Question

1. Which of the following is a common barrier to entry in a monopoly market?

A. Economic profit of the monopolist.

B. Antitrust laws.

C. A rising long-run average total cost curve.

D. Economies of scale.

2.

Which of the following is true about the output level where marginal revenue equals marginal cost?

A. Economic profits are equal to zero.

B. The firm should increase its output.

C. The firm is maximizing profit.

D. The firm should reduce its output.

3. Any firm that has economies of scale will

A. Try to spread production over many plants.

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

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

D. Prefer to produce a small amount of total industry output.

Answer 1

1. Option D.

• In a monopoly market, a common barrier to entry is economies of scale.
• When a monopoly firm increases its size of output, it will be able to decrease the per unit cost of production output.
• This will allow a monopoly firm to prevent other firm's from entering into the market.

2. Option C.

• When a firm produces an output level where the marginal revenue equals marginal cost, it is said to maximize it's profits.
• The profit maximizing condition of a firm is that one in which firms try to maximize their profits to earn highest profit levels by equating their marginal costs with marginal revenue.

3. Option B.

• Economies of scale refers to the cost of advantage a firm gains by increasing the number of production units.
• Any firm will have economies of scale if it is able to produce at a lower unit cost as it increases production.