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Unformatted text preview: Name: ________________________ Class: ___________________ Date: __________ ID: A 1 Practice test Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. A monopoly a. can set the price it charges for its output and earn unlimited profits. b. takes the market price as given and earns small but positive profits. c. can set the price it charges for its output but faces a downward-sloping demand curve so it cannot earn unlimited profits. d. can set the price it charges for its output but faces a horizontal demand curve so it can earn unlimited profits. ____ 2. Which of the following is a characteristic of a natural monopoly? a. Marginal cost declines over large regions of output. b. Average total cost declines over large regions of output. c. The product sold is a natural resource such as diamonds or water. d. All of the above are correct. Scenario 15-2 A monopoly firm maximizes its profit by producing Q = 500 units of output. At that level of output, its marginal revenue is $30, its average revenue is $60, and its average total cost is $34. ____ 3. Refer to Scenario 15-2 . At Q = 500, the firm's total revenue is a. $13,000. b. $15,000. c. $17,000. d. $30,000. Table 15-4 Consider the following demand and cost information for a monopoly. Quantity Price Total Cost $30 $3 1 $25 $7 2 $20 $12 3 $15 $18 4 $10 $25 ____ 4. Refer to Table 15-4 . The maximum profit this monopolist can earn is a. $5. b. $15. c. $16. d. $28. Name: ________________________ ID: A 2 ____ 5. If a monopolist can sell 7 units when the price is $4 and 8 units when the price is $3, then marginal revenue of selling the eighth unit is equal to a. $3. b. $4. c. $24. d.-$4. ____ 6. After the patent runs out on a brand name drug, generic drugs enter the market. What happens next in the market? a. Price increases, and total surplus decreases. b. Price decreases, and total surplus decreases. c. Price decreases, and total surplus increases. d. Price increases, and total surplus increases. ____ 7. Monopoly pricing prevents some mutually beneficial trades from taking place. These unrealized mutually beneficial trades are a. of little concern to society....
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