15 - Chapter 15 Monopoly MULTIPLE CHOICE 1 Which of the...

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Chapter 15 Monopoly M ULTIPLE  C HOICE 1 . Which of the following statements is correct? a. A competitive firm is a price maker and a monopoly is a price taker. b. A competitive firm is a price taker and a monopoly is a price maker. c. Both competitive firms and monopolies are price takers. d. Both competitive firms and monopolies are price makers. 2 . Assuming that Jerry’s Bicycle Shop operates in a competitive market for bicycles, which of the following statements  is(are) true? (i) He chooses the price at which he sells his bicycles. (ii) He chooses the quantity of bicycles that he supplies. (iii) His market is characterized by one or more barriers to entry. a. (i) only b. (ii) only c. (i) and (ii) only d. (ii) and (iii) only 3 . Angelo is a wholesale meatball distributor. He sells his meatballs to all the finest Italian restaurants in town. Nobody can make meatballs like Angelo. As a result, his is the only business in town that sells meatballs to restaurants.  Assuming that Angelo is maximizing his profit, which of the following statements is true? a. Meatball prices will be less than marginal cost. b. Meatball prices will equal marginal cost. c. Meatball prices will exceed marginal cost. d. Meatball prices will be a function of supply and demand and will therefore oscillate around marginal costs. 4 . A monopoly’s marginal cost will a. be less than its average fixed cost. b. be less than the price per unit of its product. c. exceed its marginal revenue. d. equal its average total cost. 5 . Which of the following statements is (are) true of a monopoly? (i) A monopoly has the ability to set the price of its product at whatever level it desires. (ii) A monopoly’s total revenue will always increase when it increases the price of its product. (iii) A monopoly can earn unlimited profits. a. (i) only b. (ii) only c. (i) and (ii) d. (ii) and (iii) 6 . Young Johnny inherited the only local cable TV company in town after his father passed away. The company is  completely unregulated by the government and is therefore free to operate as it wishes. Assuming that Johnny  understands the true power of his new monopoly, he is probably most excited about which of the following  statements? (i) He will be able to set the price of cable TV service at whatever level he wishes. (ii) The customers will be forced to purchase cable TV service at whatever price he wants to set. (iii) He will be able to achieve any profit level that he desires.
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