Question

1.

Any firm that has economies of scale will

Group of answer choices

Prefer to produce a small amount of total industry output.

Try to spread production over many plants.

Face an upward-sloping long-run average total cost curve.

Be able to produce at a lower unit cost as it increases production.

2.

Antitrust laws can restrain the abuse of monopoly power.

Group of answer choices

True

False

3.

If a monopolist is producing a level of output where MR is less than MC, then it should

Group of answer choices

Increase its output.

Lower its output.

Lower its price.

Shift its marginal cost curve upward.

4.

Market power is

Group of answer choices

Enjoyed by all firms at high levels of output.

The ability to alter the market price of a product.

Most common for competitive firms.

A characteristic of all market structures.

5.

Monopolists set prices

Group of answer choices

At the minimum of the long-run average total cost curve.

Without constraints since there is no competition.

At the output where marginal revenue equals marginal cost.

On the marginal revenue curve.

Answer 1

1. Option D.

• Any firm that has economies of scale will be able to produce at a lower unit cost as it increases production.
• We know that economies of scale can be achieved if a firm is able to expand its production in such a way it is able to decrease the total cost of production by distributing the cost equally among all the units produced.

2. True.

• Antitrust laws are those laws the encourage completion police's and govern them.
• These laws do not encourage monopoly power. Rather they can check and restrain their abuse.

3. Option B.

• If a monopolist is producing a level of output at a point where it's marginal revenue is less than marginal cost then it means that it is incurring losses.
• Hence the monopolist must lower it's output in order to earn more profits.

4. Option B.

• Market power can be defined as the ability to alter the Market prices.
• Any firm who has the power to alter the price are said to enjoy a market power and hence they are price maker's rather than price takers.

5. Option C.

• A monopolist aims at profit maximization and hence it sets prices at a point of output where the marginal revenue equals the marginal cost.
• This is the profit maximizing condition which allows firms to maximize their profits against their costs.