SCAN0815_000 - Chapter Fourteen. Name: Date: 1. Market...

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Unformatted text preview: Chapter Fourteen. Name: Date: 1. Market structures are categorized by the following two criteria: A) the number of firms and the size of the firms B) whether or not products are differentiated and the extent of advertising C) the number of finns and whether or not products are differentiated D) the size of the firms and the extent of advertising 2. Which of the following is(are) true concerning monopoly? A) Monopon is at the opposite end of the spectrum from a perfectly competitive firm. B) A monopoiy has no rivals. C) Barriers to entry prevent other firms from entering the industry. D) All of the statements are true. 3. The market structure called is described as having a single producer selling a single, undifferentiated product. A) perfect competition B) monopoly C) oligopoly D) monopolistic competition 4. A monopoly is a market structure characterized by: A) a single buyer and several sellers. B) a product with many close substitutes. C) a large number of small firms. D) barriers to entry and exit. 5. A monopoly is likely to and than a perfectly competitive firm. A) produce more; charge more B) produce less; charge more C) produce more; charge less D) produce less; charge less 6. Compared to perfect competition: A) monopoiy produces more at a lower price. B) monopoly produces where MR 3- MC, and a perfectly competitively film produces where P = MC. C) monopoly may have economic profits in the long run, but in perfect competition in the long run economic profits are zero. D) perfect competition may have economic profits in the long run, but in monopoly the long run economic profits are zero. 7. Because of l‘flODDpOly, consumers typically have: A) more choices. B) larger quantities. C) higher quality. D) higher prices. Chapter Fourteen Page 1 10. ll. 12. l3. l4. . Most electric, gas, and water companies are examples of: A) B) C) D) unregulated monopolies. natural monopolies. restricted—input monopolies. sunk-cost monopolies. . If your farm has the only known source of a rare cocoa bean needed to make chocolate- covered peanuts, your monopoly would result from: A) control of a scarce resource or input. B) technologicalsuperiority. C) increasing returns to scale. D) government—created barriers. If your local government gives you the exclusive right to sell breakfast bagels in your community, your monopoly would result from: A) control of a scarce resource or input. B) technological superiority. C) increasing returns to scale. D) govenunent-created barriers. The ability of a monopolist to raise the price of a product above the competitive level by reducing the output is known as: A) product differentiation. B) barrier to entry. C) market power. D) patents and copyrights. You own a lemonade stand in a very competitive lemonade market, and as such, you are a price-taking firm. Which of the following events would most likely increase your market power? A) The government abolishes the system of patents and cupyrights. B) A booming economy increases the demand for lemonade and attracts entry into the market. The average total cost curve for firms in the industry is horizontal. You own exclusive rights to harvest lemons from all domestic citrus orchards. c) D) Conditions that prevent the entry of new firms in a monopoly market are: A) barriers to entry. B) terms of sale. C) labor market stipulations. D) production controls. A natural monopoly exists whenever a single firm: A) is owned and operated by the federal or local government. B) is investor—owned but has been granted the exclusive right by the government to operate in a market. experiences economies of scale over the entire range of production that is relevant to its market. has gained centrol over a strategic input of an important production process. C) D) Chapter Fourteen Page 2 15. 16. i7. 18. 19. 20. 21. If the state govemment gives you the exciusive right to sell cement to municipalities, your monopoly would result from: ' A) sunk costs. B) government restrictions. C) economies of scale. D) location. The demand curve facing a monopolist is: A) horizontal, the same as that facing a perfectly competitive firm. B) downward—sloping, the same as that facing a perfectly competitive firm. C) upwardusloping, the same as that facing a perfectly cempetitive film. D) downward-sloping, unlike the horizontal demand curve facing a perfectly competitive finn. Which of the following is true? A) A monopoly firm is a price—taker. B) MR > P if the demand curve is dOWnWard-sloping. C) MR = MC is a profit—maximizing rule for any firm. D) In monopoly P = MC when profits are maximized. The demand curve for a monopoly is: A) the sum of the Supply curves of all the firms in the monopoly's industry. B) the industry demand curve. C) horizontal because no one can enter. D) perfectly elastic. Critics of the National Collegiate Athletic Association (NCAA) argue that the NCAA monopolizes college athletics and prevents student—athletes from earning money while in college. If this is true, what type of entry barrier does the NCAA have? A) a patent B) a copyright C) control of a scarce resource or input D) economies of scale Diamond rings are relatively scarce because: A) according to geologists, diamonds are less common than any other gem—quality colored stone. the demand for diamonds is so high. De Beers limits the quantity of diamonds supplied to the market. of monopolistic competition. B) c) D) Wendy has a monopoly in the retailing of motor homes. She can sell five per week at $21,000 each. If she wants to seil six, she must charge $20,000 each. The quantity effect of seiling the sixth motor home is: A) $20,000. B) $10,000. C) $15,000. D) $21,000. Chapter Fourteen Page 3 22. Wendy has a monopoly in the retailing of motor homes. She can sell five per week at $21,000 each. If she wants to sell six, she must charge $20,000 each. The price effect of selling the sixth motor home is: 23. 24. 25. 26. 27. A) $20,000. 13) —$15,000. C) —$5,000. D) $25,000. Compared to a perfectly competitive industry, a monopolist: A) B) C) D) produces a large quantity. charges a higher price. increases consumer surplus. earns less profit in the long run. Which of the following statements about monopoly equilibrium and perfectly competitive equilibrium is incorrect? A) B) C) D) Price is greater than marginal cost in monopoly, and price equals marginal cost in perfect competition. When a monopoly exists, the consumer surplus is less than if the market were perfectly competitive. Monopoly output will be less than the output of a comparable perfectly competitive industry. In the long run, economic profits are driven to zero in both a menopon and a perfect competitive market. Suppose a monopoly is producing at the profit-maximizing level of output. At that level. of output: A) B) C) D) marginal revenue equals marginal cost. marginal revenue is greater than marginal cost. marginal revenue is less than marginal cost. price is less than marginal cost. Marginal revenue for a monopolist is: A) B) C) 13) equal to price. greater than price. less than price. equal to average revenue. A demand curve that is downward-sloping will ensure that: A) B) C) PflMR. P>MR. P<MR. D) P=MC Chapter Fourteen Page 4 28. The profit-maximizing mle MR = MC is: A) followed by a monopoly, but not by a perfectly competitive firm. B) followed by a perfectly competitive firm but not by a monopoly. C) followed by all types of firms. D) not followed by a monopoly, because it would reduce economic profit to zero. 29. Price discrimination is the practice of: A) charging different prices to buyers of the same good. B) paying different prices to suppliers of the same good. C) equating price to marginal cost. D) equating price to marginal revenue. 30. Suppose a monopoly can separate its customers into two groups. If the monopoly practices price discrimination, it will charge the lower price to the group with: A) the higher price elasticity of demand. B) the lower price elasticity of demand. C) the fewer close substitutes. D) The answer cannot be determined with the information given. Chapter Fourteen Page 5 ...
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This note was uploaded on 02/03/2012 for the course ECONOMICS 202 taught by Professor Black during the Spring '08 term at Boise State.

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SCAN0815_000 - Chapter Fourteen. Name: Date: 1. Market...

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