Question 2

A profit-maximizing monopolist will set its price:
as far above ATC as possible.
along the elastic portion of its demand curve.
where the marginal cost curve intersects the demand curve.
as close as possible to the minimum point of ATC.
2.667 points
Question 3

A natural monopoly occurs when:
long-run average costs decline continuously through the range of demand.
a firm owns or controls some resource essential to production.
long-run average costs rise continuously as output is increased.
economies of scale are obtained at relatively low levels of output.
2.667 points
Question 4

Economic profit in the long run is:
possible for both a pure monopoly and a pure competitor.
possible for a pure monopoly, but not for a pure competitor.
impossible for both a pure monopolist and a pure competitor.
only possible when barriers to entry are nonexistent.
2.667 points
Question 5

An important economic problem associated with pure monopoly is that, at the profit maximizing outputs, resources are:
overallocated because price exceeds marginal cost.
overallocated because marginal cost exceeds price.
underallocated because price exceeds marginal cost.
underallocated because marginal cost exceeds price.
2.667 points
Question 6

Answer the next question(s) on the basis of the following information for a pure monopolist:

At its profit-maximizing output, the above monopolist:
incurs a loss.
earns an economic profit of $250.
earns a normal profit of $250.
earns an economic profit of $150.
2.667 points
Question 7

When a firm is on the inelastic segment of its demand curve, it can:
increase total revenue by reducing price.
decrease total costs by decreasing price.
increase profits by increasing price.
increase total revenue by more than the increase in total cost by increasing price.
2.667 points
Question 8

A purely monopolistic industry:
has no entry barriers.
has a downward sloping demand curve.
produces a product or service for which there are many close substitutes.
earns only a normal profit in the long run.
2.667 points
Question 9

Pure monopolists may obtain economic profits in the long run because:
of advertising.
marginal revenue is constant as sales increase.
of barriers to entry.
of rising average fixed costs.
2.667 points
Question 10

Refer to the above diagram for a nondiscriminating monopolist. Marginal revenue will be zero at output:
2.667 points
Question 11

A nondiscriminating pure monopolist finds that it can sell its fiftieth unit of output for $50. We can surmise that the marginal:
cost of the fiftieth unit is also $50.
revenue of the fiftieth unit is also $50.
revenue of the fiftieth unit is less than $50.
revenue of the fiftieth unit is greater than $50.
2.667 points
Question 12

In the long run a pure monopolist will maximize profits by producing that output at which marginal cost is equal to:
average total cost.
marginal revenue.
average variable cost.
average cost.
2.667 points
Question 13

Refer to the above data. At its profit-maximizing output, this firm's total revenue will be:
2.667 points
Question 14

Barriers to entering an industry:
are justified because they result in allocative efficiency.
are justified because they result in productive efficiency.
are the basis for monopoly.
apply only to purely monopolistic industries.
2.667 points
Question 15

Which of the following conditions is not required for price discrimination?
Buyer with different elasticities must be physically separate from each other.
The good or service cannot be resold by original buyers.
The seller must be able to segment the market, that is, to distinguish buyers with different elasticities of demand.
The seller must possess some degree of monopoly power.


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