Question

1) While a perfectly competitive firm charges P=MR=MC. the monopolist firm charges a price that is

1. Dalton Utilities
2. Burger King
3. Belk Department Store
4. Smith's Wheat Farm

2) A natural monopoly is said exist if

1. a firm is a price taker in a perfectly competitive market.
2. there are few, if any barriers to entry.
3. the economies of scale are such that many firms produce a homogenous product.
4. economies of scale are so pronounced in an industry that only one firm can survive.

3) A firm that ----- is considered a price searcher

1. faces a horizontal demand curve.
2. is a seller that searches for good employees and pays them a low wage
3. is a seller that searches for the best location to sell its product
4. is a seller that has the ability to control to some degree the price of the product it sells

4) While a perfectly competitive firm charges P=MR=MC. the monopolist firm charges a price that is

1. equal to marginal cost
2. greater than marginal cost
3. less than marginal cost
4. less or equal to marginal revenue

Answer 1

1)

a) Dalton Utilities.

2) D. In natural monopoly fixed costs are very high so it is efficient if only one firm exists.

3) D.Price searcher faces a downward sloping demand curve so he can set differentiated prices.

Choice A is wrong because if the demand curve is horizontal, the firm is a price taker.

4) B. Greater than marginal cost.