Unit 4 Review

Which of the following is a source of Monopoly Power?

• Scarcity

• Elasticity of Demand

• Barriers to Entry

• Low Profits

• Free Markets

Which of the following statements is true for a monopolist at the profit maximizing output level?

• Price exceeds marginal revenue

• Marginal cost exceeds price

• Demand is price elastic

• Price equals MC, whic equals ATC

• The demand curve intersects the supply curve

Which of the following statements is true for a perfectly competitive firm but not true for a monopoly

• The Firm's price is equal to its average revenue

• The firm cannot affect the market price for its good

• It is difficult for other firms to enter the industry

• The demand for the firms product is unit elastic

• The firm must lower its price in order to sell more of its product

Most economists argue that a monopoly is inefficient because it

• Has no incentive to minimize its 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 this wastes scarce resources

• usually produces unsafe products if not regulated by government

A profit-maximizing monopolist selects its output level in the

• inelastic region of its demand curve

• range of output where MR is rising

• elastic region of its demand curve

• range of output where TC is falling

• range of output where MC is falling

Assume there is a monopolistically competitive firm in long-run equilibrium. If this firm were to realize productive efficiency, it would

• have more economic profit.

• be under producing.

• also achieve allocative efficiency.

• have a loss.

• be in long-run equilibrium.

If the firm produces 10 units of output, its economic profits will equal

• 0

• 50

• 100

• 150

• 200

Which of the following is most likely to occur if the firm increase production beyond 10 units

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

• The firm would definitely experience a loss

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

• The firm average cost of production would initially increase

• The firm's profits would increase

The economic profit of the profit maximizing monopolist is given by the area

• A

• B

• C

• D

• E

If this were a perfectly competitive industry with the same costs as shown on the graph, the equilibrium price and output would be which of the following

• A

• B

• C

• D

• E