ECON CH 8

Market structures are categorized by the following two criteria:

The number of the firms and whether products are differentiated.

Which of the following statements about the differences between monopoly and perfect competition is incorrect??

Monopoly profits can continue in the long run because the monopoly produces more and charges a higher price than a comparable perfectly competitive industry.

Which of the following statements is true?

A monopoly has no rivals.

A monopoly is a market characterized by:

A single seller.

A monopolist is likely to produce ____ and charge ____ than a comparable perfectly competitive firm.

Less; more.

In contrast with perfect competition, a monopolist:

Produces where marginal revenue is greater than marginal cost, and a perfectly competitively firm produces where price equals marginal cost.

Because of monopoly, consumers have ____ than with perfect competition.

Higer prices.

Conditions that prevent the entry of new firms in a monopoly market are:

Barriers to entry.

A natural monopoly exists whenever a single firm:

Has economies of scale over the entire range of production that is relevant to its market.

A firm that has economies of scale:

Over the entire range of output demanded is a natural monopoly.

Which of the following is a barrier to entry?

A) Control of scare resources
B) Economies of scale
C) Government-granted barriers such as patents and copyrights
D) All of the answers are correct.

D) All of the answers are correct

Which of the following is NOT a barrier to entry?

A ban on certain kinds of advertising.

A monopoly is an industry structure characterized by:

Very large barriers to entry and exit.

The demand curve facing a monopolist is:

Downward-sloping, unlike the horizontal demand curve facing a perfectly competitive firm.

Which of the following is true?

A) A monopoly firm is a price taker.
B) Marginal revenue is greater than price if the demand curve is downward-sloping.
C) Marginal revenue equals marginal cost is a profit-maximizing rule of any firm.
D) In monopoly price equals marginal cost when profits are maximized.

C) Marginal revenue equals marginal cost is a profit-maximizing rule of any firm. MR=MC

A firm that faces downward-sloping demand curve is a:

Price setter.

Marginal revenue for a monopolist is:

Less than price.

Which of the following is true?

A) Instead applying the marginal decision rule, monopoly firms just set the price as high as possible.
B) If demand is downward-sloping, price equals marginal revenue
C) If demand is downward-sloping, price equals average total cost
D) If demand is downward-sloping, price is greater than marginal revenue.

D) If demand is downward-sloping, price is greater than marginal revenue.

Suppose a monopoly is producing at the profit-maximizing level of output. At that level of output:

Marginal revenue equals marginal cost. MR=MC

Which of the following is true?

The profit-maximizing solution occurs where marginal revenue equals marginal cost. MR=MC

A monopolist responds to an increase in demand by ____ price and ____ output.

Increasing; decreasing

The monopoly firm’s profit-maximizing price is:

Given by the point on the demand curve for the profit-maximizing quantity.

The profit-maximizing rule marginal revenue equals marginal cost is:

A) Followed by a monopoly but not by a perfectly competitive firm.
B) Followed by a perfectly competitive firm but not by a monopoly.
C) Followed by all types of firms.
D) Not followed by a monopoly because it would reduce economic profit to zero. 2424.

C) Followed by all types of firms.

In the short run, a monopoly will stop producing if:

Price is less than average variable cost.

The most important source of oligopoly in an industry is:

Economies of scale

In an oligopoly:

Firms recognize their interdependence

Oligopoly is a market structure that is characterized by a:

Small number of interdependent firms producing identical or differentiated products.

In monopolistic competition:

There is free entry and exit in the long run.

Monopolistic competition is similar to perfect competition because firms in both market structures:

Do not face any barriers to entry into the industry in the long run.

In monopolistic competition:

Firms earns zero economic profits in the long run.