This preview has intentionally blurred parts. Sign up to view the full document

View Full Document

Unformatted Document Excerpt

1 ECON 2010 Fall 2010 Review questions Chapter10 1. A significant difference between monopoly and perfect competition is that: A. free entry and exit is possible in a monopolized industry but impossible in a competitive industry. B. competitive firms control market supply, but monopolies do not. C. the monopolist's demand curve is the industry demand curve, while the competitive firm's demand curve is perfectly elastic. D. profits are driven to zero in a monopolized industry, but may be positive in a competitive industry. 2. Drug maker Wyeth produces the hormone-therapy drug Premarin, which is derived from the urine of pregnant mares. Not even Wyeth knows exactly what chemicals are in it, and the method of making the drug is a trade secret. For almost 15 years, Barr Laboratories has been trying to make a pill that is close enough to Premarin to be approved by the Food and Drug Administration as an "equivalent" drug. This story illustrates the importance of: A. declining long-run cost curves as a way of preserving monopoly. B. declining demand curves as an essential ingredient in keeping monopoly. C. barriers to entry in keeping a monopoly position. D. economies of scope in cementing a monopoly position. 3. One major barrier to entry under pure monopoly arises from: A. The availability of close substitutes for a product B. Ownership of essential resources C. The price taking ability of the firm D. Diseconomies of scale 4. Marginal revenue is not equal to price for a monopolist because: A. the monopolist's demand curve is below its marginal revenue curve. B. total revenue increases as output increases. C. the monopolist sets price equal to marginal cost. D. the monopolist must lower the price of all units in order to sell more. 5. At which combination of price and marginal revenue ( P , MR) is the price elasticity of demand greater than 1? ... View Full Document

End of Preview

Sign up now to access the rest of the document