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4 Written Questions

3 Matching Questions

  1. If a monopolist engages in price discrimination, we can expect:
    A) profits to increase and output to fall.
    B) both profits and output to increase.
    C) both profits and output to decrease.
    D) the demand curve to lie below the marginal revenue curve.
  2. . For an imperfectly competitive firm:
    A) total revenue is a straight, upsloping line because a firm's sales are independent of product price.
    B) the marginal revenue curve lies above the demand curve because any reduction in price applies to all
    units sold.
    C) the marginal revenue curve lies below the demand curve because any reduction in price applies to all
    units sold.
    D) the marginal revenue curve lies below the demand curve because any reduction in price applies only to
    the extra unit sold.
  3. If a pure monopolist is producing at that output where P = ATC, then:
    A) its economic profits will be zero.
    B) it will be realizing losses.
    C) it will be producing less than the profit-maximizing level of output.
    D) it will be realizing an economic profit.
  1. a c
  2. b b
  3. c a

5 Multiple Choice Questions

  1. b
  2. b
  3. c
  4. c
  5. c

5 True/False Questions

  1. The MR = MC rule:
    A) applies only to pure competition.
    B) applies only to pure monopoly.
    C) does not apply to pure monopoly because price exceeds marginal revenue.
    D) applies both to pure monopoly and pure competition.
    a

          

  2. A purely monopolistic industry:
    A) has no entry barriers.
    B) has a downward sloping demand curve.
    C) produces a product or service for which there are many close substitutes.
    D) earns only a normal profit in the long run
    a

          

  3. The nondiscriminating monopolist's demand curve:
    A) is less elastic than a purely competitive firm's demand curve.
    B) is perfectly elastic.
    C) coincides with its marginal revenue curve.
    D) is perfectly inelastic.
    d

          

  4. Pure monopolists may obtain economic profits in the long run because:
    A) of advertising. C) of barriers to entry.
    B) marginal revenue is constant as sales increase. D) of rising average fixed costs.
    c

          

  5. The nondiscriminating pure monopolist's demand curve:
    A) is the industry demand curve.
    B) shows a direct or positive relationship between price and quantity demanded.
    C) tends to be inelastic at high prices and elastic at low prices.
    D) is identical to its marginal revenue curve.
    c

          

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