Question 1 How is a legal monopoly different from a natural monopoly? OA legal monopoly applies to government-run institutions, whereas a natural monopoly applies to all other resources O In a legal monopoly, the Federal Trade Commission has paid a firm to be the only producer of a product in a given area. O In a legal monopoly, barriers to entry are created by the government. O In a legal monopoly, the monopolist has purchased the necessary certificate from the local government that allows the formation of a monopoly. D Question 2 The profit maximizing monopolist would achieve loss minimization when... O Total cost equals total revenue. O Price is below average variable cost. O Price is between average total cost and average variable cost. Price is above average total cost Question 3 Which of the following is NOT an example of a monopoly? Three firms control the production of a precious gem globally. The government-run postal service. In the 1930s, ALCOA (The Aluminum Company of America) controlled most of the bauxite, a key mineral used in making aluminum. O A utility (eg. water, sewer, electricity) provided primarily by one company Question 4 Patents. Trademarks, and Copyrights.... Allow innovative firms to achieve monopoly power for one year, Allow innovators to possess monopoly power forever. O Provide limited monopoly power. O Allow individual innovators to form companies and possess monopoly power for 30 years Question 5 1 pts A large airline provides most of the flights between two particular cities. A new, small start-up airline decides to offer service between these two cities. The large airline immediately slashes prices on this route to the bone, so that the new entrant cannot make any money. After the new entrant has gone out of business, the incumbent firm raises prices again. We would call the behavior of the large airline.... O Aggressive marketing Predatory pricing O Competitive pricing. O Multi-level marketing Question 6 1 pts What kind of demand curve does the monopolist face? The monopolist faces a downward sloping demand curve, which means if it wants to sell a low level of output, it can charge a high price, and if it wants to sell a large level of output it will have to charge a low price. The monopolist faces a horizontal demand curve just like the perfectly competitive firm where any change in price will lead to zero units demanded. The monopolist faces a vertical demand curve where the quantity demanded remains the same, regardless of what price is set. The monopolist faces an upward sloping demand curve, which means if it wants to sell a low level of output, it will charge a low price, and if it wants to sell a high level of output it will charge a high price. Question 7 How does the monopoly determine the level of output that maximizes profit? O By determining where marginal revenue is equal to marginal cost. O A monopoly does not need to calculate where maximum profit occurs because they have no competition and can set any price they want for their product. O By determining where total revenue equals marginal cost. O By multiplying price by marginal cost Question 8 1 pts The formula for calculating marginal revenue is... O Change in total revenue/ the change in quantity produced. O Change in quantity sold minus change in quantity produced. O Change in quantity sold/change in quantity produced. Change in total revenue / change in quantity sold. Question 9 1 pts Allocative efficiency is an economic concept regarding efficiency at the social or societal level. It refers to producing the optimal quantity of some output, the quantity where the marginal benefit to society of one more unit just equals the marginal cost. The rule of profit maximization in a world of perfect competition was for each firm to produce the quantity of output where P = MC, where the price (P) is a measure of how much buyers value the good and the marginal cost (MC) is a measure of what marginal units cost society to produce. A monopolist.... O Has no motivation to operate at an output level where P-MC, once a barrier is in place and no longer has to worry about competition. Will experience greater profits if it sets prices equal to average total cost. Would try to achieve allocative efficiency to compete with the other firms who own a larger market share. O Will prefer to operate where price < average total cost.

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Question 1 How is a legal monopoly different from a natural monopoly? OA legal monopoly applies to government-run institutions, whereas a natural monopoly applies to all other resources O In a legal monopoly, the Federal Trade Commission has paid a firm to be the only producer of a product in a given area. O In a legal monopoly, barriers to entry are created by the government. O In a legal monopoly, the monopolist has purchased the necessary certificate from the local government that allows the formation of a monopoly. D Question 2 The profit maximizing monopolist would achieve loss minimization when... O Total cost equals total revenue. O Price is below average variable cost. O Price is between average total cost and average variable cost. Price is above average total cost Question 3 Which of the following is NOT an example of a monopoly? Three firms control the production of a precious gem globally. The government-run postal service. In the 1930s, ALCOA (The Aluminum Company of America) controlled most of the bauxite, a key mineral used in making aluminum. O A utility (eg. water, sewer, electricity) provided primarily by one company Question 4 Patents. Trademarks, and Copyrights.... Allow innovative firms to achieve monopoly power for one year, Allow innovators to possess monopoly power forever. O Provide limited monopoly power. O Allow individual innovators to form companies and possess monopoly power for 30 years Question 5 1 pts A large airline provides most of the flights between two particular cities. A new, small start-up airline decides to offer service between these two cities. The large airline immediately slashes prices on this route to the bone, so that the new entrant cannot make any money. After the new entrant has gone out of business, the incumbent firm raises prices again. We would call the behavior of the large airline.... O Aggressive marketing Predatory pricing O Competitive pricing. O Multi-level marketing Question 6 1 pts What kind of demand curve does the monopolist face? The monopolist faces a downward sloping demand curve, which means if it wants to sell a low level of output, it can charge a high price, and if it wants to sell a large level of output it will have to charge a low price. The monopolist faces a horizontal demand curve just like the perfectly competitive firm where any change in price will lead to zero units demanded. The monopolist faces a vertical demand curve where the quantity demanded remains the same, regardless of what price is set. The monopolist faces an upward sloping demand curve, which means if it wants to sell a low level of output, it will charge a low price, and if it wants to sell a high level of output it will charge a high price. Question 7 How does the monopoly determine the level of output that maximizes profit? O By determining where marginal revenue is equal to marginal cost. O A monopoly does not need to calculate where maximum profit occurs because they have no competition and can set any price they want for their product. O By determining where total revenue equals marginal cost. O By multiplying price by marginal cost Question 8 1 pts The formula for calculating marginal revenue is... O Change in total revenue/ the change in quantity produced. O Change in quantity sold minus change in quantity produced. O Change in quantity sold/change in quantity produced. Change in total revenue / change in quantity sold. Question 9 1 pts Allocative efficiency is an economic concept regarding efficiency at the social or societal level. It refers to producing the optimal quantity of some output, the quantity where the marginal benefit to society of one more unit just equals the marginal cost. The rule of profit maximization in a world of perfect competition was for each firm to produce the quantity of output where P = MC, where the price (P) is a measure of how much buyers value the good and the marginal cost (MC) is a measure of what marginal units cost society to produce. A monopolist.... O Has no motivation to operate at an output level where P-MC, once a barrier is in place and no longer has to worry about competition. Will experience greater profits if it sets prices equal to average total cost. Would try to achieve allocative efficiency to compete with the other firms who own a larger market share. O Will prefer to operate where price < average total cost.

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