10) When demand for a monopoly\'s output increases, the monopolist will _____. A
ID: 1215405 • Letter: 1
Question
10) When demand for a monopoly's output increases, the monopolist will _____.
A) raise its price
B) increase its output
C) earn greater profit
D) none of these
E) all of these
11) Which of the following is a requirement for successful price discrimination
A) The ability to prevent low-price customers from reselling to high-price customers
B) Inelastic demand for the firm's output
C) Lack of market power
D) All of these
E) None of these
12) A single-price monopoly will never produce a level of output where ____.
A) average total cost exceeds marginal cost.
B) marginal cost exceeds average total cost.
C) marginal cost is positive
D) marginal revenue is negative
E) profit is negative
13) To maximize profit, a single-price monopoly should produce the output level at which P = MC (TRUE/FALSE)
14) Which of the following can explain why a market becomes a monopoly rather than a purely competitive market
A) Downward sloping market demand curve
B) Standardized product
C) Economies of scale
D) Easy entry and exit
E) Horizontal demand curve
15) For a single-price monopoly, the marginal revenue curve ____.
A) is horizontal
B) is vertical
C) is the same as the demand curve
D) lies above the demand curve
E) lies below the demand curve
16) When the conditions for price discrimination are satisfied, price discrimination_____.
A) always harms consumers and benefits the firm
B) always benefits the firm, and may help or harm consumers
C) always benefits both consumer and the firm
D) always harms both consumers and the firm
E) always harms the firm, and may help or harm consumers
17) Just like purely competitive firms, monopoly firms will not earn economic profit in the long run. (TRUE/FLASE)
Explanation / Answer
Answer 10:
Option C. Since monipolist is a profit maximizer, any increase in the demand of the product of the monopolist will raise his revenue and he will earn greater profits.
Answer 11:
Option A. The markets in third degree price discrimination should be segmented to prevent arbitrage opportunities.
Answer 12:
Option D. A monopolist will never produce the output at the inelastic portion of the demand curve or the portion of the demand curve where MR is negative.
Answer 13:
False. The profit maximizing condition of a monopolist is MR = MC.
Answer 14:
Option A. In case of monopoly, there is downward sloping demand curve and in case of Perfect Competition the demand curve is perfectly elastic or horizontal.
Answer 15:
Option E. As demand curve is downward sloping and is also Average Revenue curve of the firm, MR will lie below it.
Answer 16:
Option B.
Answer 17:
False. Monopoly can earn economic profits in the long run due to restrictions on free entry and exit of the firm from the industry.
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