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 A natural monopoly exists whenever a single firm

a. is owned and operated by the federal or local government

b. granted the exclusive right by the government to operate in a market.

c. faces economies of scale over the entire production that is relevant to its market

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

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Yusra Anees
Yusra AneesLv10
6 Jan 2021
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Related questions

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. To maximize profits, a firm should produce output up to the point where

A. marginal revenue equals marginal cost

B. price equals marginal cost

C. the gap between the demand curve and the ATC is the greatest

D. all of the above

E. answers a and b, but not c

2. Which statement is false?

A. a profit maximizing firm will increase production when price exceeds marginal cost

B. the lowest point on a firm's short-run supply curve is at the shut-down point

C. A firm will operate at that ouput where MC equals MR only when it is maximizing profits

D. A profit-maximizing firm will decrease production when marginal cost exceeds price.

3. which statement is true?

A. all monopolies are good

B. All monopolies are bad

C. Most natural monopolies are government regulated or government owned

D. None of these statements is true

4. There are _____ limits to monopoly power

A. no

B. some

C. many

5. Which statement is true?

A. the monopolist's most efficient output is her most profitable output as well

B. the monopolist charges a higher price than the perfect competitor in the long run.

C. all monopolists have control over an essential resource.

D. none is true

6. As a firm grows larger

A. economies of scale set in, then diseconomies of scale.

B. diseconomies of scale set in, then economies of scale.

C. economies of scale and diseconomies of scale set in at the same time.

D. neither economies of scale nor diseconomies of scale set in.

7. A monopolist operates at the minimum point of her ATC curve

A. only in the short run

B. only in the long run

C. in both the short run and the long run

D. in neither the short run nor the long run

8. A natural monopoly

A. has an average cost curve that reaches minimum possible average cost at a low level of output.

B. has a marginal cost curve that is steeply upward slopoing.

C. is usually subject to antitrust suits

D is usually allowed to choose its price so as to maximize profits in the United States.

E. occurs when a single firm can supply the entire market demand for a product at a lower average cost than would be possible if two or more firms supplied the market.

9. For a monopolist, the price of the product

A. always equals the marginal revenue

B. is always less than the marginal revenue

C. exceeds the marginal revenue

D. always equals the marginal cost of the product

10. Monopolies are usually viewed with concern from an economic standpoint since

A. size is ingerently dangerous; the larger ther firm, the more likely it is to squeeze out the "little producer"

B. resources may be allocated in an efficient manner.

C. the government may be put at the mercy of several large producers

D. always equals the marginal cost of the product

Discuss until July 15, 2018. After the deadline, this link will close.


1. Suppose a firm is operating in a competitive market and is maximizing profit by producing at the point where marginal revenue equals marginal cost. Now suppose that consumer wealth decreases in this market (and the good is a normal good). What might you expect to happen to the profit-maximizing output quantity for the firm?


2. In what ways are profit-maximizing and loss-minimizing the same? In what ways are they different?

3. Suppose that De Beers and the local water utility are both monopolists, in the markets for diamond jewelry and water, respectively. If both monopolies decided to raise prices 15 percent, which monopoly would be more likely to see its total revenue decrease? Why?


4. Until the 1980s, AT&T held a monopoly over the national market for phone services. Suppose that AT&T argued that it was a natural monopoly, because the fixed cost of creating a nationwide phone network generated huge economies of scale, and that there was therefore no welfare loss associated with its monopoly. Counter this argument by explaining how even a natural monopoly causes deadweight loss.

5. Explain why an oligopolist (with few competitors) pays more attention to what its competitors are doing than a producer in a competitive market (with many competitors) does.


6. Given that the market for smartphones is inefficient, explain why consumers of smartphones might not want the price to be regulated.

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