ECO 111 CHAPTER 15

One difference between a perfectly competitive firm and a monopoly is that a perfectly competitive firm produces where

• a.

  marginal cost equals price, while a monopolist produces where price exceeds marginal cost.

• b.

  marginal cost equals price, while a monopolist produces where marginal cost exceeds price.

• c.

  price exceeds marginal cost, while a monopolist produces where marginal cost equals price.

• d.

  marginal cost exceeds price, while a monopolist produces where marginal cost equals price.

A monopoly  

• a.

  can set the price it charges for its output and earn unlimited profits.

• b.

  takes the market price as given and earns small but positive profits.

• c.

  can set the price it charges for its output but faces a downward-sloping demand curve so it cannot earn unlimited profits.

• d.

  can set the price it charges for its output but faces a horizontal demand curve so it can earn unlimited profits.

Which of the following is not a characteristic of a monopoly?

• a.

  barriers to entry

• b.

  one seller

• c.

  one buyer

• d.

  a product without close substitutes

A firm that is the sole seller of a product without close substitutes is

• a.

  perfectly competitive.

• b.

  monopolistically competitive.

• c.

  an oligopolist.

• d.

  a monopolist.

Patent and copyright laws are major sources of

• a.

  natural monopolies.

• b.

  government-created monopolies.

• c.

  resource monopolies.

• d.

  antitrust regulation.

The market demand curve for a monopolist is typically

• a.

  unit price elastic.

• b.

  downward sloping.

• c.

  horizontal.

• d.

  vertical.

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.

For a monopolist, marginal revenue is

• a.

  equal to price, as it is for a perfectly competitive firm.

• b.

  less than price, as it is for a perfectly competitive firm.

• c.

  equal to price, whereas marginal revenue is less than price for a perfectly competitive firm.

• d.

  less than price, whereas marginal revenue is equal to price for a perfectly competitive firm.

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.

For a monopoly firm, which of the following equalities is always true?

• a.

  price = marginal revenue

• b.

  price = average revenue

• c.

  price = total revenue

• d.

  marginal revenue = total cost