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Question;31. The shape of the average total cost;curve in the figure suggests an opportunity for a profit-maximizing monopolist;to take advantage of;a. economies of scale.;b. diseconomies of scale.;c. diminishing marginal product.;d. increasing marginal cost.;32. In view of what we know about the;relationship between average total cost and marginal cost, the marginal cost;curve for this firm;a. must lie entirely above the average;total cost curve.;b. must lie entirely below the average;total cost curve.;c. must be upward sloping.;d. does not exist.;33. When an industry is a natural monopoly;a. it is characterized by constant returns;to scale.;b. it is characterized by diseconomies of;scale.;c. a larger number of firms may lead to a;lower average cost.;d. a larger number of firms will lead to a;higher average cost.;34. If the distribution of water is a;natural monopoly, then;(i) multiple firms will each have to pay;large fixed costs to develop their own network of pipes.;(ii) allowing for competition among;different firms in the water-distribution industry is efficient.;(iii) a single firm can serve the market at;the lowest possible average total cost.;a. (i) and (ii);b. (ii) and (iii);c. (i) and (iii);d. (i) only;35. A firm that is a natural monopoly;a. is not likely to be concerned about new;entrants eroding its monopoly power.;b. is taking advantage of economies of;scale.;c. would experience a higher average total;cost if more firms entered the market.;d. All of the above are correct.;36. Additional firms often do not try to;compete with a natural monopoly because;a. they fear retaliation in the form of;pricing wars from the natural monopolist.;b. they are unsure of the size of the;market in general.;c. they know they cannot achieve the same;low costs that the monopolist enjoys.;d. the natural monopoly doesn?t make a huge;profit.;37. The laws governing patents and copyrights;a. can lead to monopolies.;b. are intended to serve private interests;not the public interest.;c. have costs, but no benefits.;d. All of the above are correct.;38. The De Beers diamond monopoly is a;classic example of a monopoly that;a. is government-created.;b. arises from the ownership of a key;resource.;c. results in very little advertising of;the product that the monopolist produces.;d. was broken up by the government a long;time ago.;Use the information below to answer;questions 39 and 40.;Consider a transportation corporation named;C.R. Evans that has just completed the development of a new subway system in a;medium-sized town in the Northwest. Currently, there are plenty of seats on the;subway, and it is never crowded. Its capacity far exceeds the needs of the;city. After just a few years of operation, the shareholders of C.R. Evans;experienced incredible rates of return on their investment, due to the;profitability of the corporation.;39. Which of the following statements are;most likely to be true?;(i) New entrants to the market know they;will earn a smaller piece of the market than C.R. Evans currently has.;(ii) C.R. Evans is most likely experiencing;increasing average total cost.;(iii) C.R. Evans is a natural monopoly.;a. (i) and (ii);b. (ii) and (iii);c. (i) and (iii);d. All of the above are correct.;40. C.R. Evans may continue to be a;monopolist in the subway transportation industry only if;a. population growth leads to an;overcrowding of the subway cars.;b. there are no new entrants to the market.;c. demand for transportation services;decreases.;d. All of the above are correct.;41. The fundamental cause of monopoly is;a. incompetent management in competitive;firms.;b. the zero-profit feature of long-run;equilibrium in competitive markets.;c. advertising.;d. barriers to entry.;42. Which of the following items is a;primary source of barriers to entry?;a. The costs of production make a single;firm more efficient than a large number of firms.;b. A single firm hires all the people who;have the management skills that are important in the industry.;c. Contracts among firms prohibit them from;competing with one another in the production and sale of certain products.;d. All of the above are correct.;43. A firm that has a monopoly on water;(which is a necessity) can charge a high price for water;a. only if the marginal cost of producing;water is high.;b. even if the marginal cost of producing;water is low.;c. only if the firm is a natural monopoly.;d. even if the demand for water is low.;44. Suppose most people regard emeralds;rubies, and sapphires as close substitutes for diamonds. Then DeBeers, the;large diamond company, has;a. less incentive to advertise than it;would otherwise have.;b. less market power than it would;otherwise have.;c. more control over the price of diamonds;than it would otherwise have.;d. higher profits than it would otherwise;have.;45. A benefit to society of the patent and;copyright laws is that those laws;a. help to keep prices down.;b. help to prevent a single firm from;acquiring ownership of a key resource.;c. encourage creative activity.;d. discourage excessive amounts of output;of certain products.;46. When a single firm can supply a product;to an entire market at a smaller cost than could two or more firms, the;industry is called a;a. resource industry.;b. exclusive industry.;c. government monopoly.;d. natural monopoly.;47. A natural monopoly arises when;a. there are constant returns to scale over;the relevant range of output.;b. there are economies of scale over the;relevant range of output.;c. one firm owns a key natural resource.;d. the government gives a single firm the;exclusive right to produce a particular good or service.;48. When a firm has a natural monopoly, the;firm?s;a. marginal cost always exceeds its average;total cost.;b. total cost curve is horizontal.;c. average total cost curve is downward;sloping.;d. All of the above are correct.;49. It is possible for a natural monopoly;to evolve into a competitive market;a. as a market expands.;b. as patent and copyright laws change.;c. as technological advances give rise to;economies of scale.;d. None of the above are correct, it is not;possible for a natural monopoly to evolve into a competitive market.;50. The key difference between a;competitive firm and a monopoly firm is the ability to select;a. the level of competition in the market.;b. the level of production.;c. inputs in the production process.;d. the price of its output.;51. The market demand curve for a;monopolist is typically;a. unitary elastic at the point of profit;maximization.;b. downward sloping.;c. horizontal.;d. vertical.;52. When a firm operates under conditions;of monopoly, its price is;a. not constrained.;b. constrained by marginal cost.;c. constrained by demand.;d. constrained only by its social agenda.;53. In order to sell more of its product, a;monopolist must;a. sell to the government.;b. sell in international markets.;c. lower its price.;d. use its market power to force up the;price of complementary products.;54. A natural monopolist's ability to price;its product is;a. constrained by the market demand curve.;b. constrained by market supply.;c. not affected by market demand.;d. enhanced by regulatory control of the;government.;55. Economists assume that monopolists;behave as;a. cost minimizers.;b. profit maximizers.;c. price maximizers.;d. All of the above are correct.;56. A monopolist's average revenue is always;a. equal to marginal revenue.;b. greater than the price of its product.;c. equal to the price of its product.;d. less than the price of its product.;57. If a profit-maximizing monopolist faces;a downward-sloping market demand curve, its;a. average revenue is less than the price;of the product.;b. average revenue is less than marginal;revenue.;c. marginal revenue is less than the price;of the product.;d. marginal revenue is greater than the;price of the product.;58. When a monopolist increases the number;of units it sells, there are two effects on revenue. They are the;a. demand effect and the supply effect.;b. competition effect and the cost effect.;c. competitive effect and the monopoly;effect.;d. output effect and the price effect.;59. Which of the following statements is;(are) true of monopolies?;a. Monopolies are constrained by market;demand.;b. Monopolies benefit from barriers to;entry.;c. Monopolies have the ability to set the;prices of their products.;d. All of the above are correct.;60. For a monopolist, marginal revenue is;a. positive when the demand effect is;greater than the supply effect.;b. positive when the monopoly effect is;greater than the competitive effect.;c. negative when the price effect is;greater than the output effect.;d. negative when the output effect is;greater than the price effect.;61. A profit-maximizing monopolist will;produce the level of output at which;a. average revenue is equal to average;total cost.;b. average revenue is equal to marginal;cost.;c. marginal revenue is equal to marginal;cost.;d. total revenue is equal to opportunity;cost.;62. For a profit-maximizing monopolist;a. P > MR = MC.;b. P = MR = MC.;c. P > MR > MC.;d. MR < MC < P.;63. Because a monopolist is the sole;producer in its market, it can necessarily alter the price of its good;(i) without affecting the quantity sold.;(ii) without affecting its average total;cost.;(iii) by adjusting the quantity it supplies;to the market.;a. (ii) only;b. (iii) only;c. (i) and (ii);d. (i) and (iii);64. Competitive firms have;a. downward-sloping demand curves and they;can sell as much output as they desire at the market price.;b. downward-sloping demand curves and they;can sell only a limited quantity of output at each price.;c. horizontal demand curves and they can;sell as much output as they desire at the market price.;d. horizontal demand curves and they can;sell only a limited quantity of output at each price.;65. Monopoly firms have;a. downward-sloping demand curves and they;can sell as much output as they desire at the market price.;b. downward-sloping demand curves and they;can sell only a limited quantity of output at each price.;c. horizontal demand curves and they can sell;as much output as they desire at the market price.;d. horizontal demand curves and they can;sell only a limited quantity of output at each price.;66. Because many good substitutes exist for;a competitive firm?s product, the demand curve that it faces is;a. unit-elastic.;b. perfectly inelastic.;c. perfectly elastic.;d. inelastic only over a certain region.;67. When a monopolist decreases the price;of its good, consumers;a. continue to buy the same amount.;b. buy more.;c. buy less.;d. may buy more or less, depending on the;price elasticity of demand.;68. When a monopolist increases the amount;of output that it produces and sells, the price of its output;a. stays the same.;b. increases.;c. decreases.;d. may increase or decrease depending on;the price elasticity of demand.;69. When a monopolist increases the amount;of output that it produces and sells, its average revenue;a. increases and its marginal revenue;increases.;b. increases and its marginal revenue;decreases.;c. decreases and its marginal revenue;increases.;d. decreases and its marginal revenue;decreases.;70. Which of the following is an impossible;feat for a monopolist to accomplish?;a. control the price of its good;b. charge a higher price and continue to;sell the same quantity;c. operate at a point on the upper half of;the demand curve;d. All of the above are correct.

 

Paper#57931 | Written in 18-Jul-2015

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