final - 1. A market that involves only one seller of a good...

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1. A market that involves only one seller of a good or service is known as a. a monopoly b. perfect competition c. monopolistic competition d. an oligopoly e. perfect monopolistic competition ANS: A 2. A natural monopoly is based on a. diseconomies of scale b. diseconomies of scope c. external diseconomies d. economic freedom e. economies of scale ANS: E 3. Economies of scale act as a barrier to entry because a. one large firm can supply the market at a higher average cost than many small firms could b. firms are not allowed by law to sell output below average cost c. large firms can hire inputs at a higher price than smaller firms could d. firms will not compete with a larger firm when there are differences in marginal cost e. one large firm can produce the market output at a lower average cost than many small firms ANS: E 4. An example of a barrier to entry is a. patent law b. government regulations c. cost of advertising d. economies of scale e. all of the above ANS: E 5. The monopoly's marginal revenue curve a. is equivalent to its demand curve b. lies below its demand curve c. is perfectly elastic d. is perfectly inelastic e. has a positive slope ANS: B Figure 9-3 Total Price Quantity Cost $ 100 1 $150 $ 90 2 $180 $ 80 3 $220 $ 70 4 $300 $ 60 5 $400 $ 50 6 $550 6. What is the profit-maximizing level of output for the non-discriminating monopolist in Figure 9-3? a. 1 unit b. 2 units c. 3 units d. 4 units e. 5 units ANS: C
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7. Figure 9-4 depicts a monopoly that does not price discriminate . What are the equilibrium price and output? a. there is no equilibrium under monopoly b. P' and Q' c. P and Q d. P' and Q e. P and Q' ANS: B 8. The firm depicted in Figure 9-4 is a perfect price discriminator . What is its equilibrium price and output? a. P' and Q' b. P and Q c. P' and Q d. each consumer is charged the maximum price he or she is willing to pay, and the equilibrium output is Q' e. each consumer is charged the maximum price he or she is willing to pay, and the equilibrium output is Q ANS: E Figure 9-10 Price Quantity $100 1 $ 90 2 $ 80 3 $ 70 4 $ 60 5 $ 50 6 $ 40 7 9. For the monopolist in Figure 9-10, the marginal revenue from producing the last unit is a. $20 b. -$20 c. $40 d. $280 e. $50 ANS: B 10. For the monopolist in Figure 9-10, total revenue from selling 4 units of output would be a. $20 b. $300 c. $80 d. $70 e. $280 ANS: E 11. A firm that engages in perfect price discrimination produces more output to maximize its profits than it would if it charged only one price.
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a. True b. False ANS: A 12. Charging different prices to different customers for the same good or service is known as a. monopoly b. price setting c. competition d. price discrimination e. rent seeking ANS: D 13. A major difference between monopolistic competition and perfect competition is the degree of product differentiation. Pure competition has none and differentiation always exists in monopolistic competition. a.
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This note was uploaded on 09/14/2011 for the course ECON 103 taught by Professor Gispy during the Spring '11 term at Prairie State College .

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final - 1. A market that involves only one seller of a good...

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