Chapter 7 Self-test questions

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For a demand curve which is elastic, as the quantity supplied of the product increases, ___________

Total revenue rises but marginal revenue is negative correct incorrect

Total revenue rises and marginal revenue is positive correct incorrect

Total revenue falls and marginal revenue is negative correct incorrect

Total revenue falls but marginal revenue is positive correct incorrect

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Cartels ____________

are naturally stable over time correct incorrect

are naturally unstable over time correct incorrect

are easily policed correct incorrect

none of the above correct incorrect

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Which of the following is not a method of restricting entry to a cartelized industry?

Persuading the government to operate a legally enforceable quota system correct incorrect

Instituting a statutory licensing system operated by the cartel correct incorrect

Guaranteeing to undercut any price charged by a rival correct incorrect

Exploiting the presence of natural barriers to entry correct incorrect

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If a sufficient number of firms in a cartel cheat on the agreement and raise their output levels ____________.

joint profits will be driven towards the competitive level correct incorrect

new entrants will be attracted to the industry correct incorrect

policing the cartel will become easier correct incorrect

customers will lose out correct incorrect

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Consider a monopoly facing a demand curve given by P = 100 – 2Q which is currently selling 24 units. What is its marginal revenue if it lowers price sufficiently to sell two more units?

–52 correct incorrect

–26 correct incorrect

zero correct incorrect

+26 correct incorrect

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Monopoly refers to a market where there is __________.

only one buyer correct incorrect

only one seller correct incorrect

only one buyer and one seller correct incorrect

only one product available correct incorrect

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No supply curve exists for a monopolist because ____________

a monopolist enjoys increasing returns to scale for all levels of output correct incorrect

a monopolist just sells whatever quantity is demanded correct incorrect

there is no unique relationship between marginal cost and quantity supplied for a monopolist correct incorrect

there is no unique relationship between market price and quantity supplied. correct incorrect

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A monopolist ____________.

chooses price and quantity in its market simultaneously correct incorrect

decides separately on the price in its market and the quantity it will sell correct incorrect

is a price-maker but a quantity-taker correct incorrect

is a price-taker but a quantity-maker correct incorrect

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A monopolist's marginal cost curve is the ____________ of the marginal cost curves of its individual plants.

highest correct incorrect

lowest correct incorrect

horizontal sum correct incorrect

vertical sum correct incorrect

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Schumpeter called the replacement of an existing monopoly by one or more new entrants through the invention of new products or new production techniques the process of ____________

creative destruction correct incorrect

creative construction correct incorrect

productive destruction correct incorrect

destructive creation correct incorrect