Question;MULTIPLE CHOICE;1. Which of the following statements is correct?;a. A competitive firm is a price maker and a monopoly is a;price taker.;b. A competitive firm is a price taker and a monopoly is a;price maker.;c. Both competitive firms and monopolies are price takers.;d. Both competitive firms and monopolies are price makers.;2. Assuming that Jerry?s Bicycle Shop operates in a;competitive market for bicycles, which of the following statements is(are);true?;(i) He chooses the price at which he sells his bicycles.;(ii) He chooses the quantity of bicycles that he supplies.;(iii) His market is characterized by one or more barriers to;entry.;a. (i) only;b. (ii) only;c. (i) and (ii) only;d. (ii) and (iii) only;3. Angelo is a wholesale meatball distributor. He sells his;meatballs to all the finest Italian restaurants in town. Nobody can make;meatballs like Angelo. As a result, his is the only business in town that sells;meatballs to restaurants. Assuming that Angelo is maximizing his profit, which;of the following statements is true?;a. Meatball prices will be less than marginal cost.;b. Meatball prices will equal marginal cost.;c. Meatball prices will exceed marginal cost.;d. Meatball prices will be a function of supply and demand;and will therefore oscillate around marginal costs.;4. A monopoly?s marginal cost will;a. be less than its average fixed cost.;b. be less than the price per unit of its product.;c. exceed its marginal revenue.;d. equal its average total cost.;5. Which of the following statements is (are) true of a;monopoly?;(i) A monopoly has the ability to set the price of its;product at whatever level it desires.;(ii) A monopoly?s total revenue will always increase when it;increases the price of its product.;(iii) A monopoly can earn unlimited profits.;a. (i) only;b. (ii) only;c. (i) and (ii);d. (ii) and (iii);6. Young Johnny inherited the only local cable TV company in;town after his father passed away. The company is completely unregulated by the;government and is therefore free to operate as it wishes. Assuming that Johnny;understands the true power of his new monopoly, he is probably most excited;about which of the following statements?;(i) He will be able to set the price of cable TV service at;whatever level he wishes.;(ii) The customers will be forced to purchase cable TV;service at whatever price he wants to set.;(iii) He will be able to achieve any profit level that he;desires.;a. (i) only;b. (ii) only;c. (i) and (iii);d. All of the above are correct.;7. Which of the following is an example of a barrier to;entry?;(i) A key resource is owned by a single firm.;(ii) The costs of production make a single producer more;efficient than a large number of producers.;(iii) The government has given the existing monopoly the;exclusive right to produce the good.;a. (i) and (ii);b. (ii) and (iii);c. (i) only;d. All of the above are correct.;8. To define a monopoly, we cite the following;characteristics;(i) The firm is the sole seller of its product.;(ii) The firm?s product does not have close substitutes.;(iii) The firm generates a large economic profit.;(iv) The firm is located in a small geographic market.;a. (i) and (ii);b. (i) and (iii);c. (ii) and (iv);d. All of the above are correct.;9. A fundamental source of monopoly market power arises from;a. perfectly elastic demand.;b. perfectly inelastic demand.;c. barriers to entry.;d. availability of "free" natural resources, such;as water or air.;10. Because monopoly firms do not have to compete with other;firms, the outcome in a market with a monopoly is often;a. not in the best interest of society.;b. one that fails to maximize total economic well-being.;c. inefficient.;d. All of the above are correct.;11. A natural monopoly occurs when;a. the product is sold in its natural state (such as water;or diamonds).;b. there are economies of scale over the relevant range of;output.;c. the firm is characterized by a rising marginal cost;curve.;d. production requires the use of free natural resources;such as water or air.;12. An industry is a natural monopoly when;(i) government assists the firm in maintaining the monopoly.;(ii) a single firm owns a key resource.;(iii) a single firm can supply a fixed number of goods or;services at a smaller cost than could two or more firms.;a. (i) only;b. (iii) only;c. (i) and (ii);d. (ii) and (iii);13. When a natural monopoly exists, it is;a. always cost effective for government-owned firms to;produce the product.;b. never cost effective for one firm to produce the product.;c. always cost effective for two or more private firms to;produce the product.;d. never cost effective for two or more private firms to;produce the product.;14. The defining characteristic of a natural monopoly is;a. constant marginal cost over the relevant range of output.;b. economies of scale over the relevant range of output.;c. constant returns to scale over the relevant range of;output.;d. diseconomies of scale over the relevant range of output.;15. Natural monopolies differ from other forms of monopoly;because they;a. are not subject to barriers to entry.;b. are not regulated by government.;c. generally don't make a profit.;d. are generally not worried about competition eroding their;monopoly position in the market.
Paper#57934 | Written in 18-Jul-2015Price : $22