Practice Questions
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How does a monopoly's output level affect market efficiency compared to a perfectly competitive market?
A monopoly makes fewer products than a competitive market. Other options are incorrect because Some might think a monopoly produces more to help every...
In a monopoly market, if barriers to entry are high, which of the following is likely to occur in terms of consumer surplus?
In a monopoly, high barriers mean few or no competitors. Other options are incorrect because Some might think that consumer surplus can increase with ...
In a monopolistic market, how does a firm that practices price discrimination maximize its profits compared to one that does not, considering the demand curve for its product?
A firm that uses price discrimination charges different prices to different groups. Other options are incorrect because Some might think charging one ...
In a monopoly market structure, how does the monopolist's price-setting power affect consumer welfare compared to a perfectly competitive market?
In a monopoly, one company controls the market. Other options are incorrect because Some might think monopolies lower prices; It's a common belief tha...
In a monopoly market, how does the firm determine the optimal output level when it has price-setting power, considering the marginal cost and the ability to engage in price discrimination?
A monopoly sets a price higher than the cost to make one more item. Other options are incorrect because Some might think a firm should produce at the ...
What is the primary goal of a monopolist when determining output levels?
A monopolist wants to make the most money possible. Other options are incorrect because Some might think a monopolist focuses on cutting costs; People...
In a monopoly market, what is the primary factor that allows the monopolist to set prices above marginal cost?
A monopolist has the power to set prices higher than the cost of making one more item. Other options are incorrect because Some might think that compe...
In a monopoly market, what is the relationship between the demand curve and the price a monopolist sets for their product?
A monopolist can set a higher price than the demand curve shows. Other options are incorrect because Some might think the price must match the demand ...
Monopoly Output Levels : Profit Maximization :: Socially Optimal Output : ?
Socially optimal output happens when the benefit to society is equal to the cost of producing it. Other options are incorrect because Consumer surplus...
A monopolistic firm is currently producing at a level where its marginal revenue is greater than its marginal cost. Which of the following classifications best describes this situation and why?
When a firm has marginal revenue higher than marginal cost, it can make more money by producing more. Other options are incorrect because Some might t...
If a monopolist sets output at a level where marginal revenue is less than marginal cost, what is the likely effect on the firm's profit and market efficiency?
When a monopolist produces where marginal revenue is less than marginal cost, they are not maximizing profits. Other options are incorrect because Thi...
Order the steps a monopolist follows to determine its profit-maximizing output level in relation to socially optimal output.
A monopolist first needs to find the marginal revenue curve. Other options are incorrect because Some might think the monopolist should first find whe...
In a monopolistic market, how does the profit-maximizing output level compare to the socially optimal output level?
In a monopolistic market, the company sets a lower output to keep prices high. Other options are incorrect because Some might think the two levels are...
In a monopolistic market, if a firm maximizes its profit where marginal revenue equals marginal cost, what might be the consequence for consumer welfare compared to a competitive market?
In a monopolistic market, firms often set higher prices. Other options are incorrect because Some might think that prices go down in monopolies; It's ...
A local utility company operates as a monopoly in your town. The company's marginal cost of providing electricity is constant, while its marginal revenue decreases as it increases output. If the company sets its output level where marginal revenue equals marginal cost, which of the following outcomes is most likely to occur in terms of social welfare?
The company makes the most profit when it sets output where marginal revenue equals marginal cost. Other options are incorrect because Some might thin...
In a monopolistic market, the profit-maximizing output level occurs where marginal revenue equals __________.
A monopolist wants to make the most profit. Other options are incorrect because Some might think profit is highest when total costs are low; People mi...
Which of the following statements about monopoly output levels are true? Select all that apply.
Other options are incorrect because Many think a monopolist makes the most money when marginal revenue equals marginal cost; Some believe the best out...
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