Question 1

Firms that become monopolies because their operating systems and design standards gain widespread adoption are monopolies because of

Accepted Answer

When a firm becomes a monopoly because of widespread adoption of its operating systems and design standards, it is due to network effects. These occur when the value of a product or service increases as more people use it. In this case, the operating system becomes more valuable as more people adopt it, and this creates barriers to entry for other firms trying to compete.

Question 2

Which of the following would help to establish a monopoly?

Accepted Answer

Possession of patent or copyright privileges gives the firm exclusive rights to produce and sell a product or service, thereby eliminating competition and establishing a monopoly.

Question 3

A firm that realizes minimum average costs at an output rate sufficient to satisfy the entire market is an example of

Accepted Answer

A firm that realizes minimum average costs at an output rate sufficient to satisfy the entire market is known as a natural monopoly. This means that the firm is the most efficient producer in the market, making it difficult for other firms to compete.

Question 4

Which of the following conditions would be LEAST likely to lead to a monopolistic market structure?

Accepted Answer

The need to be a price taker in order to sell in the market implies that firms have no control over the price, which means they are in a perfectly competitive market structure. Monopolistic market structures arise when firms have some degree of market power, which can come from factors such as possession of patent rights, control over a key input, or exclusive geographic rights. Significant economies of scale can also create monopolistic market structures as only a few firms can satisfy the entire market demand, but this is still more likely than a perfectly competitive market structure.

Question 5

How many sellers constitute a monopoly market?

Accepted Answer

A monopoly market is characterized by a single seller who dominates the market and has no competition. Therefore, the answer is 1.

Question 6

A firm given exclusive rights by the government to do business in a particular area is a(n)________ monopoly.

Accepted Answer

A franchise is a type of monopoly where a firm is given exclusive rights to do business in a particular area. This is usually granted by the government, and the franchisee pays a fee or royalty to the franchisor for the right to use their trademark, products, and services. Examples of franchise monopolies include fast-food chains like McDonald's or Subway, which have exclusive rights to sell their products in certain locations. The other options are not relevant to describing this type of monopoly.

Question 7

A basic characteristic of natural monopoly is

Accepted Answer

Natural monopoly is characterized by continuously decreasing average costs as the firm expands output. This is due to the presence of high fixed costs that are spread over a large output, leading to economies of scale that make it difficult for other firms to enter the market and compete with the incumbent firm.

Question 8

If the demand curve is horizontal,marginal revenue must be the same as

Accepted Answer

When the demand curve is horizontal, it means that consumers are willing to buy any quantity of the product at a fixed price. Therefore, the price remains the same regardless of the quantity of units sold. As a result, the marginal revenue earned from selling each additional unit is equal to the price of the product. Hence, the correct answer is D) price.

Question 9

Marginal revenue steadily declines as a monopolist tries to increase the number of units sold because

Accepted Answer

As a monopolist tries to increase the number of units sold, it must reduce the price of all units sold in order to sell additional units. This means that the marginal revenue earned from each additional unit sold will decrease, causing the overall marginal revenue to steadily decline.

Question 10

Natural monopoly is common in the ________ industry.

Accepted Answer

Electric power industry often requires huge fixed costs to establish and maintain the infrastructure, which leads to the natural monopoly. Once a company dominates the market by providing electricity, it becomes difficult for new entrants to set up the same infrastructure and compete in the market. Therefore, electric power companies enjoy natural monopolies. The other industries listed may have competitive markets and do not necessarily require the same infrastructure and fixed costs to operate.

Question 11

When total revenue for a monopolist reaches its maximum value,marginal revenue is

Accepted Answer

Marginal revenue is the additional revenue that a firm receives from selling one more unit of a good or service. When total revenue reaches its maximum, any additional unit sold would not increase total revenue but rather start to decrease it, indicating that the marginal revenue at the maximum total revenue point is zero.

Question 12

If a firm's demand curve slopes downward,the firm's

Accepted Answer

When the demand curve slopes downward, the firm's marginal revenue will always be less than price. This is because the firm must lower the price on all units sold in order to sell an additional unit, decreasing the overall revenue earned from each unit sold.

Question 13

The monopolist faces a demand curve that is

Accepted Answer

A monopolist is the sole producer in the market, so it faces the entire market demand curve, which is identical to the industry demand curve.

Question 14

As a monopolist facing a downward-sloping demand curve increases sales from zero,total revenue

Accepted Answer

As a monopolist increases sales from zero, total revenue first rises due to higher quantity sold, but eventually falls due to the decreasing price effect of moving down the downward-sloping demand curve. This is because the monopolist must lower the price on all units sold to capture the additional sales, resulting in a lower marginal revenue for additional units sold.

Question 15

The following question are based on the following demand schedule for a monopolist:
 
-The marginal revenue associated with the sale of the third unit is

Accepted Answer

To find the marginal revenue associated with the sale of the third unit, we need to look at the change in total revenue when the third unit is sold. From the demand schedule, we can see that the price for the third unit is $110, which means that the total revenue from selling the first three units is 2*$260 + $110 = $630.

The marginal revenue is the change in total revenue divided by the change in output. In this case, the change in output is one unit (going from selling 2 units to selling 3 units), so the marginal revenue is the difference between the total revenue from selling 3 units and the total revenue from selling 2 units, which is $630 - $520 = $110.

Therefore, the correct answer is C) $110.

Question 16

The patent system is based on the theory that

Accepted Answer

The patent system is designed to provide inventors with an exclusive right to their inventions for a certain period of time in order to reward them for taking the risk of innovation. This exclusive right allows them to profit from their inventions and fund further research and development.

Question 17

The calculation of marginal revenue is best described by which of the following equations if R(q)equals total revenue for a given level of output (q)?

Accepted Answer

The correct formula for calculating marginal revenue is the change in total revenue resulting from a one-unit change in quantity demanded, which is expressed as MR(q) = R(q) - R(q-1). This formula subtracts the total revenue at the previous output level from the total revenue at the new output level to arrive at the incremental revenue from selling one more unit.

Question 18

A firm produces heavy machinery and can sell 10 units per month at a price of $50,000.To increase sales to 11 units per month,the firm must cut its price to $46,000.The marginal revenue for selling one extra unit per month is

Accepted Answer

The answer of A firm produces heavy machinery and can...

Question 19

The following question are based on the following demand schedule for a monopolist:
 
-If the monopolist wished to sell 4 units,the marginal revenue of the fourth unit would be

Accepted Answer

In a monopolistic market, to sell more units, the monopolist must lower the price not just for the additional units but for all units sold. Therefore, the marginal revenue (the revenue from selling one more unit) of the fourth unit would be less than the price at which those 4 units are sold because lowering the price to sell the fourth unit also decreases the revenue from the first three units sold.

Question 20

Marginal revenue

Accepted Answer

Marginal revenue is the additional revenue earned from the sale of one additional unit. It may or may not increase as output increases, and it does not necessarily coincide with marginal cost. Marginal revenue is also not the same as profit, which is the difference between total revenue and total cost. In a monopoly market, marginal revenue exceeds price because the monopolist has some control over the price they charge.

Quiz 7: Monopoly and Its Regulation