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Exam 11: Monopoly

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Question 31

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What is a key criterion involved in deciding a natural monopoly?

A) Size of the firm relative to its competitors.
B) Size of the firm relative to the total market demand for a product.
C) Magnitude of profits generated by the company.
D) A firm's ability to adapt to market changes.

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Question 32

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An increase in fixed cost will, in the long run, alter the industry output of

A) both a monopolist and a competitive industry.
B) only a monopolist.
C) only a competitive industry.
D) neither a monopolist nor a competitive industry.

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Question 33

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There exist only two causes of monopoly: barriers to entry and government restrictions.

Many public utilities are permitted to operate as monopolies because they enjoy economies of large-scale production.

Control of a scarce resource or input can serve as an entry barrier.

Wendy retails motor homes, which she buys for a sum that does not vary with the number she purchases from the manufacturer.She can sell eleven per week at $40,000.If she limits sales to ten, she can charge $41,000 each.She will sell eleven per week if the cost of each vehicle is no more than

Price discrimination only occurs under monopoly.

Assume that a firm has measured demand carefully and thinks that the following table accurately displays this.The total cost has been measured and can be given as TC = 20 + Q + Q₂ where Q is the level of output.Complete the table and determine the profit-maximizing level of output.

Monopolies are always large firms with great economies of scale.

Give a complete and concise definition of each of the following terms. a.deliberately erected entry barriers b.inefficiency of monopoly c.price discrimination d.profit-maximizing equilibrium for a monopolist

In cases of natural monopolies, society would be better off with many firms competing with each other.

The difference in prices for first-class and coach airline tickets exemplifies price discrimination.

A positive aspect of monopolies is that they may aid innovation in the marketplace.

Only government restrictions serve as entry barriers.

A monopolist's cost curves may shift down because

In perfect competition, one result of the model was that there were no economic profits in the long run.In a monopoly, the firm typically earns a positive economic profit.Why is there this difference?

Pure monopoly is able to exist because the firm's product is better than the substitutes that are available in the market.

Natural monopolies are of theoretical, but not practical interest.

Advertising by the monopolist

At a given output level, a monopolist earns a profit only if the