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3 Written questions

4 Matching questions

  1. When a firm is on the inelastic segment of its demand curve, it can:
    A) increase total revenue by reducing price.
    B) decrease total costs by decreasing price.
    C) increase profits by increasing price.
    D) increase total revenue by more than the increase in total cost by increasing price
  2. 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.
  3. Comparing a pure monopoly and a purely competitive firm with identical costs, we would find in long-run
    equilibrium that the pure monopolist's:
    A) price, output, and average total cost would all be higher.
    B) price and average total cost would be higher, but output would be lower.
    C) price, output, and average total cost would all be lower.
    D) price and output would be lower, but average total cost would be higher.
  4. 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
  1. a a
  2. b c
  3. c b
  4. d d

5 Multiple choice questions

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

5 True/False questions

  1. . The supply curve for a monopolist is:
    A) perfectly elastic.
    B) upsloping.
    C) that portion of the marginal cost curve lying above minimum average variable cost.
    D) nonexistent.


  2. If a nondiscriminating imperfectly competitive firm is selling its 100th unit of output for $35, its marginal
    A) may be either greater or less than $35. C) will be less than $35.
    B) will also be $35. D) will be greater than $35.


  3. 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.


  4. 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


  5. 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