1. Patents A. give firms the exclusive right to produce or control a product for at least 17 years. B. are used to encourage research and innovation. C. are a barrier to entry. D. all of the above

2. A purely monopolistic industry A. is characterized by significant entry barriers. B. is characterized by a firm that is a price searcher. C. produces a product or service for which there are no close substitutes. D. all of the above

3. A natural monopoly occurs when A. there are significant economies of scale. B. a firm owns or controls some resource that is essential to production. C. long-run average costs rise continuously as output is increased. D. there are significant diseconomies of scale.

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4. What do economies of scale, predatory behaviour, and patents all have in common? A. They must all be present before price discrimination can be practised. B. They are all barriers to entry. C. They all help explain why a monopolist"s demand and marginal revenue curves coincide. D. They all help explain why the long-run average cost curve is U-shaped.

5. The typical monopolistic firm"s demand curve A. is downward sloping. B. is perfectly elastic. C. coincides with its marginal revenue curve. D. is unitary inelastic.

6. The typical monopolistic firm"s marginal revenue curve A. is a horizontal curve. B. equals the monopolists demand curve. C. is above the monopolist"s demand curve. D. is below the monopolist"s demand curve.

7. A firm is being productively efficient if it produces at a level where A. price equals marginal cost. B. marginal revenue equals marginal cost. C. average total cost is minimized. D. it earns a normal profit.

8. Given the same unit cost data, a monopolistic producer will charge A. the same price and produce the same output as a competitive firm. B. a higher price and produce a larger output than a competitive firm. C. a higher price and produce a smaller output than a competitive firm. D. a lower price and produce a smaller output than a competitive firm.

9. Purely competitive firms and pure monopolists are similar in that A. the demand curves of both are perfectly elastic. B. significant entry barriers are common to both. C. both are price takers. D. both maximize profits where MR = MC.

10. A perfectly discriminating pure monopolist will charge each buyer A. different prices in order to compensate for differences in the characteristics of the product. B. the same price if per unit cost is constant for each unit of the product. C. the price that equals the buyer"s average cost. D. the maximum price each buyer would be willing to pay for each unit.

11. If a monopolist engages in perfect price discrimination, it will A. realize a larger revenue and a larger profit. B. charge a higher price where individual demand is elastic, and a lower price where individual demand is inelastic. C. produce a smaller output than when it did not discriminate. D. all of the above

12. If a regulatory commission wants to provide a natural monopoly with a "normal return," it should establish a price that is equal to A. minimum average fixed cost. B. average total cost. C. marginal cost. D. marginal revenue.

13. The problem with applying "marginal cost pricing" to a natural monopoly firm is that A. the firm will still make excess profits. B. the firm will charge a price higher than an unregulated monopoly. C. the firm will be allocatively inefficient. D. the firm will eventually go bankrupt.

Figure 1: This figure describes an eye clinic (firm) that has a monopoly in providing a new type of eye exam. The quantity levels in the graph below refers to the number of eye exams that the clinic can provide per time period (per 5 minute period). The price, revenue, and costs per exam (per unit) are also displayed in the graph below.

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14. Refer to Figure 1, above, to answer the following. Under the case of "single price monopoly" the profit maximizing quantity level would be A. 2 exams per time period. B. 4 exams per time period. C. 6 exams per time period. D. 8 exams per time period.

15. Refer to Figure 1, above, to answer the following. Under the case of "single price monopoly," the profit maximizing price would be A. $65 per exam. B. $60 per exam. C. $55 per exam. D. $50 per exam.

16. Refer to Figure 1, above, to answer the following. Under the case of "single price monopoly" the total dollar amount of maximum profit would be approximately (per time period) A. $40. B. $260. C. $20. D. $50.

17. Refer to Figure 1, above, to answer the following. Under the case of "marginal cost pricing regulation," the clinic would provide what quantity of exams per time period? A. 2 exams per time period. B. 4 exams per time period. C. 6 exams per time period. D. 8 exams per time period.

18. Refer to Figure 1, above, to answer the following. Under the case of "marginal cost pricing regulation," the total dollar amount of economic profit would be approximately (per time period) A. $60. B. $-60. C. $65. D. $zero economic profit.

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19. Refer to Figure 1, above, to answer the following. Under the case of "average cost pricing regulation," the clinic would charge what price per exam? A. $45 B. $50 C. $55 D. $60

20. Refer to Figure 1, above, to answer the following. Under the case of "perfect price discrimination," the profit maximizing quantity would be A. 2 exams per time period. B. 4 exams per time period. C. 6 exams per time period. D. 8 exams per time period.