1. To maximize profit, a perfectly competitive firm will produce where MR = MC, but a monopoly and a monopolistically competitive firm will produce where price = ATC.
A) True
B) False
2. From what you know about the different kind of monopolies, which answer best describes the natural ones?
A) They only exist because the government has established patent laws.
B) They can produce services, but not goods.
C) The market supports only two or three firms.
D) Potential competitors are purchased before they can enter.
E) There is a declining ATC throughout the relevant range of production.
3. Which of the following could effectively destroy a monopoly structure?
A) the appearance of just one close substitute good
B) its exclusive access to resources
C) its patent on a new technology
D) a government restriction on entry
E) a merger of two once-competing firms
4. If a shoe monopoly experiences an outward shift in its demand curve, the industry demand curve for shoes must have
A) shifted slightly less
B) been flat to begin with
C) shifted slightly more
D) shifted more quickly
E) made the exact same shift
5. The individual firm's demand curve under conditions of perfect competition is
A) perfectly horizontal
B) perfectly vertical
C) upward sloping
D) downward sloping
E) nonexistent in perfect competition
6. Many economists criticize monopolists because they produce at output levels that are not efficient, that is to say, monopolists
A) charge too high a price
B) don't innovate
C) produce a large quantity of waste
D) usually don't produce at their minimum ATC
E) may be profit conscious but they don't realize that maximum profit means maximum efficiency
7. If a perfectly competitive firm made an economic profit in the short run, but not in the long run, it must be true that
A) prices for inputs increased
B) demand declined
C) new firms entered, supply increased, and price fell
D) accounting profit exceeds economic profit
E) labor costs are increasing
8. In perfect competition, an economic profit can be earned
A) only in the long run
B) only if the firm is efficient
C) only in the short run
D) never
E) always
9. If a monopoly finds that at the present level of production, marginal revenue exceeds marginal cost, the firm should
A) shut down
B) increase production
C) maintain the production level because MR > MC signifies economic profit
D) decrease production so that MC will equal MR
E) raise price
10. A monopoly
A) can increase the price and increase output at the same time
B) can charge any price it wants and still sell all of its output
C) can sell any output it produces provided it accepts the market price
D) must lower the price in order to increase output
E) faces a perfectly elastic demand curve