College of Business Administration

College of Business Administration Microeconomics Econ 110 Dept. of Economics Prof. Mohammed El-Sakka Quiz No. 8

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1. Pure monopoly means: A) any market in which the demand curve to the firm is downsloping. B) a standardized product being produced by many firms. C) a single firm producing a product for which there are no close substitutes. D) a large number of firms producing a differentiated product. Answer: C 2. A pure monopolist is: A) any firm realizing all existing economies of scale. B) any firm whose demand curve is downsloping. C) any firm which can engage in price discrimination. D) a one-firm industry. Answer: D 3. Barriers to entering an industry: A) are justified because they result in allocative efficiency. B) are justified because they result in productive efficiency. C) are the basis for monopoly. D) apply only to purely monopolistic industries. Answer: C 4. The nondiscriminating monopolist's demand curve: A) is less elastic than a purely competitive firm's demand curve. B) is perfectly elastic. C) coincides with its marginal revenue curve. D) is perfectly inelastic. Answer: A 5. Assuming no change in product demand, a pure monopolist: A) can increase price and increase sales simultaneously because it dominates the market. B) adds an amount to total revenue which is equal to the price of incremental sales. C) should produce in the range where marginal revenue is negative. D) must lower price to increase sales. Answer: D 6. Suppose that a pure monopolist can sell 20 units of output at $10 per unit and 21 units at $9.75 per unit. The marginal revenue of the twenty-first unit of output is: A) $9.75. B) $204.75. C) $4.75. D) $.25. Answer: C 7. In the long run a pure monopolist will maximize profits by producing that output at which marginal cost is equal to: A) average total cost. B) marginal revenue. C) average variable cost. D) average cost. Answer: B 8. In the short run a pure monopolist's profit: A) will be maximized where price equals average total cost. B) may be positive, zero, or negative. C) are always positive. D) will be zero. Answer: B 9. A pure monopolist: A) will realize an economic profit if price exceeds ATC at the equilibrium output. B) will realize an economic profit if ATC exceeds MR at the equilibrium output. C) will realize an economic loss if MC intersects the downsloping portion of MR. D) always realizes an economic profit. Answer: A