Chapter 12
Which of the following is a key difference between perfect competition and monopoly?
In perfect competition, no one firm can influence price, but with monopoly, a single seller sets the price.
a) Which of the following describes a monopolist's demand curve? b) graph
a) A y-intercept of $8 and downward-sloping with a slope of -1. b) both lines start at y-int
a) Why is national defense better off as a natural monopoly? b) An example of an industry or service that is a natural monopoly is ____
a) Industries like national defense experience economies of scale since they have high fixed costs. Thus, it is cheaper to have a single firm provide a larger quantity. b) city drinking water
a) Which of the following equations calculates economic profits for a monopoly? b)
a) Profits = (P-ATC) x Q b)
The graph on the right illustrates a marginal cost (MC) curve and marginal revenue (MR) curve for a monopolist. If the firm produces at a quantity of 40 units, then marginal revenue would be____ marginal cost, and this firm would____.
greater than; produce more to enhance profits
The graph on the right illustrates a marginal cost (MC) curve and marginal revenue (MR) curve for a monopolist. (Equilibrium at 50) If the firm produces at a quantity of 60 units, then marginal revenue would be____ marginal cost, and this firm would____.
less than; reduce output to enhance profits
Both competitive firms and monopolies produce at the level where marginal cost equals marginal revenue. Then, other things remaining the same, why is price lower in a competitive market than in a monopoly?
Competitive markets face perfectly elastic demand and marginal revenue, while monopolies face downward-slopingdemand and marginal revenue.
a) Which of the following statements are true regarding first-degree price discrimination? b) consumers get charged different rates depending on their electricity consumption. c) senior citizens get discounts on the purchase of medicines. d) a bookstore has an offer of buy two get one free. e) a clothing store has an offer of 50 percent discount on the purchase of three shirts,
a) The consumer surplus is zero. There is extreme inequity in the allocation of surplus. b) Second-degree price discrimination c) Third-degree price discrimination d) First-degree price discrimination e) Second-degree price discrimination
a) Which of the following statements are true after considering the given graph? b) Therefore, price elasticity of demand at a price above $4 is ____. (price is at $7) c) At $4, the price elasticity of demand for the good is ____.
a) The marginal revenue of the good is positive for a quantity below 400 million. The total revenue of the good is maximized at a quantity of 400 million. b) elastic c) one
a) Which of the following best describes the relationship between price (P), marginal revenue (MR), and total revenue (TR)for a monopolist? b) graph
a) When MR is positive, TR is rising, and when MR is negative, TR is falling. b) negative parabola shape
Suppose the government grants an individual or company the exclusive right to intellectual property. a) In this case, the government is granting a ____. b) Which of the following is not likely covered by a copyright?
a) copyright b) a way to improve an existing machine.
a) Which of the following is not one of the sources of natural market power? b) Which of the following best describes network externalities? c) graph d) Using the graph, a firm with that type of cost curve is best suited to be
a) owning a firm in a small community b) They occur when a product's value increases as more consumers begin to use it. c) graph at points mentioned d) a natural monopoly, since it faces economies of scale and can produce at a lower cost if done by one firm.
Suppose the government grants an individual or company the sole right to produce and sell a good or service. a) In this case, the government is granting a ____. b) Which of the following is not likely covered by a copyright?
a) patent b) a new drug
a) Market power relates to the ability of sellers to affect ____, and arises because of ____. b) Legal market power is created by ____, and arises due to ____. c) Natural market power is created by ____, and arises due to ____.
a) prices; barriers to entry. b) the government; patents. c) market forces; economies of scale.
In which of the following ways is a monopoly beneficial to an economy?
d. All of the above
