Homework 5
Homework 5
Homework 5
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the
question.
1) Which of the following is NOT a characteristic of a monopolist?
A) the fact that producing where MR = MC gives the firm the maximum profit
B) the ability to set its price above marginal cost
C) the ability to set its price
D) the ability to raise its price without causing total revenue to decrease
3) In order to be able to price discriminate and maximize profit, a monopolist must be able to do all of the
following EXCEPT
A) sell a product that cannot be resold.
B) identify and separate different buyer types.
C) determine the output where marginal revenue equals marginal cost.
D) identify competitors.
4) When a person lobbies Congress to grant the person the exclusive right to sell a particular good, such
lobbying activity is called
A) revenue abatement. B) rent seeking.
C) profit recovery. D) revenue seeking.
6) Buying a monopoly from the existing owner does not ensure an economic profit because
A) the market for monopolies is a monopoly.
B) of the deadweight loss triangle.
C) competition among buyers drives up the cost of buying the firm.
D) profits equal zero in the long run anyway.
9) When a monopolist can price discriminate between two groups, it is profit maximizing to charge the
lower price in the market with
A) less perfect demand. B) more customers.
C) lower average willingness to pay. D) higher average willingness to pay.
10) A strategy of setting price below the monopoly profit-maximizing price in order to deter entry is
known as
A) unlimited pricing. B) contestable pricing.
C) limit pricing. D) entry pricing.
11) A collusive agreement to restrict output and increase prices in the United States is
A) the key tool used by oligopolists.
B) illegal.
C) legal.
D) the key tool used by monopolistic competitors.
19) Small pizza parlors exist in just about every town. Anyone can open a pizza parlor, and the pizzas from
one parlor typically have different tastes and sizes than pizzas from another parlor. Thus, the pizza industry
is an example of
A) monopoly. B) oligopoly.
C) monopolistic competition. D) perfect competition.
22) The above figure shows the demand and cost curves for a firm in monopolistic competition. The graph
represents the firm's situation in
A) only the long run. B) only the short run.
C) neither the short run nor the long run. D) either the short run or the long run.
23) Compared to a similar perfectly competitive industry, a single-price monopoly
A) is more efficient because there is no wasteful competition.
B) might or might not reduce output.
C) creates a deadweight loss and decreases economic profit.
D) creates a deadweight loss and decreases consumer surplus.