Question 1 A monopolist is Answer a. a firm with annual sales over $50 million.

Question

Question 1

A monopolist is
Answer
a.
a firm with annual sales over $50 million.
b.
a single supplier of a good for which there is no close substitute.
c.
a large firm that makes all the other firms in the industry do what it wants.
d.
a supplier of a good that everyone needs with the result that it makes large profits.


Question 2

One reason a monopoly forms is because market demand is such that it takes one firm to produce the quantity necessary to realize low unit costs. This is known as
Answer
a.
that the firm holds a patent.
b.
that the firm has been granted a government license.
c.
economies of scale.
d.
barriers to entry due to ownership of resources.


Question 3

A monopolist faces
Answer
a.
a perfectly elastic demand curve.
b.
the market demand curve.
c.
a two-tiered demand curve.
d.
a perfectly inelastic demand curve.


Question 4

For a monopolist the reason that marginal revenue is less than price is
Answer
a.
because the monopolist must lower the price of the good in order to sell an additional unit.
b.
due to the U-shaped average revenue curve.
c.
due to the perfectly elastic demand curve that the monopolist faces.
d.
because of the lack of competition in the market.


Question 5

Which of the following statements is correct when reading a graph depicting a monopoly?
Answer
a.
profit is maximized where MC=P
b.
profit is maximized where MC=MR and P is read from the demand curve
c.
profit is maximized where ATC = P
d.
profit is maximized where MC=MR and P is =MR


Question 6

A monopolist has the greatest ability to price discriminate. Which of the following is the best description of price discrimination?
Answer
a.
A monopolist charging lower prices to increase its total revenue.
b.
A monopolist charging customers a higher price becasue of higher costs for customers' special requests.
c.
The monopolist charging higher prices to those with higher incomes.
d.
A monopolist selling the product at same price to everyone.


Question 7

The monopolist that has a price =$20, ATC = $24 and an AVC of $18 will _____.
Answer

earn a positive profit

exit the industry immediately

continue to produce in the short run

shut down


Question 8

Comparing the models of monopoly and perfect competition we know that
Answer
a.

monopolies produce more and charge more than a perfectly competitive industry.
b.

monopolies produce less and charge more than a perfectly competitive industry.
c.

monopolies produce lmore and charge less than a perfectly competitive industry.
d.

monopolies produce less and charge less than a perfectly competitive industry.


Question 9

A monopolist can earn profits in the long run because
Answer
a.
a monopoly makes the good or service better than anyone else.
b.
monopolies can legally force people to buy their products and to pay more for them than they are worth.
c.
barriers to entry prevent new firms from entering the industry.
d.
a monopoly is by definition large, and this gives it the ability to make large profits.


Question 10

If a firm sells 10 units of output at $100 per unit and 11 units of output when price is reduced to $99, its marginal revenue for the last unit sold is
Answer
a.
$99.
b.
$109.
c.
$89.
d.
$11.

Explanation / Answer

b d d c a a d b c c

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