EXAM 2- Chapter 12 Quiz econ micro
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.
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 21st unit of output is
$4.75.
Which of the following is correct?
A purely competitive firm is a "price taker," while a monopolist is a "price maker."
Which of the following statements is correct?
In seeking the profit-maximizing output, the pure monopolist underallocates resources to its production.
Which of the following is characteristic of a pure monopolist's demand curve?
It is the same as the market demand curve.
If profits are maximized (or losses minimized), which of the following conditions is common to both unregulated monopoly and pure competition?
MR = MC
What do economies of scale, the ownership of essential raw materials, and patents have in common?
They are all barriers to entry.
Which of the following is not a barrier to entry?
X-inefficiency
Pure monopoly refers to
a single firm producing a product for which there are no close substitutes.
Refer to the diagram. At the profit-maximizing level of output, the firm will realize
an economic profit of ABHJ.
The marginal revenue curve for a monopolist
becomes negative when output increases beyond some particular level.
Refer to the 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.
The supply curve of a pure monopolist
does not exist because prices are not "given" to a monopolist.
A purely monopolistic firm
faces a downsloping demand curve.
The pure monopolist's demand curve is relatively elastic
in the price range where marginal revenue is positive.
In the accompanying diagram, if price is reduced from P1 to P2, total revenue will
increase by C − A.
When a firm is on the inelastic segment of its demand curve, it can
increase profits by increasing price.
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.
A natural monopoly occurs when
long-run average costs decline continuously through the range of demand.
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.
In the short run, a monopolist's economic profits
may be positive or negative depending on market demand and cost conditions.
At its profit-maximizing output, a pure nondiscriminating monopolist achieves
neither productive efficiency nor allocative efficiency.
Pure monopolists may obtain economic profits in the long run because
of barriers to entry.
Price discrimination is
only illegal if used to lessen or eliminate competition.
Comparing a pure monopoly and a purely competitive firm with identical costs, we would find in long-run equilibrium that the pure monopolist's
price and average total cost would be higher, but output would be lower.
With respect to the pure monopolist's demand curve, it can be said that
price exceeds marginal revenue at all outputs greater than 1.
Which of the following is not a possible source of natural monopoly?
rent-seeking behavior
Which of the following best approximates a pure monopoly?
the only grocery store in a small isolated town
Price discrimination refers to
the selling of a given product to different customers at different prices that do not reflect cost differences.
If a nondiscriminating imperfectly competitive firm is selling its 100th unit of output for $35, its marginal revenue
will be less than $35.
A nondiscriminating profit-maximizing monopolist
will never produce in the output range where demand is inelastic.