Monopoly MMD

In the graph above, if the firm produces 10 units of output, its economic profit will equal

• 0

• 50

• 100

• 150

• 200

In the graph above, which of the following is most likely to occur if the firm increases production beyond 10 units?

• Consumers will be willing to purchase more than 10 units at the price of $20 per unit

• The firm will definitely experience a loss

• The firm would have to lower its price to sell more than 10 units

• The firm’s average cost of production would initially increase

• The firm’s profits would increase

Within the range of market demand, which of the following is consistent with the conditions of a natural monopoly?

• Long run total cost decreases as output increases
• Long run average total cost remains constant as output increases
• Long run average total cost decreases as output increases
• Marginal cost exceeds average cost
• Setting price equal to marginal cost will maximize profits

The profit maximizing firm depicted in the graph above should

• exit if conditions do not improve in the long run

• produce the output that minimizes average total cost

• increase price to maximize profits

• increase output to maximize profits

• use less capital and more labor to reduce cost

Most economists argue that a monopoly is inefficient because it

• Has no incentive to minimize costs
• Produces too little output and sets a price above marginal cost
• Earns too much profit by charging consumers any price it wants
• Produces too much output and thus wastes scarce resources
• Usually produces unsafe products if not regulated by the government

The primary purpose of antitrust laws is to

• Protect consumers from fraudulent business practices
• Protect small businesses from unfair foreign competition
• Prevent firms from monopolizing trade and to promote competition
• Reduce lawsuits and limit the liabilities of businesses
• Grant the government the right to take over private property

If the monopolist chooses to maximize total revenue rather than total profit, it will choose which combination of price and output?

• P=P1 output=Q5

• P=P2 output=Q4

• P=P3 output=Q3

• P=P4 output=Q4

• P=P5 output=Q5

If the monopolist produces the allocatively efficient level of output rather than the profit maximizing level of output, consumer surplus will

• decrease by the area P5JKP4

• decrease by the area P5JMP2

• increase by the area P5JGP1

• increase by the area P5JKP4

• increase by the area P5JMP2

A profit maximizing monopolist selects its output level in the

• Inelastic region of its demand curve

• Elastic region of its demand curve

• Range of output where marginal revenue is rising

• Range of output where total cost is falling

• Range of output where marginal cost is falling

Which of the following enables a seller to capture the entire consumer surplus in a market?

• Perfect price discrimination
• Perfect competition
• An excise tax on buyers
• Effective price ceiling
• Effective price floor