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ECON2302 - KC - Ch15

Economics Chapter 15 review

QuestionAnswer
Definition of monopoly: a firm that is the sole seller of a product without close substitutes.
Definition of natural monopoly: a monopoly that arises because a single firm can supply a good or service to an entire market at a smaller cost that could 2 or more firms.
Definition of price discrimination: the business practice of selling the same good at different prices to different customers.
Average revenue for a monopoly is the total revenue divided by the quantity produced. True or false? TRUE
Antitrust laws allow the government to break up companies.
A monopolist maximizes profit by producing an output level where marginal cost equals price. True or false? FALSE
Government intervention is always preferable to doing nothing when reducing the social inefficiencies of monopoly/ True or false? FALSE
The De Beers Diamond company is not worried about differentiating its product from all other gemstones. True or false? FALSE
A common solution to monopoly in European countries is public ownership. True or false? TRUE
Price discrimination is an attempt by a monopoly to increase its profit by selling the same good to different customers at different prices.
When a single firm can supply a product to an entire market at a lower cost than could 2 or more firms, the industry is called a natural monopoly.
Which of the following is the preferred strategy for the government to follow to remedy the inefficient allocation of resources associated with monopolies? preventing mergers, regulating prices, doing nothing None of the above strategies is preferred. Each is a viable strategy.
A monopoly creates a deadweight loss to society because it earns both short-run and long-run positive economic profits. True or false? FALSE
Which of the following statements is not correct? Antitrust laws automatically prevent mergers between companies that produce similar products.
Encouraging firms to invest in research and development and individuals to engage in creative endeavors such as writing novels is one justification for government-created monopolies.
Airlines often separate their customers into business travelers and personal travelers by giving a discount to those travelers who stay over a Saturday night. True or false? TRUE
A monopolist's supply curve is horizontal. True or false? FALSE
The profit that a monopolist earns represents a loss to society that is measured through deadweight loss. True or false? FALSE
Created by: debra473
 

 



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