1. Briefly explain why the following statements are TRUE or FALSE:
A) A monopolist produces the quantity at which MC = MR.
B) A monopolist sets a price equal to MR.
C) A monopolist faces a downward sloping MR curve.
D) A monopolist faces a perfectly elastic demand curve.
E) A monopolist must lower price if it produces additional units.
F) A monopolist is always able to price discriminate.
2. Why are barriers to entry essential for a monopoly to exist?
a) With no barriers to entry, price setting would be determined by the government
b) If there were no barriers to entry, when the firm earned a profit, new firms would enter the market and compete away its profit. As a result, they would lose their monopoly status.
c) Price fixing is common and is increased with barriers to entry
d) Two of the above
3. Which of the following is NOT an example of a barrier to entry for monopolists?
a) Natural ability
b) Economies of scale
c) Government restrictions
d) There is complete information
4. To charge different prices to different individuals or groups of individuals is called:
a) unfair
b) price-discrimination
c) price-fixing
d) monopoly
5. An industry in which a single firm can produce at a lower cost than can two or more firms is called a(n):
a) natural monopoly
b) fair monopoly
c) strategic monopoly
d) compelling monopoly