MONOPOLY (Chap. 10)

A profit-maximizing monopoly will produce where which of the following is true?

-Marginal revenue is less than the price

-Marginal revenue is equal to the marginal cost

-Marginal revenue is positive

Imagine two firms with identical cost structures that do not exhibit economies of scale at high levels of production. One is competing in a perfectly competitive market and one is a monopoly. In the long run which of the following is true?

The monopoly will charge a higher price than the perfectly competitive firm

If a firm faces increasing returns to scale, average costs will do which of the following?

Be above marginal costs

If a monopoly faces a demand curve that is downward-sloping, then marginal revenue will be which of the following?

Must be less than price

All firms that are profit-maximizing, regardless of whether the demand curve is horizontal or downward-sloping, will produce where which of the following is true?

Marginal cost is equal to marginal revenue

An increase in fixed costs for a monopoly will do which of the following?

Decrease the economic profits

A decrease in variable costs will cause the monopoly to do what?

Decrease the price

A monopoly facing a demand curve lower than the average cost curve over wide ranges of output will likely do what?

Go out of business

A monopoly produces a level of output where demand is (elastic, inelastic, or unit elastic) ______________.

Elastic

A movie theater price discriminates by charging children and seniors lower prices than adults because their demand is ______________(elastic / inelastic).

Elastic

A monopoly will not necessarily be technically efficient because which of the following is true?

Barriers to entry will keep firms from entering

The supply curve in a perfectly competitive market is the sum of all of the individual firm's marginal cost curves. What is the supply curve for a monopoly?

A monopoly does not have a supply curve

When comparing a monopoly and a perfectly competitive market where the costs are the same, the monopoly will produce a ______________ (greater / lower / same) quantity.

Lower

A monopoly producing where marginal revenue equals marginal cost will do which of the following?

-It cannot increase quantity and make a greater profit

-It is producing at the highest profit possible in their market

-It is producing where the additional revenue is just equal to the additional cost for each output

If a monopoly faces a demand curve that is entirely above the average cost function, in the long run they will likely do what?

Continue to operate

A monopoly would never produce where marginal revenue is negative because which of the following is true?

Marginal cost is always positive

The market demand in a monopoly market differs (or not) from the demand the monopoly itself faces by _________.

The monopoly is the only firm in the market, so it does not differ.

If a monopoly is not producing at the profit-maximizing quantity, then it must be the case that which of the following is true?

All of the above are possible

Which situation would be labeled a "natural monopoly"?

A firm has large economies of scale, and is thus able to sell the good for a lower price than it would be possible if there were many firms.

If a monopoly increased the price above the profit maximizing level __________.

Revenue would decrease

If a monopoly increases the quantity above the profit-maximizing level which of the following will be true?

-Marginal revenue will be lower than before

-Marginal cost will be greater than marginal revenue

-Price would decrease

Monopolies will price discriminate if which of the following is true?

At the current price, one group of consumers has an elastic demand curve while another group is not as responsive (has an inelastic demand curve)

The Pepsi Company is the only producer of Pepsi. Is it considered a monopoly?

No, because Pepsi has many close substitutes.

What is a reason that monopolies exist?

-A firm owns a resource that no one else has

-A firm is given legal protection that prevents another firm from entering

-A firm naturally drives out competitors through lower prices.

Given your answers to the previous question, the marginal revenue is ______________ (less than / greater than / equal to) the price at each quantity demanded?

Less than

A profit-maximizing monopolist produces where marginal cost is equal to ________.

Marginal Revenue

A monopolist will produce on the portion of the demand curve that is _______.

Elastic

In the long run, the monopolist ______________ (will/will not) produce a quantity where average cost is at a minimum, whereas the perfectly competitive firm ______________ (will/will not) produce that quantity.

Will not; Will

If a monopoly is producing where price is greater than average cost (and thus making a profit), more firms will enter the market (True / False).

False

A monopolist will engage in price discrimination, if it can, in order to increase profits by doing which of the following?

While continuing to produce the same amount

Why do barriers to entry allow a monopolist to make positive economic profits?

Otherwise, firms would enter the market, resulting in a decrease in price and profits.

Is the marginal utility / marginal cost = marginal utility / price for the monopoly?

No

Is the marginal utility / marginal cost = marginal utility / price for the perfectly competitive firms?

Yes