Chapter 22 -

Question 1

Which statement is false?

• A monopoly is both a firm and an industry
• A monopoly is an imperfect competitor
• There are no monopolies in the US
• None of these statements is false

Answer 1

There are no monopolies in the US

Question 2

Which statement is false:

• The monopolists demand and marginal revenue curves are two separate curves
• The monopolist can sell more output only by lowering price
• The monopolist produces at the minimum point of her ATC curve
• None of these statements are false

Answer 2

The monopolist produces at the minimum point of her ATC curve

Question 3

Which statement is true?

• All monopolists products have close subsitutes
• Most firms in the US are monopolies
• There are no monopolies in the US
• A monopoly is a firm that produces all the output in an industry
• none of these are true

Answer 3

A monopoly is a firm that produces all the output in an industry

Question 4

The monopolist produces where:

• where MC=MR
• at the minimum point of ATC
• at maximum output
• where prices is highest

Answer 4

where MC=MR

Question 5

Which statement is true?

• The monopolist cannot lose money
• The monopolist always operates a large firm
• The monopolist will not lose money in the short run
• The monopolist will not lose money in the long run

Answer 5

The monopolist will not lose money in the long run

Question 6

The most efficient output is found:

• where MC and MR cross
• at the bottom of the ATC curve
• when the demand and MR curves are equal
• where the ATC and demand curves cross

Answer 6

At the bottom of the ATC curve

Question 7

An example of government ownership of a monopoly would be:

• The Tennesse Valley Authority
• The New York State Public Service Commission
• ATT
• General Motors

Answer 7

The Tennesse Valley Authority

Question 8

Which statement is true?

• The monopolist most efficient output is her most profitable output as well
• The monopolist charges a higher price than the perfect competitor in the long run
• All monopolists have control over an essential resource
• None is true

Answer 8

The monopolist charges a higher price than the perfect competitor in the long run

Question 9

Which statement is true?

• All monopolies are very large firms
• Most monopolists do not produce at an output in which MC=MR
• The monopolists demand curve and MR curve are identical
• None is true

Answer 9

None is true

Question 10

A monopolist operates at the minimum point of her ATC curve

• only in the short run
• only in the long run
• in both the short run and the long run
• in neither the short run nor the long run

Answer 10

in neither the short run nor the long run

Question 11

If the government attempts to break up a natrual monopoly to enforce competition in an industry:

• the average cost of producing the good will increase
• the smallest firm will have a significant cost advantage over the larger efficient firims
• the average cost of producing the good will decrease
• the price paid by consumers will be expected to remain the same

Answer 11

the average cost of producing the good will increase

Question 12

In the United State, natural monopolies:

• are easily converted to competitive industries
• are common in retailing
• are commonly regulated by governments
• are rarely regulated by governements

Answer 12

are commonly regulated by governments

Question 13

Patents function to

• establish permanent monopolies
• temporarily protect monopoly power
• encourage firms to reduce output
• reduce monopoly power

Answer 13

temporarily protect monopoly power

Question 14

Monopoly firms are

• always very large
• usually very large
• sometimes very large
• never very large

Answer 14

sometimes very large

Question 15

A public utility would be an example of

• a natural monopoly
• an unnatural monopoly
• an unregulated private monopoly
• a government monopoly
• a competitive monopoly

Answer 15

a natural monopoly

Question 16

Monopoly profit

• equals (price - ATC) times quantity sold
• equals price times quantity sold
• exists only in the short run
• existis because no entry barriers exist

Answer 16

equals (price - ATC ) times quanitity sold

Question 17

When an industry is a natural monopoly

• the economies of scale in it are very great
• it would be most efficient to have several (or many) firms competiing in the the market
• it has a perfectly elastic industry demand curve
• the typical firm’s marginal cost curve is everywhere above its average curve

Answer 17

the economies of scale in it are very great

Question 18

The perfect competitor ___________________ produces at the output at which MC=MR, the monopoly ________________ produces at the output at which MC=MR

• always; always
• sometimes; sometimes
• always; sometimes
• sometimes; always

Answer 18

always; always

Question 19

Which statement is true?

• some monopolists are imperfect competitors
• most monopolists are imperfect competitors
• all monopolist are imperfect competitiors
• none is true

Answer 19

All monoplists are imperfect competitors

Question 20

Which of the following companies is NOT a natural monopoly?

• the international Nickel Company
• California Edison
• Southwestern Bell
• Keyspan Gas Company

Answer 20

The International Nickel Company

Question 21

A monopolists makes a profit

• only in the short run
• only in the long run
• in both the short run and the long run
• in neither the short nor long run

Answer 21

in both the short and long run

Question 22

Which statement is true?

• Since the monopolist is the only firm in the industry, her profit is calculated differently from the way a perfect competitor would calculate his profit
• The monopolist’s demand curve and marginal revenue curve are the same
• in the long run under monopoly, the most efficient output is the most profitable output
• a monopolist can lose money

Answer 22

A monopolist can lose money

Question 23

Each of the following is a legal barrier to entry into an industry except:

• licensing
• patents
• governement franchises
• brand names

Answer 23

brand names

Question 24

Which statement is true?

• one basis for monopoly is control over an essential resource
• monopoly is illegal in the United States
• The economies of being established is the same as the economies of scale
• General Motors is a monopoly

Answer 24

One basis for monopoly is control over an essential resource

Question 25

Which statement is true?

• Monopolies tend to be inefficient
• Most industries in the United States are monopolies
• All electric power companies are natural monopolies that do not have competition

Answer 25

Monopolies tend to be inefficient