). a. (I

41. At the profit maximizing output in the question above, the difference between P and MC would be: (a) 0 (b) $6 (c) $5 (d) $4.50 (e) none of these.

42. In a certain monopolized industry with a constant = $5, price is $10/unit and 1,000,000 units are sold. Under competition, 4 million units would be sold. In this case the welfare loss is: (a) $15,000,000 (b) $3,000,000 (c) $10,000,000 (d) $5,000,000 (e) none of the above.

43. Monopoly is inefficient because: (a) profits are too high (b) the cost of further production is Jess than the value society places upon it (c) the industry demand curve slopes down (d) production does not necessarily occur where is at a minimum (e) for all ofthe above reasons.

44. If the in a certain industry ahvays lies above the MC, the number of firms likely to be found in the industry is: (a) one (b) a large number, (c) a lju-ge number only if demand is elastic (d) a small number only if demand is elasdc (e) zero because the firm cant make a profit.

45. A monopolist is currendy selling at a price of $5 with constant at $3. If quandty demanded increases by three units for each one cent reducdon in the price the welfare (efficiency) loss will be: (a) $900 (b)$600 (c)$6000 (d) $2000 (e) $1600.

46. A natural monopoly is likely to emerge when:

(a) the government restricts entry into the business

(b) unlimited economies of scale exist (c) only a few firms can sell in the industry (d) tariffs prevent imports from entering (e) patents provide an exclusive protected posidon.

47. A certain firm believes that at its current output MR is 1 and MC is $1. To maximize profits the firm should: (a) decrease output and decrease price (b) increase output and increase price (c) increase output and decrease price (d) decrease output and increase price (e) enter an easier business.

48. If elasdcity of demand is less than one vvhere a certain monopolist is currendy operadng, then: (a) it must be incurring a loss (b) it should increase production (c) its MR curve must be rising (d) its will fall if output rises (e) none of the above.

49. Monopolists always strive to set a price where: (a) the difference benveen MR and MC is as large as possible (b) the difference beuveen P and is as large as possible (c) price is as large as possible

(d) elasdcity of demand is as large as possible (c) none of the above.

50. If a monopolist seeks to maximize total revenue instead of total profit, he should operate where the elasdcity of demand is: (a) zero (b) one (c) infinite (d) between zero and one (e) between one and infinity.

51. We would expect to find a monopolist with t)p-ical U shaped cost curves operadng where its demand elasticity is: (a) less than 0 (b) greater than 1.0 (c) between 1.0 and 0 (d) infinite (e) none of the above.

52. If a certain monopolists AVC is constant at zero, the, elasdcity of demand at its chosen output will be: (a) zero (b) infinite (c) one (d) between zero and one (e) betvveen one and infinity-

53. If a monopolist were to produce and sell one more unit, the price of that unit less the loss of revenue from selling previous units at the new lower price would be: (a) MR (b) AR (c) TR (d) TC

(e) AFC.

54. Wich of the following statements is false? (a) selling in the region of negative MR means selling where demand is inelastic (b) selling w-here MR = 0 is the same as selling where TR is maximized (c) selling where MR = 0 is the same as selling where elastici-t)- = 0 (d) selling where MR = 0 may be rational when TVC is zero (e) selling where elasticity is greater than 1 can never mean selling where MR is negative.

55. If the price of crude oil in California is $12 per barrel and the price of the same type of crude in Texas is $9 per barrel, and crude oil is transshipped from Texas to California, then we may conclude: (a) transportation costs amount to $3 per barrel (b) transportation costs are less than $3 per barrel (c) u-ansportadon costs are more than $3 per barrel (d) these two markets cannot be in equilibrium (e) it is irrational to seil crude oil in Texas at this price.

56. Suppose that we have tlie facts in the previous question except that crude is never transshipped from Texas to California, then ive may infer: (a) tfie markets are not in equilibrium (b) transportation costs exceed $3 (c) transportauon costs are less than $3 (d) oil companies are exploiting consumers (e) none of the above.

57. If marginal over a range of output is less than zero, then elasticity of demand must be: (a) constant (b) zero (c) greater than one (d) undefined (e) less than one.

its resources efficiendy (b) customers will have less than the optimal quandty (c) customers will have to pay higher prices (d) all of the above (e) none of the above.

60- A monopolist always maximiies profit by producing where: (a) marginal cost equals marginal revenue (b) marginal cost equals marginal udlity (c) average total cost equals average revenue (d) the difference between average total cost and average revenue is the greatest (e) the difference between MR and MC is maximized.

58. Regulation of public udlities through average cost pricing has: (a) generally reduced the price of utility service (b) shifted the average total cost curve upward (c) transformed the industry into a compeddve market (d) solved the problem of inefficiency

(e) none of the abo\e.

59. If an unregulated monopolist is successful in maximizing profit: (a) society will not be allocating

61. If marginal cost is greater than zero, we know that a monopolist will produce where the elasdcity of demand is: (a) greater than one (b) equal to one (c) less than one but greater than zero (d) zero (e) less than zero.

62. A monopolist will definitely shut down in the short run if: (a) P < MC (b) P > MR (c) P < TFC (d) P < AVC (e) P < .

NOTES