Question

1 .For a natural monopoly, economies of scale are

Group of answer choices

unimportant when compared to the market quantity demanded

large when compared to the market quantity demanded

2. In the context of the Organization of the Petroleum Exporting Countries (OPEC),

Group of answer choices

an agreement is in place for countries to operate like perfect competitors.

agreements made are not legally enforceable.

it is legal for U.S. companies to copy the cartel's behavior.

one country can sue another to prevent violating the agreement.

3. A monopolist must _____ price in order to sell more of its output, because it is subject to a _____ demand curve.

Group of answer choices

reduce; upward-sloping

reduce; downward-sloping

raise; upward-sloping

raise; downward-sloping

Answer 1

1. The correct answer is large when compared to the market quantity demanded. This is because a natural monopoly arises as a result of large economies of scale. Fir natural monopolies, the average total cost declines continuously as output increases.

2. The correct answer is that the agreements made by OPEC are not legally enforceable. This is because the members are not bound by any legal document to follow the agreements and the non observance of the instruments cannot lead to seeking of any legal remedy by other country.

The countries in OPEC cannot sue each other. Otherwise, it would have collapsed by now. Also, OPEC counties are a cartel behaving like a monopoly.

3. The monopolist faces a downward sloping demand curve. This is why it should reduce its price in order to sell more.