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3 Written Questions

4 Matching Questions

  1. The profit-maximizing output of a pure monopoly is economically inefficient because in equilibrium:
    A) price equals minimum average total cost. C) marginal cost exceeds price.
    B) marginal revenue equals marginal cost. D) price exceeds marginal cost.
  2. Under which of the following situations would a monopolist increase profits by lowering price (and
    increasing output):
    A) if it discovered that it was producing where MC = MR
    B) if it discovered that it was producing where its MC curve intersects its demand curve
    C) if it discovered that it was producing where MC < MR
    D) under none of the above circumstances because a monopolist would never lower price
  3. Which of the following is not a precondition for price discrimination?
    A) The commodity involved must be a durable good.
    B) The good or service cannot be resold by original buyers.
    C) The seller must be able to segment the market, that is, to distinguish buyers with different elasticities of
    D) The seller must possess some degree of monopoly power.
  4. Economic profit in the long run is:
    A) possible for both a pure monopoly and a pure competitor.
    B) possible for a pure monopoly, but not for a pure competitor.
    C) impossible for both a pure monopolist and a pure competitor.
    D) only possible when barriers to entry are nonexistent.
  1. a d
  2. b b
  3. c a
  4. d c

5 Multiple Choice Questions

  1. d
  2. c
  3. c
  4. d
  5. d

5 True/False Questions

  1. When the pure monopolist's demand curve is elastic, marginal revenue:
    A) may be either positive or negative. B) is zero. C) is negative. D) is positive.


  2. ) Children are charged less than adults for admission to professional baseball games but are
    charged the same prices as adults at the concession stands. Which of the following conditions of price
    discrimination explain why this occurs?
    A) The seller must have some monopoly power; that is, it must be able to set the product price.
    B) The seller must be able to identify buyers by group characteristics such as age or income.
    C) Groups must have different elasticities of demand for the product.
    D) The items cannot be bought by people in the low-price group and transferred to members of the highprice group.


  3. *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.


  4. A nondiscriminating pure monopolist's demand curve:
    A) is perfectly inelastic. C) lies above its marginal revenue curve.
    B) coincides with its marginal revenue curve. D) lies below its marginal revenue curve.


  5. The vertical distance between the horizontal axis and any point on a perfectly discriminating monopolist's
    demand curve measures:
    A) the quantity demanded. C) product price and marginal revenue.
    B) total revenue. D) average revenue and average total cost.


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