Economics - monopolies ?

Question

Which of the following rules is satisfied when a monopoly maximizes profits?

a.Price >AVC.

b.Price>MC.

c.MR = MC.

d.All of the above.

The demand curve faced by a monopolist is:

a.Horizontal.

b.The same as the marginal revenue curve.

c.The market demand curve.

d.All of the above.

A monopoly realizes larger profits than a comparable competitive market by:

a.Setting a higher price at the competitive level of output, thereby increasing total revenue.

b.Producing a greater quantity at the competitive price, thereby increasing profits.

c.Producing at output levels with more favorable cost structures and charging the competitive market price, thereby increasing profits per unit.

d.Reducing production and pushing prices up.

A firm can take advantage of economies of scale through:

a.Investment decisions to increase capacity.

b.Investment decisions to reduce capacity.

c.Production decisions to increase capacity.

d.Production decisions to increase output

Answer 1

1-D

2-C

3-D

4-D

Answer 2

1. D. price must be above AVC for the firm to produce, price is above MC because MR=MC and the price is determined by the demand curve, which lies above the marginal revenue curve

2. C, market demand curve, because they're the only firm in the market

3. D, which they can do because they are the only firm in the market so they can set the price most favorable to them

4. D, economies of scale are when output increases in a greater proportion to inputs, the decision must be to increase output