Log in
Economics
1
answer
0
watching
87
views
1 Mar 2019

A firm that produces and distributes electricity has mostly fixed costs. It also tends to be the only provider of electricity in its market. This is an example of pure monopoly resulting from the firm:

having economies of scale over the entire range of the market.
owning a key resource.
having the ability to freely enter the market.
having a government-created monopoly.

Watch
1
answer
0
watching
87
views

For unlimited access to Homework Help, a Homework+ subscription is required.

Nestor Rutherford
Nestor RutherfordLv2
3 Mar 2019

Unlock all answers

Get 1 free homework help answer.
Already have an account? Log in
Share

Related textbook solutions

Principles of Economics
2nd Edition, 2017
Openstax
ISBN: 9781947172364
Principles of Macroeconomics
2 Edition,
Openstax
ISBN: 9781947172388
Principles of Microeconomics
2 Edition,
Openstax
ISBN: 9781947172340

Related questions

A natural monopoly, such as a local electricity provider, is the result of?

i. a firm owning or controlling a key input used in the production process
ii. long-run average total costs declining continuously as output increases
iii. long-run total costs declining continuously as output increases
iv. economies of scale existing over a wide range of output

A natural monopoly exists whenever a single firm:

A) is owned and operated by the government.

B) is investor owned but has been granted the exclusive right by the government to operate in a market.

C) has economies of scale over the entire range of production that is relevant to its market.

D) has gained control over a strategic input of an important production process.

1.As long as price is sufficient to cover __________, the firm isbetter off by operating rather than by shutting down in the shortrun.
Answer
marginal cost
average fixed cost
average variable cost
marginal revenue

2.The owner of Tie-Dyed T-shirts, a perfectly competitive firm, hashired you to give him some economic advise. He has told you thatthe market price for his shirts is $20 and that he is currentlyproducing 200 shirts at an AVC of $15 in the short run and an AC of$25. What would you recommend to him?
Answer
To continue producing in the short run, as his loss from productionis less than his fixed costs, but to exit the industry in the longrun if there are no changes in economic conditions.
To shut down in the short run, as he is incurring a loss and toleave the industry in the long run, if there are no changes ineconomic conditions.
To continue to produce in the short run, even though he is earninga loss, and to expand in the future with the hope of increasingmarket share and total revenue.
You tell him you cannot make any recommendations until you knowwhat his fixed costs are.

3.Which type of barrier to entry allows the electric company tomaintain a monopoly over the production of electricity?
Answer
a patent
economies of scale
diseconomies of scale
ownership of a scarce factor of production.

4. Why can a monopolist continue to make positive profits even inthe long-run while a perfectly competitive firm can make only zeroeconomic profits in the long-run?
Answer
Because a monopoly only has one firm while perfect competition hasmany.
Because monopoly has barriers to entry and perfect competition hasfree entry.
Because perfect competition has barriers to entry and monopoly hasfree entry.
Because in perfect competition everyone produces the same productand because in monopoly there are no close substitutes.

5.What is the difference between diminishing returns anddiseconomies of scale?
Answer
Diminishing returns is in the short run while diseconomies of scaleis in the long run.
Diminishing returns is in the long run while diseconomies of scaleis in the short run.
They are both the same thing.
There is no such thing as diseconomies of scale.

6. What does the LAC look like for a firm with constant returns toscale?
Answer
It slopes downwards.
It slopes upwards.
It is a horizontal straight line.
It is a vertical straight line.

7.Natural monopoly occurs when there are:
Answer
large economies of scale.
firms joining together to limit output and raise prices.
different prices for different consumers or groups ofconsumers.
patents.

8.Suppose we know that a monopolist is maximizing its profits.Which of the following must be true? The monopolist has
Answer
maximized its total revenue.
set price equal to its average cost.
maximized the difference between marginal revenue and marginalcost.
set marginal revenue equal to marginal cost.

Related Documents

ECO 1104 Chapter 14: Microeconomics
silverprairie-dog36
ECO105Y1 Chapter Notes - Chapter 10: Invisible Hand, Canadian Medical Association, Bid Rigging
periwinklespider813
ECO101H1 Lecture Notes - Lecture 6: Monopoly Profit, Monopoly Price, Marginal Revenue
chocolatezebra335

Weekly leaderboard

Home
Homework Help 3,900,000
Economics 400,000
Start filling in the gaps now
Log in