1. A nondiscriminating pure monopolist is generally viewed as: (Points : 1) Productively efficient, but allocatively inefficient
Productively inefficient, but allocatively efficient
Both productively and allocatively inefficient
Both productively and allocatively efficient
keep its price constant and thus decrease its market share
increase its price and thus increase its market share
decrease its price and thus decrease its market share
3. One defining characteristic of pure monopoly is that: (Points : 1) The monopolist is a price taker
The monopolist uses advertising
The monopolist produces a product with no close substitutes
There is relatively easy entry into the industry, but exit is difficult
4. The MR = MC rule applies: (Points : 1) to firms in all types of industries.
only when the firm is a “price taker.”
only to monopolies.
only to purely competitive firms.
5. Electric utilities generally charge higher prices for electricity used for illumination and lower prices for electricity used for heat. These lower prices for electric heat result primarily from: (Points : 1) the existence of good heating substitutes
economies of scale in electric heat generation
prices for electric heat being set at the socially optimal level
strict government regulation of the price charged for electric heat
6. If a monopolized industry should become purely competitive without any change in cost conditions: (Points : 1) Both price and quantity produced will increase
Both price and quantity produced will decrease
Price will increase and quantity produced will decrease
Price will decrease and quantity produced will increase
7. Sam owns a firm that produces tomatoes in a purely competitive market. The firm’s demand curve is: (Points : 1) A vertical line
A horizontal line
Upsloping to the right
Downsloping to the right
8. Which is not a basic market model? (Points : 1) Pure competition
9. A positive effect of advertising for society is that it: (Points : 1) increases market share for the dominant firm in the industry.
provides useful information to reduce search cost for consumers.
raises barriers to entry into the industry and protects existing firms.
creates price leadership and gives firms guidance in dealing with rivals.
10. A major reason that firms form a cartel is to: (Points : 1) reduce the elasticity of demand for the product.
enlarge the market share for each producer.
minimize the costs of production.
maximize joint profits.