When a monopolist faces a fixed marginal cost of production, profit is maximized if:
a. the slope of the tangent to the total revenue curve is equal to the slope of the total cost curve.
b. the slope of the total cost curve is 1.
c. the marginal revenue is zero.
d. the slope of the tangent to the total revenue curve is equal to the slope of the marginal revenue curve.
QUESTION 2Firms that have downward-sloping demand curves:
a. earn positive economic profits even in the long run.
b. produce homogeneous products.
c. operate in a perfectly competitive market structure.
d. enjoy monopoly or market power.
e. are price takers.
QUESTION 3A natural monopoly has
a. constant average costs cost over the relevant range of output.
b. economies of scale over the relevant range of output.
c. constant returns to scale over the relevant range of output.
d. diseconomies of scale over the relevant range of output.
QUESTION 4Preferential trade agreements have a beneficial trade-diversion effect when they reduce prices for traded goods and stimulate the volume of international trade.
a. True
b. False
Indicate whether the statement is true or false
QUESTION 5The peak of the total revenue curve is achieved at the point where:
a. marginal revenue is the highest.
b. price is the highest.
c. marginal revenue is zero.
d. marginal cost is zero.
QUESTION 6A firm, such as a public utility, which is the sole producer in a market in which the government determines prices and standards of service, is known as a(n):
a. local monopoly.
b. natural monopoly.
c. regulated monopoly.
d. oligopoly.
e. monopolistically competitive firm.
QUESTION 7Under marginal cost pricing by a natural monopoly,
a. price is less than average cost.
b. there will be a welfare cost.
c. the producer will earn a higher than normal rate of return.
d. there is little or no incentive for the producer to hold down costs.
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