3 Written questions
3 Matching questions
- Comparing a pure monopoly and a purely competitive firm with identical costs, we would find in long-run
equilibrium that the pure monopolist's:
A) price, output, and average total cost would all be higher.
B) price and average total cost would be higher, but output would be lower.
C) price, output, and average total cost would all be lower.
D) price and output would be lower, but average total cost would be higher.
- When a firm is on the inelastic segment of its demand curve, it can:
A) increase total revenue by reducing price.
B) decrease total costs by decreasing price.
C) increase profits by increasing price.
D) increase total revenue by more than the increase in total cost by increasing price
- A natural monopoly occurs when:
A) long-run average costs decline continuously through the range of demand.
B) a firm owns or controls some resource essential to production.
C) long-run average costs rise continuously as output is increased.
D) economies of scale are obtained at relatively low levels of output
- a c
- b a
- c b
5 Multiple choice questions
5 True/False questions
Suppose a pure monopolist is charging a price of $12 and the associated marginal revenue is $9. We thus
A) demand is inelastic at this price. C) the firm is maximizing profits.
B) total revenue is increasing. D) total revenue is at a maximum. → c
*For a pure monopolist the relationship between total revenue and marginal revenue is such that:
A) marginal revenue is positive when total revenue is at a maximum.
B) total revenue is positive when marginal revenue is increasing, but total revenue becomes negative when
marginal revenue is decreasing.
C) marginal revenue is positive when total revenue is increasing, but marginal revenue becomes negative
when total revenue is decreasing.
D) marginal revenue is positive so long as total revenue is positive. → c
Pure monopoly means:
A) any market in which the demand curve to the firm is downsloping.
B) a standardized product being produced by many firms.
C) a single firm producing a product for which there are no close substitutes.
D) a large number of firms producing a differentiated product → c
*If a nondiscriminating pure monopolist decides to sell one more unit of output, the marginal revenue
associated with that unit will be:
A) equal to its price.
B) the price at which that unit is sold less the price reductions which apply to all other units of output.
C) the price at which that unit is sold plus the price increases which apply to all other units of output.
D) indeterminate unless marginal cost data are known. → b
Purely competitive firms and pure monopolists are similar in that:
A) the demand curves of both are perfectly elastic. C) both are price makers.
B) significant entry barriers are common to both. D) both maximize profit where MR = MC. → b