Quiz monopoly

A firm is a natural monopoly if it exhibits the following as its output increases:

• decreasing marginal revenue.

• increasing marginal cost.

• decreasing average revenue.

• decreasing average total cost.

For a profit-maximizing monopoly that charges the same price to all consumers, what is the relationship between price P, marginal revenue MR, and marginal cost MC?

• P = MR and MR = MC.

• P > MR and MR = MC.

• P = MR and MR > MC

• P > MR and MR > MC.

If a monopoly’s fixed costs increase, its price will

_____ and its profit will _____.

• increase, decrease

• decrease, increase

• increase, stay the same

• stay the same, decrease

Compared to the social optimum, a monopoly firm chooses

• a quantity that is too low and a price that is too high.

• a quantity that is too high and a price that is too low.

• a quantity and a price that are both too high.

• a quantity and a price that are both too low.

The deadweight loss from monopoly arises because

• the monopoly firm makes higher profits than a competitive firm would.

• some potential consumers who forgo buying the good value it more than its marginal cost.

• consumers who buy the good have to pay more than marginal cost, reducing their consumer surplus.

• the monopoly firm chooses a quantity that fails to equate price and average revenue.

When a monopolist switches from charging a single price to practicing perfect price discrimination, it reduces

• the quantity produced.

• the firm’s profit.

• consumer surplus.

• total surplus.

A _______________is a firm that is the sole seller in its market