As other firms enter a monopoly’s market, the monopoly’s market power A) is unaffected. B) declines. C) increases. D) increases according to the Lerner Index but decreases according to the price/marginal cost ratio. ANSWER B
Date: September 9th, 2020
A monopoly sets a price of $50 per unit for an item that has a marginal cost of $10. Assuming profit maximization, the implicit demand elasticity is A) -0.2. B) -0.8. C) -1.25. D) -5.0. ANSWER C
Date: September 9th, 2020
If a firm is operating at an output level where losses are minimized, the firm A) has no incentive to stay in the industry. B) is better off exiting the industry. C) is maximizing profits. D) will shut down. ANSWER C
Date: September 9th, 2020
The more elastic the demand curve, a monopoly A) will have a larger Lerner Index. B) will face a lower marginal cost. C) will earn more profit. D) will lose more sales as it raises its price. ANSWER D
Date: September 9th, 2020
If transaction costs are high, then it is more likely a firm’s demand curve is downward sloping. Indicate whether the statement is true or false ANSWER True . Transaction costs increase the costs for consumers to find a new firm. Thus, high transaction costs allow a firm to charge more than others.
Date: September 9th, 2020
In a competitive market, one would expect to see A) no advertising. B) false advertising. C) advertising only in the Sunday papers. D) minimal advertising. ANSWER A
Date: September 9th, 2020
A monopoly always operates in the inelastic portion of its demand curve. Indicate whether the statement is true or false ANSWER False. A monopoly never operates in the inelastic portion of its demand curve. Marginal revenue is negative in this region.
Date: September 9th, 2020
In a competitive market where the elasticity of the market demand curve is -2, the elasticity of the supply curve is 1, and an individual firm faces a residual demand curve with an elasticity of -98. What happens to the individual firm’s residual demand curve when the number of firms serving this market declines? A) […]
Date: September 9th, 2020
How can the market demand for a product be inelastic but the demand for a particular firm is elastic? A) There is no advertising. B) There is a sufficiently large number of sellers. C) There is only one or two sellers. D) Buyers do not have complete information. ANSWER B
Date: September 9th, 2020
The model of perfect competition is valuable for A) prediction. B) comparison to other markets. C) Either A or B D) None of the above. ANSWER C
Date: September 9th, 2020
