Review Chapter 15

A monopoly  

• can set the price it charges for its output and earn unlimited profits

• takes the market price as given and earns small but positive profits

• can set the price it charges for its output but faces a downward-sloping demand curve so it cannot earn unlimited profits

• can set the price it charges for its output but faces a horizontal demand curve so it can earn unlimited profits

Which of the following is not a characteristic of a monopoly?

• barriers to entry

• one seller

• one buyer

• a product without close substitutes

Which of the following is not a reason for the existence of a monopoly?

• sole ownership of a key resource

• patents

• copyrights

• diseconomies of scale

Refer to Figure 15-1. The shape of the average total cost curve reveals information about the nature of the barrier to entry that might exist in a monopoly market. Which of the following monopoly types best coincides with the figure?

• ownership of a key resource by a single firm

• natural monopoly

• government-created monopoly

• a patent or copyright monopoly

In order to sell more of its product, a monopolist must

• sell to the government

• sell in international markets

• lower its price

• use its market power to force up the price of complementary products

Which of the following statements is true of a monopoly firm?

• A monopoly firm is a price taker and has no supply curve

• A monopoly firm is a price maker and has no supply curve

• A monopoly firm is a price maker and has a downward-sloping supply curve

• A monopoly firm is a price maker and has an upward-sloping supply curve

In a market characterized by monopoly, the market demand curve is

• upward sloping

• horizontal

• downward sloping

• vertical

For a monopoly firm, which of the following equalities is always true?

• price = marginal revenue

• price = average revenue

• price = total revenue

• marginal revenue = marginal cost

Refer to Figure 15-3.  What price will the monopolist charge?

• A

• B

• C

• F

Refer to Scenario 15-2. The firm's profit-maximizing price is

• $30

• between $30 and $34

• between $34 and $60

• $60