4 Written questions
3 Matching questions
- 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
- Other things equal, in which of the following cases would economic profit be the greatest?
A) an unregulated monopolist which is able to engage in price discrimination
B) an unregulated monopolist
C) a regulated monopolist charging a price equal to average total cost
D) a regulated monopolist charging a price equal to marginal cost
- Under which of the following situations would a monopolist increase profits by lowering price (and
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
- a a
- b d
- c c
5 Multiple choice questions
5 True/False questions
Which of the following is correct?
A) Both purely competitive and monopolistic firms are "price takers."
B) Both purely competitive and monopolistic firms are "price makers."
C) A purely competitive firm is a "price taker," while a monopolist is a "price maker."
D) A purely competitive firm is a "price maker," while a monopolist is a "price taker." → b
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. → b
) 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. → d
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
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. → b