Chapter 10 Practice Quiz + Answers PDF

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Chapter 10 Practice Quiz + Answers...

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Practice Quiz

Monopoly – Chap 10

1.

A purely monopolistic industry: A. has significant entry barriers. B. has a downward sloping demand curve. C. produces a product or service for which there are no close substitutes. D. has all of the above.

2.

A natural monopoly occurs when: A. long-run average costs decline continuously through the range of demand. B. a firm owns or controls some resource essential to production. C. long-run average costs rise continuously as output is increased. D. economies of scale are quickly exhausted.

3.

The pure monopolist's demand curve is: A. nonexistent. B. identical with the industry demand curve. C. of unit elasticity throughout. D. perfectly inelastic. E. perfectly elastic.

4.

In order for a firm to receive monopoly profits in the long run, there must be: A. homogeneous products. B. barriers to market entry. C. mutual interdependence among firms. D. free entry and exit to the market.

5.

Which of the above diagrams correctly portray a nondiscriminating pure monopolist's demand (D) and marginal revenue (MR) curves? A. A B. B C. C D. D

6.

An unregulated pure monopolist will maximize profits by producing that output at which: A. P = MC. B. P = ATC. C. MR = MC. D. MC = AC. E. total revenue equals total cost. 1

7.

Refer to the above diagram. In order to maximize profits or minimize losses this firm should produce: A. OE units and charge price OC. B. OE units and charge price OA. C. OM units and charge price NM. D. OL units and charge price LK. E. OE units and charge price OB.

8.

Refer to the above diagram. In equilibrium total revenue will be: A. NM times OM. B. OAJE. C. OEGC. D. OEHB.

9.

If a monopolist engages in price discrimination, we can expect: A. profits to increase and output to fall. B. both profits and output to increase. C. both profits and output to decrease. D. the demand curve to lie below the marginal revenue curve.

10.

If a regulatory commission wants to establish a "optimal social" price for a natural monopoly, it should select that price: A. at which the marginal cost curve intersects the demand curve. B. at which marginal revenue is zero. C. at which the average total cost curve intersects the demand curve. D. which corresponds with the equality of marginal cost and marginal revenue.

11.

Price exceeds marginal revenue for the pure monopolist because the: A. average and marginal revenue curves are identical. B. law of diminishing returns is inapplicable. C. demand curve is downsloping. D. monopolist produces a smaller output than would a purely competitive firm. E. demand curve lies below the marginal revenue curve.

2

1-D 2-A 3-B 4-B 5-B 6-C 7-B 8-B 9-B 10-A 11-C

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