1. A major difference between a monopolist and a perfectly competitive firm is that
a. the monopolist is certain to earn economic profits.
b. the monopolist’s marginal revenue curve lies below its demand curve.
c. the monopolist engages in marginal cost pricing.
d. the monopolist charges the highest possible price that he can.
2. A monopolist is producing at an output level at which ATC = $5, P = $6, MC = $4, and MR = $3. We can conclude that
a. economic profit could be increased by producing less.
b. the firm is earning $10 in economic profits.
c. economic profit could be increased by producing more.
d. economic profit cannot be increased.
3. A natural monopoly
a. involves multiple firms selling differentiated products.
b. is derived from deposits of natural resources.
c. usually arises when there are large economies of scale.
d. requires government licensing initially.
4. If a monopolist produces to a point at which marginal revenue is greater than marginal cost then
profits will always be negative.
the incremental cost of producing the last unit is less than the incremental revenue.
profits are being maximized.
the incremental cost of producing the last unit exceeds the incremental revenue.
5. If the above figure accurately portrays the market conditions for a given monopolist, we can be assured that the monopolist
a. is making a normal profit.
b. will be forced to go out of business in the long run.
c. is making excessive profits.
d. is producing at the level that will maximize benefit to society.
6. The MR curve of a monopolist is
downsloping and above the demand curve.
downward sloping and below the demand curve.
horizontal and same as the market demand curve.
downsloping and identical to the demand curve.
7. Which of the following is a characteristic of a monopoly market?
a. Firm is a price taker.
b. easy entry
c. one firm
d. many firms
8. In a perfectly competitive market, the average revenue curve of a firm is
a. the same as its demand curve.
b. the same as its total revenue curve.
c. the difference between its total revenue curve and its marginal revenue curve.
d. the same its economic profits.
9. The profit-maximizing output for the perfectly competitive firm occurs at the point at which
TR – ATC is at a maximum.
MR = MC.
TR – MR is at a maximum.
TR – TC is at a minimum.