ch08 - File: Ch08; CHAPTER 8: Monopoly Each question...

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File: Ch08; CHAPTER 8: Monopoly Each question contains a code showing the section of the chapter text from which it was taken. The codes for this chapter are: Code Section 1 Pure Monopoly 2 Perfect Competition Versus Pure Monopoly 3 Monopolistic Competition MULTIPLE CHOICE 1. A pure monopoly a) Can raise price indefinitely. a) Typically is more efficient than other firms in the market. a) Is the only seller in an industry. d) Always restricts output below the competitive level. e) Answers c and d are both correct. ANSWER: e SECTION: 1 2. A monopolist maximizes profit by a) Maximizing the markup of price over marginal cost. b) Producing until average cost is minimized. c) Producing until the cost of the last unit of output is equal to the price of the unit. d) Producing an output level such that marginal revenue equals marginal cost. e) Answers b and c are both correct. ANSWER: d SECTION: 1 3. A monopoly earns positive economic profits in the long run due to a) Barriers to entry. b) Perfectly elastic demand. c) A kinked demand curve. d) Diseconomies of scale. e) Operating with an optimal plant size. ANSWER: a SECTION: 1 4. Which of these factors contributes to the existence of monopoly power? a) A continuously decreasing long-run average cost curve. 8-1
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Monopoly b) Possession of a patent. c) Control of essential inputs in the production process. d) A pure cost or quality advantage. e) All of the answers above are correct. ANSWER: e SECTION: 1 5. If a natural monopoly is broken up into two smaller firms, a) The market price will be unchanged. b) Industry output will increase. c) Production costs will increase. d) Production costs will decrease. e) Industry profits will increase. ANSWER: c SECTION: 2 6. Monopoly reduces overall economic welfare because a) Monopolies earns excess economic profits. b) Monopolies overproduce to maximize profits. c) Monopolies are usually anticompetitive. d) Monopolies engage in excessive product differentiation. e) Monopolies restrict output below efficient levels. ANSWER: e SECTION: 2 7. A pure monopoly occurs when a) All firms sell homogeneous goods. b) There is a single buyer of a good. c) A single firm produces a good that is similar in use to goods produced by other industries. d) A few firms produce a good for which other industries offer no substitutes. e) Entry barriers prevent other firms from competing. ANSWER: e SECTION: 1 8. Is the monopolist supply decision fundamentally different than the competitive supply decision? a) Yes, because the monopolist must determine both price and output quantity. b) Yes, because the monopolist sells a unique product. c) No, because industry demand determines the output level in both markets. d)
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This note was uploaded on 03/11/2012 for the course ECON 333 taught by Professor Barkley during the Fall '08 term at CSU Fullerton.

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ch08 - File: Ch08; CHAPTER 8: Monopoly Each question...

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