11. A monopoly charges a higher price and has a lower level of output than a per
ID: 1134561 • Letter: 1
Question
11. A monopoly charges a higher price and has a lower level of output than a perfectly competitive industry. However a monopolist cannot charge any price in the free market it wants and expect to sell all its goods.
a. true b. false
12. A firm is more likely to be a monopoly if
a. economies of scale are prevalent.
b. if economies of scale are nonexistent.
c. there are no barriers to entry.
d. its patent has expired.
15. Having a marginal social cost and a marginal private cost that are exactly the same is characteristic of a good with external costs.
a. true b. false
16. The residents of a high-rise condominium building have always had an unobstructed view of the city. Now a hotel is being built that will block everyone’s view. Meanwhile the tax accessor’s office is now accessing these condos at a higher property value (which means higher property taxes). The accessor’s office argues that the new hotel proves that land is becoming more scarce and adjoining property values are going up.
The accessor’s office reasoning is flawed. If anything the property values will be declining because
a. Blocking the view will shift the demand curve for the condos to the left.
b. Blocking the view will shift the supply curve to the left.
c. Blocking the view will shift the demand curve to the right.
d. Both a) and b) are correct.
Explanation / Answer
11) True. This is because demand curve lies above the MR curve and so when MR = MC is used, output is lower and price is higher relative to a competitive firm
12) Option A. This is one of the key reasons why one firm having falling ATC experiences no competition when it lowers the price it charges while others are not able to do so.
15) False. If MSC and MPC are same, then the external cost is internalized.
16) Option A. This is because prices will fall only when demand shifts left.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.