Chapter 15/Monopoly v 1015Chapter 15MonopolyTRUE/FALSE1.Monopolists can achieve any level of profit they desire because they have unlimited market power.ANS:FDIF:2REF:15-0NAT:AnalyticLOC:MonopolyTOP:MonopolyMSC:Interpretive2.Even with market power, monopolists cannot achieve any level of profit they desire because they will sell lower quantities at higher prices.ANS:TDIF:2REF:15-0NAT:AnalyticLOC:MonopolyTOP:MonopolyMSC:Interpretive3.One characteristic of a monopoly market is that the product is virtually identical to products produced by competing firms.ANS:FDIF:2REF:15-1NAT:AnalyticLOC:MonopolyTOP:MonopolyMSC:Definitional4.The fundamental cause of monopolies is barriers to entry.ANS:TDIF:2REF:15-1NAT:AnalyticLOC:MonopolyTOP:MonopolyMSC:Interpretive5.The De Beers Diamond company advertises heavily to promote the sale of all diamonds, not just its own. This is evidence that it has a monopoly position to some degree.ANS:TDIF:1REF:15-1NAT:AnalyticLOC:MonopolyTOP:MonopolyMSC:Interpretive6.The De Beers Diamond company is not worried about differentiating its product from all other gemstones.ANS:FDIF:1REF:15-1NAT:AnalyticLOC:MonopolyTOP:MonopolyMSC:Interpretive7.The amount of power that a monopoly has depends on whether there are close substitutes for its product.ANS:TDIF:1REF:15-1NAT:AnalyticLOC:MonopolyTOP:MonopolyMSC:Interpretive8.If the ABC company owns the exclusive rights to mine land in Afghanistan for Lapis Lazuli, a rare stone used in jewelry which is found only in Afghanistan, the company benefits from a barrier to entry.ANS:TDIF:1REF:15-1NAT:AnalyticLOC:MonopolyTOP:MonopolyMSC:Applicative9.Copyrights and patents are examples of barriers to entry that afford firms monopoly pricing powers.ANS:TDIF:2REF:15-1NAT:AnalyticLOC:MonopolyTOP:PatentsMSC:Interpretive10.If the government deems a newly invented drug to be truly original, the pharmaceutical company is given the exclusive right to manufacture and sell the drug for 50 years.ANS:FDIF:1REF:15-1NAT:AnalyticLOC:MonopolyTOP:PatentsMSC:Interpretive11.A natural monopoly has economies of scale for most if not all of its range of output.ANS:TDIF:2REF:15-1NAT:AnalyticLOC:MonopolyTOP:Natural monopolyMSC:Applicative12.Declining average total cost with increased production is one of the defining characteristics of a natural monopoly.ANS:TDIF:1REF:15-1NAT:AnalyticLOC:MonopolyTOP:Natural monopolyMSC:Definitional13.A monopolist maximizes profit by producing an output level where marginal cost equals price.ANS:FDIF:2REF:15-2NAT:AnalyticLOC:MonopolyTOP:Profit maximizationMSC:Interpretive14.A monopolist produces an output level where marginal revenue equals marginal cost and charges a price where marginal cost equals average total cost.ANS:FDIF:2REF:15-2NAT:AnalyticLOC:MonopolyTOP:Profit maximizationMSC:Applicative15.Average revenue for a monopoly is the total revenue divided by the quantity produced.ANS:TDIF:1REF:15-2NAT:AnalyticLOC:MonopolyTOP:Average revenueMSC:Definitional16.For a monopoly, marginal revenue is often greater than the price they charge for their good.ANS:FDIF:1REF:15-2NAT:AnalyticLOC:MonopolyTOP:Marginal revenueMSC:Interpretive17.Like competitive firms, monopolies choose to produce a quantity in which marginal revenue equals marginal cost.ANS:TDIF:2REF:15-2NAT:AnalyticLOC:MonopolyTOP:Profit maximizationMSC:Interpretive18.Like competitive firms, monopolies charge a price equal to marginal cost.ANS:FDIF:2REF:15-2NAT:AnalyticLOC:MonopolyTOP:Profit maximizationMSC:Interpretive19.A monopolist produces where P MC = MR.ANS:TDIF:2REF:15-2NAT:AnalyticLOC:MonopolyTOP:Profit maximizationMSC:Interpretive20.A monopolist produces where P = MC = MR.ANS:FDIF:2REF:15-2NAT:AnalyticLOC:MonopolyTOP:Profit maximizationMSC:Interpretive21.A monopolist does not have a supply curve because the firms decision about how much to supply is impossible to separate from the demand curve it faces.ANS:TDIF:2REF:15-2NAT:AnalyticLOC:MonopolyTOP:Supply curveMSC:Interpretive22.A monopolists supply curve is vertical.ANS:FDIF:1REF:15-2NAT:AnalyticLOC:MonopolyTOP:Supply curveMSC:Applicative23.A monopolists supply curve is horizontal.ANS:FDIF:1REF:15-2NAT:AnalyticLOC:MonopolyTOP:Supply curveMSC:Applicative24.During the life of a drug patent, the monopoly pharmaceutical firm maximizes profit by producing the quantity at which marginal revenue equals marginal cost.ANS:TDIF:1REF:15-2NAT:AnalyticLOC:MonopolyTOP:Profit maximizationMSC:Interpretive25.The socially efficient quantity is found where the demand curve inters