economics data bank

81) For a monopoly, marginal revenue is equal to

A) the price of the product.

B) the amount people buy between two prices.

C) the amount people buy at a given price.

D) the change in total revenue brought about by a one-unit increase in quantity sold.

E) the price multiplied by the quantity sold.

81)

82) A single-price monopoly

A) is able to raise its price as high as it wants and consumers must still buy from it because it

is a monopoly.

B) can lower its price for only a few select consumers if it wants to increase its sales.

C) must practice price discrimination.

D) must lower the price for all customers if it wants to increase its sales.

E) will set its price equal to a consumer's willingness to pay.

82)

83) In order for a hotel to successfully price discriminate so that senior citizens are given a discount,

the hotel must be able to

A) lower its prices to younger customers too.

B) prevent senior citizens from reselling their rooms to younger customers.

C) offset the economic loss from charging senior citizens a lower price by lowering the

marginal cost of renting rooms to senior citizens.

D) shift its demand curve rightward.

E) determine if a senior citizen can pay a higher price.

83)

84) A price-discriminating monopoly is a monopoly that

A) has a license to sell the product.

B) sells its output at a single price to all of its customers.

C) illegally charges different customers different prices for the good it produces.

D) sells different units of a good or service at different prices.

E) has control over the resources used to produce the product.

84)

85) A single-price monopoly

A) sets a single price for all consumers.

B) asks each consumer what single price they would be willing to pay.

C) sets a single, different price for each consumer.

D) sells each unit of its output for the single, highest price that the buyer of that unit is

willing to pay.

E) sets a single, different price for each of two different groups.

85)

86) Which of the following statements is correct?

A) Because a monopoly is the only firm in the market, its marginal revenue curve must be the

same as the market demand curve.

B) Monopolies are guaranteed to earn an economic profit.

C) The market demand and the firm's demand are the same for a monopoly.

D) Monopolies have perfectly inelastic demand for the product sold.

E) Because a monopoly is the only firm in the market, its supply curve is the same as the

market demand curve.

86)

87) Patents

A) remove legal barriers to entry.

B) are prohibited in the United States.

C) are a legal barrier to entry.

D) decrease the incentive to innovate.

E) create economies of scale.

87)

88) A natural monopoly's average cost curve

i. intersects the demand curve while the average cost curve slopes downward.

ii. reaches its minimum before it intersects the demand curve.

iii. intersects the demand curve below the intersection of the marginal cost curve and the

demand curve.

A) i, ii, and iii.

B) ii only.

C) i and iii.

D) iii only.

E) i only.

88)

89) For a natural monopoly, economies of scale

A) as well as constant returns to scale and diseconomies of scale exist along the long-run

average cost curve at least until it crosses the market demand curve..

B) are totally absent.

C) and diseconomies of scale exist along the long-run average cost curve at least until it

crosses the market demand curve.

D) lead to a legal barrier to entry.

E) exist along the long-run average cost curve at least until it crosses the market demand

curve.

89)

90) A natural monopoly

A) occurs when one firm controls a natural resource.

B) arises when one firm can meet the entire market demand at a lower average total cost than

two or more firms.

C) arises as a result of legal barriers to entry.

D) Both answers A and B are correct.

E) Both answers A and C are correct.

90)

91) A natural barrier to entry is defined as a barrier that arises because of

A) technology that allows economies of scale over the entire relevant range of output.

B) patents or licenses that exclude others from producing a good or service.

C) many firms producing the good and thereby allowing choice for all consumers.

D) one firm owning a key natural resource.

E) anticompetitive practices by a firm that keep other firms from producing.

91)

92) A monopoly

A) must determine the price it will charge.

B) cannot price discriminate because such a pricing strategy is illegal in the United States.

C) faces extensive competition from firms making close substitutes.

D) has no control over the price it must charge.

E) Both answers B and C are correct.

92)

93) One of the requirements for a monopoly is that

A) products are high priced.

B) there is a unique product with no close substitutes.

C) there are several close substitutes for the product.

D) there is no barrier to entry.

E) the product cannot be produced by small firms.

93)

94) A monopoly is a market with

A) no barriers to entry.

B) many substitutes.

C) one supplier.

D) many suppliers each producing an identical product.

E) many suppliers each producing a slightly different product.

94)

95) Technology reduces the average cost of production, so in the long run

i. perfectly competitive firms produce at a lower average cost.

ii. the market price of the good falls.

iii. firms with older plants either exit the market or adopt the new technology.

A) i and ii.

B) i only.

C) iii only.

D) i and iii.

E) i, ii, and iii.

95)

96) When a firm adopts new technology, generally its

A) cost curves are unaffected.

B) cost curves shift downward.

C) production permanently decreases.

D) supply curve shifts leftward.

E) cost curves shift upward.

96)

97) Suppose a perfectly competitive market is in long-run equilibrium with a price of $12. Then

there is a permanent increase in demand. As a result, in the short run the market price ________

and in the long run the number of firms ________ and the price is ________ the price was in the

short run.

A) falls; decreases; is equal to

B) rises; does not change; lower than

C) rises; increases; higher than

D) rises; increases; lower than

E) rises; does not change; is equal to

97)

98) Keith is a perfectly competitive carnation grower. The market price is $2 per dozen carnations.

Keith's average total cost to grow carnations is $2.50 per dozen. In the long run, Keith will

A) continue to earn an economic profit.

B) raise his price to more than $2.50 per dozen carnations.

C) raise his price to $2.50 per dozen carnations.

D) exit the industry if the price and his costs do not change.

E) incur an economic loss.

98)

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99) In the long run, existing firms exit a perfectly competitive market

A) only if economic profits are zero.

B) only if they incur an economic loss.

C) if they earn a positive economic profit.

D) if they either earn only a normal profit or if they incur an economic loss.

E) if normal profits are greater than zero.

99)

100) Suppose a perfectly competitive market is in short-run equilibrium. Firms that are incurring a

________ economic loss ________.

A) persistent; exit the industry and shift the market supply curve rightward

B) temporary; decrease their production but definitely stay open

C) persistent; exit the industry and shift the market supply curve leftward

D) temporary; exit the industry

E) persistent; increase their output to increase their profit