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A natural monopoly market is characterized diseconomies of scale over the entire range of output.

A) True
B) False

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The two basic reasons why a monopoly exists are barriers to entry and cost advantages.

A) True
B) False

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Owning a patent can always provide a firm with monopoly control of a market.

A) True
B) False

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Which of the following is not a barrier to entry?


A) Legal restrictions
B) Patents
C) Large sunk costs
D) Survivor rights

E) All of the above
F) A) and B)

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The demand curve of the monopoly firm is always the


A) average revenue curve.
B) marginal revenue curve.
C) total revenue curve.
D) marginal cost curve above average variable cost.

E) A) and B)
F) B) and C)

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Entry barriers are present in monopoly markets but are not in perfectly competitive markets.

A) True
B) False

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A patent


A) is given only to government owned companies.
B) is not a legal impediment to entry.
C) is a privilege granted by a state to an inventor over his or her invention.
D) does not give the holder a monopoly during the period it is in effect.

E) All of the above
F) B) and D)

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Explain why marginal revenue is less than price for a monopolist.

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To sell additional units, a monopoly mus...

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What is true for both a monopolist and a perfect competitor?


A) Both maximize profits by producing where MR = MC.
B) Both have prices that are greater than marginal revenue
C) Both minimize average total cost.
D) Both face downward-sloping demand curve.

E) A) and C)
F) None of the above

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Table 11-1 Table 11-1 Table 11-1 shows demand and total cost schedules for Monopoliteria. At its profit-maximizing level of output, Monopoliteria's profit is A) $10. B) $15. C) $22. D) $30. Table 11-1 shows demand and total cost schedules for Monopoliteria. At its profit-maximizing level of output, Monopoliteria's profit is


A) $10.
B) $15.
C) $22.
D) $30.

E) B) and D)
F) A) and B)

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Explain how each of the following industries practices price discrimination. a. Movie theaters b. Airlines c. Auto dealers d. U.S. Postal Service

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a. Movie theaters charge different price...

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Why does perfect competition shun advertising? Does advertising benefit a monopoly?

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In perfect competition, advertising expe...

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Which of the following can serve as an entry barrier?


A) Legal restrictions
B) Patents
C) Control of scarce resources or inputs
D) All of these responses are correct.

E) C) and D)
F) A) and D)

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The average total cost curve of a natural monopoly is always


A) upward sloping.
B) horizontal.
C) downward sloping at all points.
D) downward sloping where it crosses the market demand curve for the good.

E) A) and C)
F) A) and B)

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A profit-maximizing monopolist


A) engages in more research and development activity than a perfectly competitive firm.
B) produces the output level where P = MC.
C) produces less output than a perfectly competitive industry.
D) produces at the unit elastic point on the market demand curve.

E) All of the above
F) C) and D)

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Under monopoly


A) too small a share of society's resources is used to produce the monopolized commodity.
B) Adam Smith's invisible hand assures efficient resource allocation.
C) too large a share of society's resources is being used to produce the monopolized commodity.
D) MC > MU.

E) B) and C)
F) A) and C)

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What is the equilibrium condition for price discriminating monopoly firm? Give some examples for price discrimination.

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The equilibrium condition is:
MC = MRA =...

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Figure 11-4 Figure 11-4 Physicians have two types of patients: private patients who pay directly or with insurance, and Medicaid patients whose care is paid for by the state. Physicians must lower prices to attract more private patients, but they can add unlimited Medicaid patients at a constant price. The situation facing Dr. Casey is depicted in Figure 11-4. Units of medical service (say, number of patients × number of visits) are measured on the horizontal axis. How many units of medical service will Dr. Casey deliver to Medicaid patients? A) OA B) AC C) OC D) OD Physicians have two types of patients: private patients who pay directly or with insurance, and Medicaid patients whose care is paid for by the state. Physicians must lower prices to attract more private patients, but they can add unlimited Medicaid patients at a constant price. The situation facing Dr. Casey is depicted in Figure 11-4. Units of medical service (say, number of patients × number of visits) are measured on the horizontal axis. How many units of medical service will Dr. Casey deliver to Medicaid patients?


A) OA
B) AC
C) OC
D) OD

E) A) and B)
F) A) and C)

Correct Answer

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Figure 11-6 Figure 11-6 At its optimal output level, the profit-maximizing monopolist in Figure 11-6 will earn a profit equal to A) zero. B) (P<sub>2</sub> − P<sub>3</sub>) Q. C) P > Q. D) (P<sub>5</sub> − P<sub>6</sub> ) Q. At its optimal output level, the profit-maximizing monopolist in Figure 11-6 will earn a profit equal to


A) zero.
B) (P2 − P3) Q.
C) P > Q.
D) (P5 − P6 ) Q.

E) A) and D)
F) A) and B)

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The ability to control a scarce resource or input is a characteristic of perfect competition.

A) True
B) False

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