Which of the following is characteristic of a pure monopolist's demand curve?
A) Average revenue is less than price.
B) Its elasticity coefficient is 1 at all levels of output.
C) Price and marginal revenue are equal at all levels of output.
D) It is the same as the market demand curve.
A pure monopolist is producing an output such that ATC = $4, P = $5, MC = $2, and MR = $3. This firm is
A) a loss that could be reduced by producing more output.
B) a loss that could be reduced by producing less output.
C) an economic profit that could be increased by producing more output.
D) an economic profit that could be increased by producing less output.
Because the monopolist's demand curve is downsloping:
A) MR will equal price.
B) price must be lowered to sell more output.
C) the elasticity coefficient will increase as price is lowered.
D) its supply curve will also be downsloping.
5 Multiple Choice Questions
5 True/False Questions
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. → c
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 → c
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
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
A pure monopolist:
A) will realize an economic profit if price exceeds ATC at the equilibrium output.
B) will realize an economic profit if ATC exceeds MR at the equilibrium output.
C) will realize an economic loss if MC intersects the downsloping portion of MR.
D) always realizes an economic profit. → d