EC 142 Unit 6 Quiz.docx - Score for this quiz 14 out of 15 Submitted Dec 1 at 9:24pm This attempt took 19 minutes Question 1 1 1 pts Which is a major

EC 142 Unit 6 Quiz.docx - Score for this quiz 14 out of 15...

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Score for this quiz: 14 out of 15 Submitted Dec 1 at 9:24pm This attempt took 19 minutes. Question 1 1 / 1 pts Which is a major criticism of a monopoly as a source of allocative inefficiency? Correct! A monopolist fails to expand output to the level where the consumers' valuation of an additional unit is just equal to its opportunity cost Good Job! A monopolist has no incentive to produce efficiently, because even the inefficient monopolist can be assured of economic profits A monopolist will always make profits and that means that prices are too high A monopolist has an unfair advantage because it can purchase labor at a lower price than competitive firms in other industries According to the text on page 178, “the monopolist’s profit-maximizing output results in an underallocation of resources. The monopolist finds it profitable to restrict output and therefore employ fewer resources than are justified from society’s standpoint. So the monopolist does not achieve Allocative efficiency.” Question 2 1 / 1 pts When compared with the purely competitive industry with identical costs of production, a monopolist will produce: More output and charge the same price More output and charge a higher price Correct!
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Less output and charge a higher price Great! Less output and charge the same price Monopolists are profit maximizers (just like purely competitive market participants). Because of this, they set their MR = MC to determine the quantity of production. Unlike the purely competitive industry though, monopolists MR is not equal to demand because the demand curve is downward sloping for a monopolist firm and MR falls below Demand. This leads to a price that is greater than MC which is greater than the price in the purely competitive industry. For the same reasons, monopolists will produce less than would be produced in a purely competitive industry. Question 3 1 / 1 pts Refer to the graph below. The profit-maximizing monopolist in it will set its price and output at: Correct! 0 J and 0 V , respectively Great Job! 0 G and 0 Y , respectively 0 G and 0 V , respectively 0 H and 0 X , respectively Remember, the profit maximizing Monopolist sets quantity at the point where MR and MC intersect. Price is set by extending that line up to the Demand Curve. In this case, quantity will be set at 0V and price will be set at 0J.
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