Monopoly Test Review (AP Econ)

where is profit maximized (monopoly)

MR = MC

relationship of P & AR (monopoly)

P = AR

relationship of P & MR (monopoly)

P > MR

Monopoly Characteristics

Price maker, single seller, barriers to entry, no close subs, non-price competition

DeBeers has a monopoly in the diamond market because it ________. a. Buys up a significant portion of diamond resources. b. Can supply the entire market at a lower price than two or more firms. c. Has been granted a public franchise. d. Has been granted a government license.

a

If the Chicago White Sox is currently charging ticket prices where its demand is inelastic, the White Sox's marginal revenue is a. Negative. b. Positive. c. Zero.

a

The relationship between marginal revenue and elasticity is a. When demand is elastic marginal revenue is positive and when demand is inelastic marginal revenue is negative. b. Whenever the elasticity is positive, marginal revenue is positive. c. Whenever the elasticity is negative, marginal revenue is positive. d. When demand is elastic marginal revenue is negative and when demand is inelastic marginal revenue is positive.

a

Compared to a perfectly competitive industry, a single-price monopoly will produce a. More output. b. Less output. c. The same output.

b

For a pure monopoly, price is a. Equal to marginal revenue. b. Greater than marginal revenue. c. Less than marginal revenue because the firm must lower its price in order to sell another unit of output.

b

If we compare a perfectly competitive market to a monopoly with the same costs, we see that the monopoly sells a. The same quantity at a higher price. b. A smaller quantity at a higher price. c. A larger quantity at a lower price.

b

In order to maximize its profit, a single-price monopoly equates a. P = MC. b. MR = MC. c. P = MC - MR. d. P = MR.

b

The U.S. Postal Service has a monopoly over first-class mail service because a. the government has granted this agency a public franchise. b. Stamps are copyrighted. c. Stamps are trademarked.

b

To maximize its profit, a single-price monopoly will change the amount of output so that its marginal revenue a. Equals zero. b. Equals its marginal cost. c. Exceeds its marginal cost but not necessarily by as much as possible.

b

We define a monopoly as a market with a. One supplier and no barriers to entry. b. One supplier with barriers to entry. c. Many suppliers with no barriers to entry. d. Many suppliers with barriers to entry.

b

When a firm is able to engage in perfect price discrimination, its marginal revenue curve a. lies below its demand curve. b. is the same as its demand curve. c. lies above its demand curve. d. is the same as its supply curve.

b

Economies of scale, legal barriers, key resource ownership

barriers to entry

10. Price discrimination is a. always illegal in the United States. b. defined as charging the same price to all consumers. c. defined as charging different prices for different units. d. setting the price to minimize the quantity sold.

c

A gas station in the mountains of Oregon has a monopoly over the retail gas market within a 50-mile radius. The station decides not to price discriminate. As a result, all consumers will pay a. the highest price each consumer is willing to pay. b. The lowest price possible. c. A single price.

c

An important characteristic of monopoly is that there are a. No close substitutes for the good or service sold if the firm price discriminates and there are many close substitutes for the good or service sold if the firm sets a single price. b. A few close substitutes for the good or service sold. c. No close substitutes for the good or service sold.

c

The good produced by a monopoly a. Has perfect substitutes. b. Has no substitutes. c. Has no close substitutes. d. Must be unable to be resold.

c

The makers of the movie FINDING NEMO have some monopoly power over this film because the a. movie is patented. b. name Nemo is trademarked. c. movie is protected by copyright law.

c

To be able to price discriminate, a firm must a. have a public franchise. b. Be natural monopoly. c. Be able to prevent resale of its good. d. Have a patent. e. Have an ownership barrier to entry.

c

To be able to price discriminate, a firm must a. lower prices for all customers. b. raise prices for all customers. c. be able to identify and separate different types of buyers. d. sell a product that can be resold. e. B and C.

c

Which of the following is an example of a natural monopoly? a. the trademark protecting Gatorade b. the talents of Tom Hanks c. the local water company d. the patent on an Intel processor

c

A single-price monopoly a. Must practice price discrimination. b. Can lower its price for only a few select consumers if it wants to increase its output. c. Will set its price equal to a consumer's willingness to pay. d. Must lower the price for all customers if it wants to increase its output.

d

Movie theaters often practice price discrimination. Price discrimination means that movies charge a. men higher prices than women. b. the same low price to everyone. c. the same high price to everyone. d. different customers different prices.

d

the demand curve for a monopoly is

downward sloping

A monopoly a. Is not protected by barriers to entry. b. Produces a good with no close substitutes. c. Faces a downward-sloping demand curve. d. A and B. e. B and C.

e

why are cartels difficult to maintain in the long run?

find it profitable to cheat on agreements

mutual interdependence (oligopoly)

firm must consider reactions of its rivals when determining it price policy

first-degree price discriminating seller charges the _____ demand price for each unit sold

highest

what is the benefit of collusion

increase profit

why is it difficult to analyze and oligopoly

mutual interdependence and outcomes are less certain

the supply curve for a monopoly is

nonexistent

few large producers, differentiated products,control over price, barriers to entry

oligopoly characteristics

Fair return price is where

p=atc

what kind of profit does a monopoly have in the long run

positive

what kinds of profit can a monopoly have in the short run

positive, zero, economic loss

price is too low to cover ATC. demand curve to become *horizontal* p=mc

socially optimal price