Unit IV Test

A pure monopolist is:

• any firm realizing economies of scale

• any firm whose demand curve is downward sloping

• any firm whose demand curve is greater than the marginal revenue curve

• any one-firm industry with high barriers to entry

• any firm that can make an economic profit in the long-run

What do economies of scale, the ownership of raw materials, and patents have in common?

• They are characteristics of perfect competition

• They are all barriers to entry

• They explain why a monopolist's demand and marginal revenue curves coincide

• They explain why the long-run average cost curve is U-shaped

• They explain why monopolies make profit

For a pure monopolist the relationship between total revenue and marginal revenue is such that:

• the total revenue increases at a constant rate since marginal revenue decreases

• total revenue is positive when marginal revenue is increasing, but total revenue becomes negative when marginal revenue is decreasing

• marginal revenue is positive when total revenue is increasing, but marginal revenue becomes negative when total revenue is decreasing

• marginal revenue is positive so long as total revenue is positive

• marginal revenue is positive when total revenue is at a maximum

Confronted with the same unit cost data, a monopolistic producer will charge:

• the same price and produce the same output as a competitive industry

• a higher price and produce a larger output than a competitive industry

• a higher price and produce a smaller output than a competitive industry

• a lower price and produce a smaller output than a competitive industry

• a lower price and produce a larger output than a competitive industry

Price exceeds marginal revenue for the pure monopolist because:

• the law of diminishing returns doesn’t apply

• the demand curve lies below the marginal revenue curve

• the monopolist produces a smaller output than would a purely competitive firm

• the demand curve is inelastic

• to sell more the monopolist must lower its price

For the profit maximizing monopolist in Figure A consumer surplus is:

• AEB

• AEKD

• AGD

• KFG

• AFC

Refer to Figure B. To maximize profits or minimize losses this firm should produce:

• E units and charge price C

• E units and charge price A

• M units and charge price N

• L units and charge price B

• E units and charge price B

Refer to Figure B. At profit maximization, the firm will realize:

• an economic profit of ABHJ

• an economic profit of ACGJ

• an economic profit of BCGH

• a loss of JH per unit.

• a loss of BCGH

Refer to Figure C. Compared to industry represented in (1), the price for the industry represented by diagram (2) will be _______ and the quantity will be _______.

• higher; higher

• higher, lower

• lower, lower

• lower, higher

• same

Pure monopolists may obtain economic profits in the long run because:

• they advertise extensively

• marginal revenue is constant as sales increase

• barriers to entry keep other firms from entering the market

• diseconomies of scale keep costs low

• the demand for their products are inelastic