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Market power is
a. A characteristic of all market structures.
b. The ability to alter the market price of a product.
c. Most common for competitive firms.
d. Enjoyed by all firms at high levels of output.
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B
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Which of the following is likely to be a monopolist?
a. A drug firm that has a patent granting it the exclusive right to produce a drug.
b. A large firm like GM, which has a substantial portion of the car market.
c. The Boeing Company, which is one of the largest producers of airplanes.
d. An Indonesian restaurant in a large city.
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A
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Monopolists are price
a. Takers, as are competitive firms.
b. Takers, but competitive firms are price makers.
c. Makers, but competitive firms are price takers.
d. Makers, as are competitive firms.
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C
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Both a competitive industry and a monopoly
a. Use marginal cost pricing.
b. Maximize profit per unit where P = MC.
c. Face downward-sloping market demand curves.
d. Produce products that have many identical substitutes.
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C
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A monopolist will find that its marginal revenue curve
a. Is the same as its demand curve.
b. Lies above its demand curve and is flatter than its demand curve.
c. Lies below its demand curve and is steeper than its demand curve.
d. Lies below its demand curve and has the same slope as its demand curve.
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C
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The marginal revenue of a monopolist falls below price because the firm
a. Is not limited by market demand.
b. Faces a market demand curve that is inelastic.
c. Confronts a downward-sloping demand curve.
d. Has an upward-sloping marginal cost curve.
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C
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The marginal revenue of a monopolist
a. Is equal to price at all output levels.
b. Is above a downward-sloping demand curve.
c. Is positive up to the rate of output that maximizes total revenue.
d. Is negative up to the rate of output that maximizes total revenue.
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C
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Suppose a monopoly concrete contractor builds 20 driveways per month for $10,000 each. In order to increase sales to 21 driveways, the contractor must lower the price of driveways to $9,500. The marginal revenue of the 21st driveway is
a. $500.
b. $199,500.
c. -$500.
d. $9,500.
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C
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Monopolists set prices
a. On the marginal revenue curve.
b. Without constraints since there is no competition.
c. At the output where marginal revenue equals marginal cost.
d. At the minimum of the long-run average total cost curve.
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C
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If a monopolist is producing a level of output where MR exceeds MC, then it should
a. Raise its price.
b. Increase its output.
c. Lower its output.
d. Shift its marginal cost curve upward.
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B
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Which of the following statements is not correct?
a. A monopolist’s ability to act as a price setter guarantees economic profits in the short run.
b. The monopolist’s marginal revenue is less than the price for any output greater than one.
c. A monopolist’s demand curve is the same as the market demand curve for the product.
d. In the long run, a monopolist will experience only positive or zero economic profits
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A
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A profit-maximizing monopolist produces the rate of output where
a. MR = MC and determines price based on the demand curve.
b. Price = MC.
c. MR = MC and can set price at any amount it chooses.
d. MR = MC and determines price based on ATC.
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A
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Which of the following is a barrier to entry in a monopoly market?
a. Economic profit of the monopolist.
b. Antitrust laws.
c. A rising long-run average total cost curve.
d. Economies of scale.
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D
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A monopoly realizes larger profits than a comparable competitive market by
a. Setting a higher price at the competitive level of output, thereby increasing total revenue.
b. Producing a greater quantity at the competitive price, thereby increasing profits.
c. Producing at output levels with more favorable cost structures and charging the competitive market price,
thereby increasing profits per unit.
d. Reducing production and pushing prices up.
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D
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A monopoly can have a high degree of market power because of all but
a. Control over key inputs.
b. Government-bestowed franchise rights.
c. A downward-sloping demand curve for its product.
d. The presence of many close substitutes for its product.
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D
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Which of the following is a barrier to entry into a monopoly market?
a. Economic profits for the monopolist.
b. Economies of scale.
c. A large number of firms in the industry.
d. Production of a homogeneous product.
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B
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Economies of scale over the entire range of market output
a. Lead to higher levels of competition.
b. Become a low barrier to entry, preventing a market from being contestable.
c. Mean that as the size of a firm increases, its minimum average total costs rise.
d. Mean that the long-run average total cost curve is downward-sloping.
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D
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Even if a market is not competitive, the firms in the market may behave competitively if
a. Potential competition exists.
b. There are economies of scale.
c. A natural monopoly exists.
d. The market is regulated.
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A
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In a contestable market,
a. Product differentiation results in nonprice competition as well as price competition.
b. There are economies of scale that heighten competition.
c. Barriers to entry and long-run economic profits are low.
d. Many firms compete in producing a standardized product.
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C
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