FIRST e. a single seller of a product with no close substitute 30. If a firm is

Question

FIRST e. a single seller of a product with no close substitute 30. If a firm is a natural monopoly, its a. long- b. long-run c. fixed d. fixed cost increases over the full range of market demand run average cost declines over the full range of market demand average cost increases over the full range of market demand cost declines over the full range of market demand average cost declines and marginal cost rises over the full range of market demand. 31. As a monopolist increases the quantity of output produced, what happens to price (P) and marginal revenue (MR)? a. both P and MR remain constant b. P is constant, but MR decreases c. P decreases, but MR is constant d. both P and MR decrease, but P falls faster than MR e. both P and MR decrease, but MR falls faster than P 32. Which of the following describes the market structure of monopoly? a. many firms with some control over price, and considerable product differentiation b. many firms with no control over price, producing identical products with no differentiation c. a few firms with some control over price, producing similar products which are close substitutes a few firms with no control over price, producing highly differentiated products a single firm producing all of the output for the industry d. e.

Explanation / Answer

30> a

In case of a natual monopoly, it is more efficient to produce at a bulk manner. Thus average cost must decline over quantity.

31> e

Marginal revenue curve has 2 times the slope of the demand curve, so it falls more quickly than price.

32> e

Monopoly must have a single firm.

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