Question

1. Which of the following are characteristics of a monoply? Choose all that apply.

a. Faces no significant competition.

b. Responds to changes in the market price.

c. Is the sole supplier in a market.

2. A monopolistic is a price:

a. blocker

b. taker

c. maker

3. If congress reduced the period of patent protection from 20 years to 10 years, what would likely happen to the amount of private research and development?

a. It would make innovation more lucrative, so the amount of research and develpment would likely increase.

b. It would have no impact on the amount of research and devleopment.

c. It would make innovation less lucrative, so the amount of research and development would likely decline.

4. If a monopolistic increases quanitiy by one unit, but sells the increased output at a slightly lower price:

a. The marginal revenue of selling a unit is more than the price of the unit.

b. The marginal revenue curve must be below the demand curve.

c. All the previous units, which used to sell at a higher price, now sell for more.

d. Because of higher output the marginal revenue curve is above the demand curve.

Answer 1

a) "A" and "C"

A monopoly doesn't have any significant competition in the market and they are the sole supplier in the market because of several barriers to entry in the market.

b) "C"

A monopolistic firm is a price maker they fix their own price.

c) "C"

Less year so patent protection means less profit form the monopoly the firm is getting because of restriction in the market. It will lead to a decline in research and development.

d) "A"

The marginal revenue of selling a unit is more than the price of the unit.