Question 1

When a monopolist produces an additional unit, the marginal revenue generated by that unit must be

Accepted Answer

below the price because the price effect outweighs the output effect.

Answer

above the price because the output effect outweighs the price effect.

Answer

below the price because the output effect outweighs the price effect.

Answer

above the price because the price effect outweighs the output effect.

Question 2

Which of the following statements about price discrimination is not true?

Accepted Answer

Perfect price discrimination generates a deadweight loss.

Answer

Price discrimination requires that the seller be able to separate buyers according to their willingness to pay.

Answer

Price discrimination increases a monopolist's profits.

Answer

Price discrimination can raise economic welfare.

Question 3

If regulators break up a natural monopoly into many smaller firms, the cost of production

Accepted Answer

Answer

could either rise or fall depending on the elasticity of the monopolist's supply curve.

Answer

will remain the same.

Answer

Question 4

One source of inefficiency in monopolistic competition is that

Accepted Answer

because price is above marginal cost, some units are not produced that buyers value in excess of the cost of production and this causes a deadweight loss.

Answer

monopolistically competitive firms produce beyond their efficient scale.

Answer

monopolistically competitive firms earn economic profits in the long run.

Answer

because price is above marginal cost, surplus is redistributed from buyers to sellers.

Question 5

Which of the following firms has the least incentive to advertise?

Accepted Answer

a wholesaler of crude oil

Answer

a manufacturer of breakfast cereal

Answer

a manufacturer of home heating and air conditioning

Answer

a restaurant

Question 6

If oligopolists engage in collusion and successfully form a cartel, the market outcome is

Accepted Answer

the same as if it were served by a monopoly.

Answer

the same as if it were served by competitive firms.

Answer

known as a Nash equilibrium.

Answer

efficient because cooperation improves efficiency.

Question 7

Collusion is difficult for an oligopoly to maintain

Accepted Answer

for all of the above reasons.

Answer

because, in the case of oligopoly, self-interest is in conflict with cooperation.

Answer

because antitrust laws make collusion illegal.

Answer

if additional firms enter of the oligopoly.

Question 8

Which of the following is true regarding the similarities and differences in monopolistic competition and monopoly?

Accepted Answer

The monopolist makes economic profits in the long run while the monopolistic competitor makes zero economic profits in the long run.

Answer

Both the monopolist and the monopolistic competitor operate at the efficient scale.

Answer

The monopolist charges a price above marginal cost while the monopolistic competitor charges a price equal to marginal cost.

Answer

The monopolist faces a downward-sloping demand curve while the monopolistic competitor faces an elastic demand curve.

Question 9

In the short run, if the price is above average total cost in a monopolistically competitive market, the firm makes

Accepted Answer

profits and firms enter the market.

Answer

losses and firms enter the market.

Answer

profits and firms exit the market.

Answer

losses and firms exit the market.

Question 10

A firm whose average total cost continually declines at least to the quantity that could supply the entire market is known as a

Accepted Answer

natural monopoly.

Answer

government monopoly.

Answer

regulated monopoly.

Answer

perfect competitor.

Related quizzes

Related quizzes