ECON 260 list can use the market demand curve to determine the highest price con
ID: 1114827 • Letter: E
Question
ECON 260 list can use the market demand curve to determine the highest price consumers are willing and able to pay its product, a monopolist must Even though a monopol for a specific quantity of output, however, in order to sell more of a. lower its price. c. sell to the government. 23. Marginal revenue for a monopolist is computed as change in total revenue per one unit increase in quantity sold. Marginal 22. b. use its market power to force up the price of complementary products. d. sell in international markets. revenue can become negative for a. both competitive and monopoly firms. c. competitive firms, but not for monopoly firms. b. neither competitive nor monopoly firms. d. monopoly firms, but not for competitive firms 24. What is the monopolist's profit under the following conditions? The profit-maximizing price charged for goods produced is $12. The intersection of the marginal revenue and marginal cost curves occurs where output is 10 units and marginal cost is S6. Average total cost for 10 units of output is $5 a. $60. b. $70 c. $100 d. $120 25. By definition, a contestable market is an imperfectly competitive situation that is subject to entry. Even if there is only one producer of a particular good, the market may NOT be contestable because: New technology can make the current good obsolete. c. Domestic firms can potentially enter the market b. New technology cannot make the current good obsolete. d. Foreign producers of the good can provide the good to the U.S. market. 26. Private ownership of a monopoly may benefit society because the monopoly will have an incentive to a. lower its costs to earn a higher profit. b. price its good according to the intersection of marginal cost and average revenue. c. charge a price that prevents some people from buying. d. charge a price that is consistent with that of a benevolent social planner 27. Monopolistic competition is characterized by which of the following attributes? (6) Free entry; (ii) Product differentiation; (iii) Many sellers a. () and (ii) only b. (i) and (ii) only c. (ii) and (iii) only d. (), (ii), and (ii) 28. When an industry has many firms, the industry is an oligopoly if the firms sell differentiated products, but it is monopolistically competitive if the firms sell identical products. b. an oligopoly if the firms sell differentiated products, but it is perfectly competitive if the firms sell identical products. c. perfectly competitive if the firms sell differentiated products, but it is monopolistically competitive if the firms sell identical products. d. monopolistically competitive if the firms sell differentiated products, but it is perfectly competitive if the firms sell identical products. 29. Monopolistic competition differs from perfect competition because in monopolistically competitive markets each of the sellers offers a somewhat different product. Moreover, a profit-maximizing firm in a monopolistically competitive market differs from a firm in a perfectly competitive market because the firm in the monopolistically competitive market a. make zero profit in long run. b. faces a horizontal demand curve at the market clearing price s characterized by setting the price at P = ATC. d. has no barriers to entryExplanation / Answer
Q 22. Option A
This is the reason for downward sloping demand curve faced by a monopoly. The lowering of price results in price effect and quantity effect that entails that prices need to be reduced to sell more.
Q 23. Option D
Monopolies have downward sloping demand and MR curves so that MR can be negative but perfectly competitive firms have horizontal MR which stays fixed.
Q 24 Option B
Profit = (P - ATC)*Q = (12 - 5)*10 = $70
Q 26. Option A
Private monoply will reduce cost because it has an objective to earn profit. Government run monopoly is a wasteful entity that has no incentive to reduce cost and increase efficiency
Q 27 Option B
There are not many sellers but only a few firms supply to the market. In monopolistically competitive market, the market structure allows limited barriers to entry so that many firms competing for price and non-price variables such as, product design, creativity, quantity to be produced, advertising, etc. the product sold in these market is highly differentiated.
Q28. Option D
Q29. Option A
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