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Econ Test 4 (True) Quiz
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Multiple Choice Questions
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158.To define a monopoly, we cite the following characteristics: (i) and (ii). (i) The firm is the sole seller of itsproduct.(ii) The firm's product does not haveclose substitutes.(iii) The firm generates a largeeconomic profit.(iv) The firm is located in a smallgeographic market.
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True
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14-The maximum profit available to this firm is $5.
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True
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False
Since natural monopolies have a declining average cost curve, regulating natural monopolies by setting price equal to marginal cost would cause the monopolist to operate at a loss.
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True
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False
Antitrust laws allow the government to prevent mergers.
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True
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False
14-The additional revenue a firm in a competitive market receives if it increases its production by one unit equals its marginal revenue.
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True
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False
Roundtrip airline tickets are usually cheaper if you stay over a Saturday night before you fly back. The reason for this price discrepancy is that airlines are practicing imperfect price discrimination to raise their profits.
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True
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157.Examples of barriers to entry include (i) A key resource is owned by a single firm, (ii) The costs of production make a single producer more efficient than a large number of producers, or (iii) The government has given the existing monopoly the exclusive right to produce the good.
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True
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For a monopolist, profit is determined by Profit = Total Revenue - Total Cost
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True
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False
For a profitmaximizing monopolist, P > MR = MC.
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True
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False
A perfectly pricediscriminating monopolist is able to maximize profit and produce a sociallyoptimal level of output.
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True
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False
14-For a competitive firm, Profit = Total revenue - Total cost.
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True
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Price discrimination requires the firm to separate customers according to their willingness to pay.
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True
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155.A monopoly has the ability to set the price of its product at whatever level it desires.
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True
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14-2.When a firm has little ability to influence market prices it is said to be in a competitive market.
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True
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14-The assumption of a fixed number of firms is appropriate for analysis of the short run, but not the long run.
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14-3.In a competitive market, the actions of any single buyer or seller will have a negligible impact on the market price.
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True
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14-A long-run supply curve that is flatter than a short-run supply curve results from the fact that firms can enter and exit a market more easily in the long run than in the short run.
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True
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14-8.For a firm in a perfectly competitive market, the price of the good is always equal to marginal revenue.
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Allowing an inventor to have the exclusive rights to market her new invention will lead to (i) (ii) and (iii). (i) a product that is priced higherthan it would be without the exclusive rights.(ii) desirable behavior in the sense that inventors are encouraged to invent.(iii) higher profits for the inventor.
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True
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False
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