

They are all barriers to entry.

Pure monopoly refers to:

a single firm producing a product for which there are no close substitutes.

Refer to the above diagram. At the profit-maximizing level of output, the firm will realize:

an economic profit of ABHJ.

The MR = MC rule:

applies both to pure monopoly and pure competition.

Suppose that a pure monopolist can sell 4 units of output at $2 per unit and 5 units at $1.75 per unit. The monopolist will produce and sell the fifth unit if its marginal cost is:

$.75 or less.

A monopolistic firm has a sales schedule such that it can sell 10 prefabricated garages per week at $10,000 each, but if it restricts its output to 9 per week it can sell these at $11,000 each. The marginal revenue of the tenth unit of sales per week is:

$1,000.

Suppose that a pure monopolist can sell 5 units of output at $4 per unit and 6 units at $3.90 per unit. The monopolist will produce and sell the sixth unit if its marginal cost is:

$3.40 or less.

Suppose that a pure monopolist can sell 20 units of output at $10 per unit and 21 units at $9.75 per unit. The marginal revenue of the twenty-first unit of output is:

$4.75.

Answer the question on the basis of the following table showing the demand schedule facing a nondiscriminating monopolist: P: 10 7 5 3 1 Qd: 1 2 3 4 5 Refer to the above table. Assume that this monopolist faces zero production costs. The profit-maximizing monopolist will set a price of:

$5

The above diagram indicates that the marginal revenue of the sixth unit of output is:

-$1

Refer to the above diagram. At the profit-maximizing level of output, total revenue will be:

0AJE.

Refer to the above diagram. At the profit-maximizing level of output, total cost will be:

0BHE

Answer the question on the basis of the following table showing the demand schedule facing a nondiscriminating monopolist: P: 10 7 5 3 1 Qd: 1 2 3 4 5 Refer to the above table. The monopolist will select its profit-maximizing level of output somewhere within the:

1-3 unit range of output.

If profits are maximized (or losses minimized), which of the following conditions is common to both unregulated monopoly and to pure competition?

MR = MC

An unregulated pure monopolist will maximize profits by producing that output at which:

MR = MC.

Refer to the above two diagrams for individual firms. Figure 1 pertains to, while Figure 2 refers to

a purely competitive firm; an imperfectly competitive firm

Refer to the above diagram. This firm is selling in:

an imperfectly competitive market.

Refer to the above two diagrams for individual firms. Figure 2 pertains to:

an imperfectly competitive seller.

Refer to the above diagram. Demand is relatively inelastic:

at any price below P2.

Which of the following is a characteristic of pure monopoly?

barriers to entry

The marginal revenue curve for a monopolist:

becomes negative when output increases beyond some particular level.

Refer to the above diagram for a pure monopolist. Monopoly output will be:

f

A purely monopolistic firm:

faces a downsloping demand curve.

Refer to the above diagram. Demand is relatively elastic:

in the P2P4 price range.

The pure monopolist's demand curve is relatively elastic:

in the price range where marginal revenue is positive.

When a firm is on the inelastic segment of its demand curve, it can:

increase profits by increasing price.

A pure monopolist should never produce in the:

inelastic segment of its demand curve because it can increase total revenue and reduce total cost by increasing price.

price: 7 6 5 4 3 quantity demanded: 1 2 3 4 5 Refer to the above data. At the point where 3 units are being sold, the coefficient of price elasticity of demand:

is greater than unity (one).

The nondiscriminating monopolist's demand curve:

is less elastic than a purely competitive firm's demand curve.

The demand curve faced by a pure monopolist:

is less elastic than that faced by a single purely competitive firm.

The nondiscriminating pure monopolist's demand curve:

is the industry demand curve.

If a pure monopolist is producing at that output where P = ATC, then:

its economic profits will be zero.

Refer to the above two diagrams for individual firms. In Figure 2 the firm's demand and marginal revenue curves are represented by:

lines B and C respectively.

For a pure monopolist the relationship between total revenue and marginal revenue is such that:

marginal revenue is positive when total revenue is increasing, but marginal revenue becomes negative when total revenue is decreasing.

If a pure monopolist is operating in a range of output where demand is elastic:

marginal revenue will be positive but declining.

Because the monopolist's demand curve is downsloping:

price must be lowered to sell more output.

A nondiscriminating pure monopolist finds that it can sell its fiftieth unit of output for $50. We can surmise that the marginal:

revenue of the fiftieth unit is less than $50

Answer the question on the basis of the following table showing the demand schedule facing a nondiscriminating monopolist: P: 10 7 5 3 1 Qd: 1 2 3 4 5 Refer to the above table. The profit-maximizing monopolist will sell at a price:

that cannot be determined with the information provided.

For an imperfectly competitive firm:

the marginal revenue curve lies below the demand curve because any reduction in price applies to all units sold.

If a nondiscriminating pure monopolist decides to sell one more unit of output, the marginal revenue associated with that unit will be:

the price at which that unit is sold less the price reductions which apply to all other units of output.

Refer to the above two diagrams for individual firms. In Figure 1, line A represents the firm's:

total revenue curve only.

If a nondiscriminating imperfectly competitive firm is selling its 100th unit of output for $35, its marginal revenue:

will be less than $35.