Chapter 10 Quiz

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Quiz 10

A pure monopolist is selling 6 units at a price of $12. If the marginal revenue of the seventh unit is $5, then: [pic]

|[pic] |firm's demand curve is perfectly elastic. | |[pic] |price of the seventh unit is $10. | |[pic] |price of the seventh unit is greater than $12. | |[pic][pic] |price of the seventh unit is $11. |

Economic profit in the long run is:
[pic]

|[pic] |impossible for both a pure monopolist and a pure competitor. | |[pic][pic] |possible for a pure monopoly, but not for a pure competitor. | |[pic] |possible for both a pure monopoly and a pure competitor. | |[pic] |only possible when barriers to entry are nonexistent. |

If a pure monopolist is operating in a range of output where demand is elastic: [pic]

|[pic] |total revenue will be declining. | |→[pic] |marginal revenue will be positive but declining. | |[pic] |marginal revenue will be positive and rising. | |[pic][pic] |it cannot possibly be maximizing profits. |

The supply curve for a monopolist is:
[pic]

|[pic][pic] |that portion of the marginal cost curve lying above minimum average variable cost. | |[pic] |upsloping. | |[pic] |perfectly elastic. | |→[pic] |nonexistent. |

A pure monopolist is producing an output such that ATC = $4, P = $5, MC = $2, and MR = $3. This firm is realizing: [pic]

|[pic] |a loss that could be reduced by producing less output. | |[pic] |a loss that could be reduced by producing more output. | |[pic] |an economic profit that could be increased by producing less output. | |[pic][pic] |an economic profit that could be increased by producing more output. |

If a regulatory commission imposes upon a nondiscriminating natural monopoly a price that is equal to marginal cost and below average total cost at the resulting output, then: [pic]

|[pic] |the firm will earn only a normal profit. | |[pic] |allocative efficiency will be worsened. | |[pic][pic] |the firm must be subsidized or it will go bankrupt. | |[pic] |the firm will realize an economic profit....
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