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3 Written questions

3 Matching questions

  1. Assuming no change in product demand, a pure monopolist:
    A) can increase price and increase sales simultaneously because it dominates the market.
    B) adds an amount to total revenue which is equal to the price of incremental sales.
    C) should produce in the range where marginal revenue is negative.
    D) must lower price to increase sales.
  2. 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.
  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.
  1. a d
  2. b a
  3. c b

5 Multiple choice questions

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

5 True/False questions

  1. Price exceeds marginal revenue for the pure monopolist because the:
    A) law of diminishing returns is inapplicable.
    B) demand curve is downsloping.
    C) monopolist produces a smaller output than would a purely competitive firm.
    D) demand curve lies below the marginal revenue curve


  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. 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.


  4. Which of the following statements is correct?
    A) The pure monopolist will maximize profit by producing at that point on the demand curve where
    elasticity is zero.
    B) In seeking the profit-maximizing output the pure monopolist underallocates resources to its production.
    C) The pure monopolist maximizes profits by producing that output at which the differential between
    price and average cost is the greatest.
    D) Purely monopolistic sellers earn only normal profits in the long run


  5. 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.