tut8

The fundamental cause of monopoly is:

• incompetent management in competitive firms.

• the zero-profit feature of long-run equilibrium in competitive markets.

• advertising.

• barriers to entry.

If a monopoly lowers its price, its:

• total revenue must increase.

• total revenue must decrease.

• marginal revenue must increase.

• marginal revenue must decrease.

• remain unchanged.

• decrease.

The monopolist has total fixed costs of $60 and has a constant marginal cost of $15. What is the profit-maximizing price?

• $4

• $39

• $36

• $42

The following table provides information on the price, quantity, and average cost for a monopoly. At what price will the firm maximize its profit?

• $1

• $2

• $3

• $4

Deadweight loss

• measures monopoly inefficiency.

• exceeds monopoly profits.

• equals monopoly profits.

• equals monopoly revenues minus profits.

To maximize total surplus with a monopoly firm, a benevolent social planner would:

• choose the level of output where MR = MC.

• choose the level of output where MR intersects the demand curve.

• choose the level of output where MC intersects the demand curve.

• allow the free market system to determine the level of output.

"Monopolists do not worry about efficient production and minimizing costs since they can just pass along any increase in costs to their consumers." This statement is:

• false; price increases will mean fewer sales, which may lower profits.

• true; this is the primary reason why economists believe that monopolies result in economic inefficiency.

• false; the monopolist is a price taker.

• true; consumers in a monopoly market have no substitutes to turn to when the monopolist raises prices.

Refer to Figure 15-8. The deadweight loss caused by a profit-maximizing monopoly amounts to:

• $150.

• $200.

• $250.

• $500.

One problem with government operation of monopolies is that:

• a. a benevolent government is likely to be interested in generating profits for political gain.

• b. monopolies typically have rising average costs.

• c. the government typically has little incentive to reduce costs.

• d. a government-regulated outcome will increase the profitability of the monopoly.