Why a monopoly firm is different from a competitive firm – Microeconomics
1. A monopoly firm is different from a competitive firm in that:
there are many substitutes for a monopolist’s product while there are no substitutes for a competitive firm’s product.
a monopolist’s demand curve is perfectly inelastic while a competitive firm’s demand curve is perfectly elastic.
a monopolist can influence market price while a competitive firm cannot.
a competitive firm has a U-shaped average cost curve while a monopolist does not.
2. Natural monopoly exists when:
one firm can supply the entire quantity demanded at higher cost than two or more firms.
one firm can supply the entire quantity demanded at lower cost than two or more firms.
one firm can supply the entire quantity demanded at the same cost as two or more firms.
the long-run average cost curve exhibits constant returns to scale.
3. If marginal costs are rising, then average total costs are rising.
True
False
4. Which of the assumptions in the theory of perfect competition assures us that economic profit will be zero in the long run?
buyers and sellers have complete information
firms produce identical goods
number of firms is small
there is easy entry and exit (i.e. no barriers to entry)
5. In a long-run equilibrium, monopolistically competitive firms produce where:
marginal cost is equal to price.
marginal revenue is equal to price.
average total cost is equal to price.
marginal revenue is greater than marginal cost.
6. Which of the following will not shift the demand for labor to the right?
an increase in the price of a competing input
an increase in the demand for output
an increase in the wage rate
an increase in the competitiveness of an industry
7. Based on the information below, a perfectly competitive profit-maximizing firm would produce:
qty total cost total revenue
10 $25 50
20 60 100
30 105 150
40 160 200
10 units of output.
20 units of output.
30 units of output.
40 units of output.
8. A price discriminating monopolist will charge a higher price to:
individuals with a more inelastic demand.
individuals with a more elastic demand.
women.
minorities.
9. The demand curve for a monopolist is:
perfectly elastic.
not relevant since the monopolist sets price.
downward-sloping.
perfectly inelastic.
10. Economies of scale account for what part of a long-run average total cost curve?
Downward-sloping.
Horizontal.
Upward-sloping.
Vertical.
