Question

1. City gas is a natural monopoly that supplies gas to a particular city. its cost and demand information are given below

Quantity (Millions of therms)	Price ($ per therm)	TotalCost(million$)
1	48	35
2	44	64
3	38	90
4	30	113
5	20	133
6	8	150

the marginal cost  of going from a production of 5 million therms to a production of 6 million therms is

a. $133 millioon

b. $150 million

c. $20 million

d. $17 million

2. A firm can become a monopoly due to

a. exlusive ownership of an input.

b. patent

c. cost advantages occuring due to technological advances

d. all of the above

3.  mononopolistic Competition implies that eventually there are way too many firms in the market, and thus there is:

a. unused capacity in each firm and this is an efficiency

b. each firm in the long run makes zero economic profit'  

c. both a and b

d. neither a nor b

Answer 1

Answer)

1) the marginal cost  of going from a production of 5 million therms to a production of 6 million therms is 150-133 = 17 million.

So, correct option is option D.

2) A firm can become a monopoly due to

a. exlusive ownership of an input.

b. patent

c. cost advantages occuring due to technological advances

So, all of the options are correct..

So, correct option is D.

3) . mononopolistic Competition implies that eventually there are way too many firms in the market, and thus there is:

Unused capacity so there is an efficiency, firms in the long run make zero economic profits.

In monopolistic competition, there is excess capacity with the firms. And due to supernormal profits in the short run, new firms enter market due to which firms earn zero economic profits in the long run.

So, correct option is C(both a & b).

If you have any doubts please comment...