Chapter 13: Monopoly

Suppose a monopolist has constant average marginal cost of (AC = MC = 8) and faces demand such that QD = 100 - P. The firm’s profit maximizing revenue will be
1. 736
2. 368
3. 2484
4. 3680
All monopolies exist because of
1. firms’ desire to maximize profits.
2. failure of antitrust laws.
3. barriers to entry.
4. natural selection.
Which of the following is not a technical barrier to entry in a monopolized market?
1. A patent.
2. Decreasing average cost.
3. A low cost method of production known only by monopolist.
4. Increasing returns to scale.
Which of the following is not a legal barrier to entry in a monopolized market?
1. A patent.
2. An exclusive franchise.
3. Decreasing average cost.
4. An exclusive license.
A natural monopoly
1. is a monopoly in the production of raw materials.
2. occurs when one firm can supply the entire market more cheaply than can a number of firms.
3. is one result of a patent.
4. necessarily involves inefficient pricing.
A profit-maximizing monopoly will produce that output for which
1. marginal revenue equals price.
2. average cost is minimized.
3. marginal cost is minimized.
4. marginal cost equals marginal revenue.
The supply curve for a monopoly is given by
1. the firm’s marginal cost curve above the average variable cost curve.
2. the one point on the demand curve that corresponds to the quantity for which price is equal to marginal cost.
3. the one point on the demand curve that corresponds to the quantity for which marginal revenue equals marginal cost.
4. the entire demand curve above the point where price is equal to average cost.
A monopoly’s economic profits are represented by
1. [price minus marginal cost] times number of units sold.
2. [price minus average cost] times number of units sold.
3. [marginal revenue minus price] times number of units sold.
4. [marginal cost minus price] times number of units sold.
The principal difference between economic profits for a monopolist and for a competitive firm is that
1. monopoly profits create major problems of equity whereas competitive profits do not.
2. competitive profits exist only in the short run whereas monopoly profits may exist in the long run as well.
3. monopoly profits represent a transfer out of consumer surplus whereas competitive profits do not.
4. monopoly profits are usually larger than competitive profits.
From the point of view of economic efficiency, output in a monopolized market is
1. too high.
2. perfect.
3. too low.
4. undesirable.

Chapter 13: Monopoly

Multiple Choice Questions