Question

Electric utilities achieved monopoly because of

Select one:

a. control of essential resources

b. economies of scale

c. control over key patents

d. very low fixed costs

For a market to be a true monopoly, it must have

Select one:

a. a single seller, no close substitutes for the product, and patents

b. a few interdependent sellers, homogenous products, and entry barriers

c. a few interdependent sellers, differentiated products, and entry barriers

d. a single seller, no close substitutes for the product, and entry barriers

e. many small sellers, homogenous products, and no entry barriers

If there are significant barriers to entry, then a firm may do what over the long-run?

Select one:

a. charge whatever price they want without fear of it reducing output

b. ignore demand

c. earn economic profits

Price can also be called

Select one:

a. total revenue minus total cost

b. both b and d above

c. average revenue

d. profit

e. total revenue divided by quantity of output

Firms in a perfectly competitive market achieve

Select one:

a. none of the above - competitive firms are not efficient

b. both allocative (distribution) and productive efficiency but only in the short-run, not in the long run

c. only productive efficiency in the long run

d. both allocative (distribution) and productive efficiency in the long run

e. only allocative (distribution) in the long run

Answer 1

Electric utilities achieved monopoly because of

C. Control over key patents. It is because, the word monopoly refers to a single firm controlling the entire market and is the producer and supplier of the commodity. This is the reason why monopoly is called as price maker.

For a market to be a true monopoly, it must have

D. A single seller, no close substitutes for the product, and entry barriers.

If there are significant barriers to entry, then a firm may do what over the long-run?

C. Earn economic profits. In Economics, economic profit is also known as abnormal profit, supernormal profit, excess profit or pure profit.

Price can also be called

Apparently, I can't find a single option for this and there is a mistake in the given options. The second option has to be both c and e.

C. Average Revenue (AR)

E. Total Revenue divided by Quantity of output (TR/Q)

I will show how it works,

TR = P * Q,

AR = TR/Q

i.e. (P * Q) / Q = P

So, P = AR and

   P = TR/Q

Firms in a perfectly competitive market achieve

D. Both allocative (distribution) and productive efficiency in the long run

The reason for this is,

• The entire resources are allocated at their best alternative use.
• Such allocated resources provide maximum satisfaction to the society.