7 - The demand curve facing a monopoly: ( )A) is equal to...

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The demand curve facing a monopoly: ( ) A) is equal to the industry demand curve. (X) B) is horizontal at the going market price. ( ) C) is steeper than the industry demand curve. ( ) D) is flatter than the industry demand curve. Feedback: The monopolist is the industry. For a monopolist: (X) A) MR < P. ( ) B) MR < average revenue. ( ) C) MR declines as output increases. ( ) D) All of the above are true. Feedback: All of these are true for a monopolist. A monopolist maximizes profit by producing at the output for which: ( ) A) marginal cost = marginal revenue. (X) B) (marginal revenue minus marginal cost) is at its maximum. ( ) C) marginal cost = average revenue. ( ) D) (marginal cost minus marginal revenue) is at its maximum. Feedback: The profit-maximizing rule is the same for a monopolist &ndash; produce the output where MC = MR. If your firm is a monopoly: ( ) A) it will always earn positive economic profit. ( ) B) it will never earn positive economic profit. (X) C) it may earn positive economic profit, zero economic profit, or suffer losses depending on demand conditions. ( ) D) None of the above is true.
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Feedback: A monopolist may make a profit or incur a loss. If a firm converts a previously competitive industry into a monopoly without any changes in the cost curves: ( ) A) it will increase output and price to generate more profit. ( ) B) it will reduce output and raise price to generate more profit. ( ) C) it will keep output the same but increase price to generate more profit. (X) D) it will reduce price and increase output to keep potential competitors from entering the industry. Feedback: Assuming equal costs, a monopolist produces a smaller output and charges a higher price than a competitive industry. Monopolies have some undesirable characteristics; however:
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This note was uploaded on 03/07/2012 for the course BUSN 1000 taught by Professor Web during the Spring '12 term at Webster.

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7 - The demand curve facing a monopoly: ( )A) is equal to...

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