A profit-maximizing monopolist that produces in the short run will
a. produce the level of output where marginal revenue exceeds marginal cost by the largest amount
b. increase output as long as the marginal revenue exceeds the marginal cost of producing that unit
c. produce the level of output where average total cost is at a minimum
d. increase price as long as the average revenue exceeds the average total cost
e. produce the level of output where average revenue exceeds average total cost by the largest amount
QUESTION 2When government regulations force a natural monopoly to produce where price equals average total cost, social welfare is
a. maximized
b. less than it would be without regulation
c. greater than it would be without regulation, but it is not maximized
d. exactly the same as it would be without regulation
e. minimized
QUESTION 3At its present rate of output, Barrel O' Biscuits, a perfectly competitive firm, finds that its marginal cost exceeds its marginal revenue and price exceeds average variable cost. To maximize profit, the firm should
a. lower the price
b. raise the price
c. increase output
d. reduce output
e. maintain its current rate of output
QUESTION 4Which of the following is not true of a pure monopoly?
a. Demand is negatively sloped
b. Marginal revenue is less than price therefore the firm should consider raising its price until marginal revenue equals demand
c. Marginal revenue is less than average revenue therefore the firm should consider adjusting its quantity until marginal revenue equals average revenue
d. It is a price taker
e. Its position is protected by significant barriers to entry
QUESTION 5If a monopolist is forced to set price equal to average total cost, economic profit
a. will be negative, and the monopolist may go out of business
b. will be zero
c. will be positive
d. will be negative, and the firm will stay in business if there are significant fixed costs
e. may be positive, negative, or zero
QUESTION 6In the short run, a perfectly competitive firm will always shut down if, at all positive output levels, total revenue is
a. less than total cost
b. less than total cost but greater than variable cost
c. less than total cost but greater than fixed cost
d. greater than fixed cost
e. less than variable cost
QUESTION 7Suppose a monopolist cannot price discriminate. To maximize profit, it will
a. always produce in the inelastic range of its demand curve
b. never produce in the elastic range of its demand curve
c. never produce in the inelastic range of its demand curve
d. never produce in the elastic range of its marginal cost curve
e. produce in the elastic range of the marginal revenue curve
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