ECN FINAL EXAM QUESTIONS AND REVISED ANSWERS 100% CORRECT 2024/2025 LATEST UPDATE ALREADY PASSED
A price-discriminating monopolist will charge a higher price to individuals whose demand is:
(a) more inelastic.
(b) more elastic.
(c) unit elastic.
(d) unit inelastic. - Answer- (a) more inelast...
ECN FINAL EXAM QUESTIONS AND
REVISED ANSWERS 100% CORRECT
2024/2025 LATEST UPDATE ALREADY
PASSED
A price-discriminating monopolist will charge a higher price to individuals whose
demand is:
(a) more inelastic.
(b) more elastic.
(c) unit elastic.
(d) unit inelastic. - Answer- (a) more inelastic.
Because a monopolistic competitor has some monopoly power, advertising to increase
that monopoly power makes sense as long as:
(a) the marginal benefit of advertising is positive.
(b) the marginal cost of advertising is positive.
(c) the marginal benefit of advertising exceeds the marginal cost of advertising.
(d) the marginal cost of advertising exceeds the marginal benefit of advertising. -
Answer- (c) the marginal benefit of advertising exceeds the marginal cost of advertising.
If a monopolistically competitive firm is earning economic profits in the short run:
(a) these profits will persist in the long run because of the firm's limited monopoly power.
(b) these profits will be eliminated in the long run as new firms enter the industry.
(c) its output will increase in the long run.
(d) price will be driven down to minimum average total cost in the long run. - Answer- (b)
these profits will be eliminated in the long run as new firms enter the industry.
A profit-maximizing firm in a monopolistically competitive industry sells its product at a
price:
(a) that exceeds average variable cost.
(b) equal to average variable cost.
(c) that exceeds marginal cost.
(d) equal to marginal cost. - Answer- (c) that exceeds marginal cost.
Monopolies that exist because economies of scale create a barrier to entry are called:
,(a) normal monopolies.
(b) natural monopolies.
(c) price-discriminating monopolies.
(d) government monopolies. - Answer- (b) natural monopolies.
If a natural monopoly faces a relatively inelastic consumer demand over the range of
the production, it will have an incentive to:
(a) charge a low price.
(b) charge a high price.
(c) sell more.
(d) advertise more. - Answer- (b) charge a high price.
For a monopolist, the price of the product:
(a) equals the marginal revenue.
(b) is less than the marginal revenue.
(c) exceeds the marginal revenue.
(d) equals the marginal cost. - Answer- (c) exceeds the marginal revenue.
A British waste management company acquired two other companies that specialized in
disposal of hazardous wastes even though the two companies were losing money.
Planning and regulatory requirements in the United Kingdom make it difficult for firms to
establish new hazardous waste landfills, and the combined companies would control
most hazardous waste landfills in some parts of the country. How do the planning and
regulatory requirements affect the market for hazardous waste?
(a) They create a burden on the company, and so it probably will lobby to repeal them.
(b) They make the market for hazardous waste disposal into a contestable market.
(c) They make the market for hazardous waste disposal into a monopolistically
competitive market.
(d) They help the merged companies because it will be expensive for other firms to
enter the market to compete with them. - Answer- (d) They help the merged companies
because it will be expensive for other firms to enter the market to compete with them.
Under monopolistic competition:
(a) firms can sell all the output they wish without affecting the price.
(b) firms face a downward-sloping demand curve.
(c) firms have no monopoly power.
(d) a single seller serves the market. - Answer- (b) firms face a downward-sloping
demand curve.
A monopoly firm is different from a competitive firm in that:
, (a) there are many substitutes for a monopolist's product whereas there are no
substitutes for a competitive firm's product.
(b) a monopolist's demand curve is perfectly inelastic whereas a competitive firm's
demand curve is perfectly elastic.
(c) a monopolist can influence market price whereas a competitive firm cannot.
(d) a competitive firm has a U-shaped average cost curve whereas a monopolist does
not. - Answer- (c) a monopolist can influence market price whereas a competitive firm
cannot.
A perfectly price-discriminating monopolist:
(a) shifts the demand curve for its product to the right by producing where MC = MR.
(b) will cause a greater welfare loss than will a monopolist that is not price-
discriminating.
(c) captures some or all of the consumer surplus.
(d) increases both consumer surplus and producer surplus. - Answer- (c) captures some
or all of the consumer surplus.
If P = Q/15 represents market supply for a competitive industry and market demand is
given by Qd = 500 - 10P, the equilibrium price is:
(a) decrease production.
(b) increase production.
(c) maintain the same level of production.
(d) stop producing. - Answer- (a) decrease production.
In the Standard Oil antitrust case in 1911, the Court ruled that:
(a) the company had a monopolistic structure and therefore should be broken up.
(b) the company was guilty of unfair business practices and therefore should be broken
up.
(c) the Sherman Antitrust Act did not apply.
(d) the company had to be disbanded. - Answer- (b) the company was guilty of unfair
business practices and therefore should be broken up.
To prevent price wars and enhance profits, firms in a cartel may:
(a) encourage foreign competition.
(b) accept the price in the marketplace.
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