ECO HW5
1. A monopoly can earn positive profits because it
a. can set the price it charges for its output but faces a horizontal demand curve
b. can maintain a price such that total revenues will exceed total costs
c. can sell unlimited quantities at any price it chooses
d. takes the market price as given and can sell unlimited quantities
2. Which of the following is not an example of a barrier to entry?
a. Ruby’s Mining Company owns a unique plot of land in Utah, under which lies the
only large deposit of Red beryl in the world.
b. A pharmaceutical company obtains a patent for a specific allergy medication.
c. A musician obtains a copyright for her original song.
d. An entrepreneur opens a popular new restaurant.
3. A government-created monopoly arises when
a. government spending in a certain industry gives rise to monopoly power.
b. the government exercises its market control by encouraging competition among
sellers.
c. the government gives a firm the exclusive right to sell some good or service.
d. the government collects taxes in a particular industry.
4. When a firm has a natural monopoly, the firm’s
a. marginal cost always exceeds its average total cost.
b. total cost curve is horizontal.
c. average total cost curve is downward sloping.
d. marginal cost curve must lie above the firm’s average total cost curve.
5.
Refer to Figure 1. If the monopoly firm is currently producing Q4 units of output,
then a decrease in output will
a. remain unchanged.
Figure 1
Figure 2
