Microeconomics Module 12

question

A competitive firm is a price _____ Monopoly is a _________

answer

price taker, price maker

question

A monopoly

answer

can set the price it charges for its output but faces a downward-sloping demand curve so it cannot earn unlimited profits.

question

Because monopoly firms do not have to compete with other firms, the outcome in a market with a monopoly is often

answer

not in the best interest of society.
one that fails to maximize total economic well-being.
inefficient

question

Which of the following is NOT a characteristic of a competitive market?
Buyers and sellers are price takers.
Each firm sells a virtually identical product.
Entry is limited.
Each firm chooses an output level that maximizes profits.

answer

entry is limited

question

Which of the following industries is most likely to exhibit the characteristic of free entry?
nuclear power
municipal water and sewer
dairy farming
airport security

answer

dairy farming

question

When firms are said to be price takers, it implies that if a firm raises its price,

answer

buyers will go elsewhere

question

If a firm in a competitive market doubles its number of units sold, total revenue for the firm will

answer

double

question

For a firm operating in a competitive industry, which of the following statements is not correct?
Price equals average revenue.
Price equals marginal revenue.
Total revenue is constant.
Marginal revenue is constant.

answer

total revenue is constant

question

Which is the difference between monopolies and perfectly competitive markets?

answer

Monopolies can earn profits in the long run while perfectly competitive firms break even.
Monopolies charge a price higher than marginal cost while perfectly competitive firms charge a price equal to marginal cost
Monopolies face downward sloping demand curves while perfectly competitive firms face horizontal demand curves.

question

For a monopoly firm, price always _______

answer

exceeds marginal revenue

question

A monopolist maximizes profits by

answer

producing an output level where marginal revenue equals marginal cost
earning a profit of (P -MC) x Q.

question

Due to the nature of the patent laws on pharmaceuticals, the market for such drugs

answer

switches from monopolistic to competitive once the firm's patent runs out

question

A monopolost produces...

answer

less than the socially efficient quantity of output but at a higher price than in a competitive market.

question

The deadweight loss associated with a monopoly occurs because the monopolist

answer

produces an output level less than the socially optimal level.

question

Price discrimination is the business practice of

answer

selling the same good at different prices to different customers.

question

Price discrimination requires the firm to

answer

separate customers according to their willingnesses to pay.

question

A monopolist's profits with price discrimination will be

answer

higher than if the firm charged just one price because the firm will capture more consumer surplus.

question

Which of the following is not an example of price discrimination?
A movie theater charges a lower price for a child's ticket than for an adult's ticket.
A university rebates part of the cost of tuition in the form of financial aid for needy students.
A local pizza chain offers a "buy three get one free" deal.
An ice cream parlor charges a higher price for ice cream than for sherbet.

answer

an ice cream parlor charges a higher price for ice cream than for sherbert

question

If a monopolist can practice perfect price discrimination, the monopolist will

answer

eliminate consumer surplus.
eliminate deadweight loss.
maximize profits.

question

What are the ways that antitrust laws promote competition?

answer

Antitrust laws allow the government to prevent mergers.
Antitrust laws allow the government to break up companies into smaller ones.
Antitrust laws prevent companies from coordinating their activities in ways that make markets less competitive.

question

Which of the following is not a characteristic of a monopoly?
barriers to entry
one seller
one buyer
a product without close substitutes

answer

one buyer

question

Which of the following is not an example of a barrier to entry?
Mighty Mitch's Mining Company owns a unique plot of land in Tanzania, under which lies the only large deposit of Tanzanite in the world.
A pharmaceutical company obtains a patent for a specific high blood pressure medication.
A musician obtains a copyright for her original song.
An entrepreneur opens a popular new restaurant

answer

An entrepreneur opens a popular new restaurant

question

The demand curve for a monopoly's product is

answer

the market demand for the product

question

A monopolist's profit-maximizing price and output correspond to the point on a graph

answer

where marginal revenue equals marginal cost and charging the price on the market demand curve for that output.

1 of 24

question

A competitive firm is a price _____ Monopoly is a _________

answer

price taker, price maker

question

A monopoly

answer

can set the price it charges for its output but faces a downward-sloping demand curve so it cannot earn unlimited profits.

question

Because monopoly firms do not have to compete with other firms, the outcome in a market with a monopoly is often

answer

not in the best interest of society.
one that fails to maximize total economic well-being.
inefficient

question

answer

entry is limited

question

Which of the following industries is most likely to exhibit the characteristic of free entry?
nuclear power
municipal water and sewer
dairy farming
airport security

answer

dairy farming

question

When firms are said to be price takers, it implies that if a firm raises its price,

answer

buyers will go elsewhere

question

If a firm in a competitive market doubles its number of units sold, total revenue for the firm will

answer

double

question

answer

total revenue is constant

question

Which is the difference between monopolies and perfectly competitive markets?

answer

question

For a monopoly firm, price always _______

answer

exceeds marginal revenue

question

A monopolist maximizes profits by

answer

producing an output level where marginal revenue equals marginal cost
earning a profit of (P -MC) x Q.

question

Due to the nature of the patent laws on pharmaceuticals, the market for such drugs

answer

switches from monopolistic to competitive once the firm's patent runs out

question

A monopolost produces...

answer

less than the socially efficient quantity of output but at a higher price than in a competitive market.

question

The deadweight loss associated with a monopoly occurs because the monopolist

answer

produces an output level less than the socially optimal level.

question

Price discrimination is the business practice of

answer

selling the same good at different prices to different customers.

question

Price discrimination requires the firm to

answer

separate customers according to their willingnesses to pay.

question

A monopolist's profits with price discrimination will be

answer

higher than if the firm charged just one price because the firm will capture more consumer surplus.

question

answer

an ice cream parlor charges a higher price for ice cream than for sherbert

question

If a monopolist can practice perfect price discrimination, the monopolist will

answer

eliminate consumer surplus.
eliminate deadweight loss.
maximize profits.

question

What are the ways that antitrust laws promote competition?

answer

question

Which of the following is not a characteristic of a monopoly?
barriers to entry
one seller
one buyer
a product without close substitutes

answer

one buyer

question

answer

An entrepreneur opens a popular new restaurant

question

The demand curve for a monopoly's product is

answer

the market demand for the product

question

A monopolist's profit-maximizing price and output correspond to the point on a graph

answer

where marginal revenue equals marginal cost and charging the price on the market demand curve for that output.

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Microeconomics Module 12

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