Question

1.Which of the following does not contribute to the existence of monopoly power? A)A relatively inelastic market demand curve B)A pure cost or quality advantage C)A continuously decreasing long-run average cost curve D)The control of essential inputs in the production process E)The possession of a patent

2.Which of the following is true of a pure monopoly? A)A pure monopoly produces at the level where price equals marginal cost. B)A pure monopoly faces a horizontal demand curve. C)A pure monopoly is typically more efficient than other firms in the market. D)A pure monopoly can raise the market price indefinitely. E)A pure monopoly restricts output below the competitive level.

3.A monopolist maximizes profit by producing: A)at the level where the deadweight loss is minimized B)on the inelastic portion of the demand curve C)at the point where the cost of producing the last unit of output equals price D)at the level where average cost is minimized E)at the output level where marginal revenue equals marginal cost

Answer 1

1.
The answer is A)
A relatively inelastic market demand curve
A monopolist does not function on the inelastic portion of the demand curve
2.
The answer is E)
A pure monopoly restricts output below the competitive level.
A pure monopoly produces where Mc=MR,faces a downwardsloping demand curve and is less efficient than competitive firms.
3.
The answer is E)
at the output level where marginal revenue equals marginal cost
A profit maximizing monopolist will produce where the marginal revenue from the last unit equals the marginal cost of the last unit