Chapter 9 Practice Quiz Monopoly. 1. A monopolist always faces a demand curve that is a. perfectly inelastic. b. perfectly elastic. c. unit elastic. d. the same as the market demand curve.
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a. perfectly inelastic.
b. perfectly elastic.
c. unit elastic.
d. the same as the market demand curve.
D. A monopoly is the only seller, so there is no distinction between the market demand curve and the individual demand curve.
b. price that maximizes total revenue.
c. highest possible price on its demand curve.
d. price at which marginal revenue equals
D. As shown in the next slide, profits are
always maximized if the firm produces
at the point where MR = MC.
a. the highest possible price.
b. a price corresponding to the minimum
average total cost.
c. a price equal to marginal revenue.
d. a price determined by the point on the
demand curve corresponding to the level
of output at which marginal revenue
equals marginal cost.
e. none of the above.
D. Demand determines price in all market forms.
a. Economic profit is possible in the long-run.
b. Marginal revenue is less than the price
c. Profit maximizing or loss minimizing
occurs when marginal revenue equals
d. All of the above are true.
D. As shown in the graph on the next slide, all of the above are characteristics of a monopoly.
Exhibit 11 Profit Maximizing for a Monopolist
Price, costs and revenue (dollars)
Quanitity of output (units per day)
a. 100 units per day.
b. 200 units per day.
c. 300 units per day.
d. 400 units per day.
B. 200 units is the point at which MR = MC.
a. should shut down in the short-run.
b. should shut down in the long-run.
c. earns zero economic profit.
d. earns positive economic profit.
D. At the point where MR = MC (on the
vertical line), P is greater than ATC;
therefore, total revenue is greater than total
cost and an economic profit is being made.
monopolist in Exhibit 11 should set its price at
a. $30 per unit.
b. $25 per unit.
c. $20 per unit.
d. $10 per unit.
e. $40 per unit.
B. Maximum profit or minimized losses
are found by drawing a vertical line
where MR = MC. This line intersects the
demand curve at $25.
d. All total fixed costs.
discrimination, one necessary condition is
b. differences in the price elasticity of demand among groups of buyers.
c. a homogeneous product.
d. none of the above.
B. Price discrimination takes place when a monopolist is faced with buyers that are widely different; therefore, the buyers elasticity of demand for the product will be different.
lower price and selling it at a higher price?
a. Buying short.
D. The practice of earning a profit by
buying a good at a low price and
reselling the good at a higher price.
monopoly, a firm
a. is a price taker.
b. is a price maker.
c. will shut down in the short run if price falls
short of average total cost.
d. always earns a pure economic profit.
e. sets marginal cost equal to marginal
E. The profit maximizing output for any
firm is where MR = MC.
marginal revenue is positive, the
downward-sloping straight-line demand
a. perfectly elastic.
b. elastic, but not perfectly elastic.
c. unitary elastic.
B. When marginal revenue is zero, the demand curve is unitary elastic, and it is inelastic when marginal revenue is negative. Demand is perfectly elastic in perfect competition.
intersection of the marginal cost and marginal revenue
curves. If this price is between its average variable cost and
average total cost curves, the firm will
a. earn an economic profit.
b. stay in operation in the short-run, but shut down in the
long run if demand remains the same.
c. shut down.
d. none of the above.
B. If the firm can cover its average variable cost, it is paying for the cost of operating. In the long run, demand could increase and the firm earns economic profit.
a monopolist operates in the long run at a
quantity of output at which
a. P = MC.
b. MR = MC.
c. P = ATC.
d. P > MR.
D. The perfectly competitive firm’s demand curve is perfectly elastic; therefore, the firms operates where P = MR. For a monopolist, the MR curve is downward sloping and below the price.
competitive firm, can continue to earn an
economic profit in the long run because of
a. collusive agreements with competitors.
b. price leadership.
d. a dominant firm.
e. extremely high barriers to entry.
E. Answers a. – d. can increase a monopolist’s profits, but a key characteristic that results in long run economic profit is an extremely high barrier to entry.