Quiz 9 Questions and Answers PDF

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QUIZ #9 (Fall 2018, Morrison) Use the attached scratch-off form to answer questions. There may be different versions of scratch-off forms and tests, so you must use the form you were assigned. Answer all questions. Scoring: Scratching off the correct answer reveals a star. You may scratch off answer...

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QUIZ #9 (Fall 2018, Morrison) Use the attached scratch-off form to answer questions. There may be different versions of scratch-off forms and tests, so you must use the form you were assigned. Answer all questions. Scoring: Scratching off the correct answer reveals a star. You may scratch off answers until you get the correct answer, however, points be awarded as follows: 1 point – Scratch off only the correct answer=1 point; ½ point – Scratch off two answers including the correct answer; ¼ point – scratch off three answers including the correct answer; 0 points – scratch off all four answers.

1. Barriers to entry are a reason a monopoly: A) maximizes its profits by producing where P = MC. B) produces with no fixed costs in the long run. C) produces at the minimum average total cost in the long run. D) earns an economic profit in the long run. 2. Critics of the National Collegiate Athletic Association (NCAA) argue that the NCAA monopolizes college athletics and prevents student–athletes from earning money while in college. If this is true, what type of entry barrier does the NCAA have? A) economies of scale B) a patent C) control of a scarce resource or input D) a copyright 3. A monopolist responds to a decrease in demand by _____ price and _____ output. A) decreasing, increasing B) increasing; decreasing C) increasing; increasing D) decreasing; decreasing 4. If a monopoly has a linear demand curve and is producing at the profit-maximizing level of output, at that level of output, demand is: A) price-inelastic. B) perfectly price-inelastic. C) price unit-elastic. D) price-elastic. 5. Suppose that a monopoly firm is required to pay a new annual license fee to do business in its city and that the fee is somewhat less than the economic profit the firm is now earning. In response to the increase in fees, the firm will: A) not change its price. B) raise its price by less than the amount of the license fee. C) raise its price by somewhat more than amount of the license fee. D) raise its price by the amount of the license fee.

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(Monopoly D018)

6. Suppose a monopoly is producing output so that marginal revenue equals marginal cost. If the monopolist reduces output, it: A) will decrease marginal revenue. B) can charge a higher price and it will increase profits. C) can charge a higher price. D) will increase profits.

Figure: The Profit-Maximizing Output and Price

7. (Figure: The Profit-Maximizing Output and Price) Look at the figure The ProfitMaximizing Output and Price. Assume that there are no fixed costs and AC = MC = $200. At the profit-maximizing output and price for a monopolist, consumer surplus is: A) $1,000. B) $1,600. C) $0. D) $600. 8. Suppose that you build a high-speed, magnetically powered transportation system from New York to Los Angeles, and you are the only firm providing this service. High fixed costs resulting from the enormous quantity of capital used in this system enable decreasing average cost for any conceivable level of demand. Your monopoly would result from: A) technological superiority. B) increasing returns to scale. C) control of a scarce resource or input. D) government-set barriers.

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9. A monopoly is producing output so that average total cost is $30, marginal revenue is $40, and the price is $50. If ATC is at its minimum level and the ATC curve is U- shaped, to maximize profits this firm should: A) increase output. B) shut down. C) reduce output. D) do nothing; it is already maximizing profits.

10. (Table: Demand and Total Cost) Look at the table Demand and Total Cost. Lenoia runs a natural monopoly producing electricity for a small mountain village. The table shows Lenoia's demand and total cost of producing electricity. The price effect of increasing production from 3 megawatts to 4 megawatts is: A) –$50. B) –$150. C) $450. D) $500.

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