LSU ECON 2000 BERNARD SHARKEY
EXAM 3 QUESTIONS & ANSWERS
Like a competitive industry, a monopoly must: - ANSWERSdeal with the law of demand
If a firm is producing in the kink in its demand curve and it decides to increase its price,
according to the kinked demand model: - ANSWERSit will lose market share to the
firms that do not follow the price increase
The long-run average total cost curve of a natural monopolist: - ANSWERSis
downward-sloping in the relevant range of production
If the government regulated a natural monopolist to achieve price efficiency without
substitutes or price discrimination, the monopolist would: - ANSWERSlose money and
go out of business
Ameritech has a monopoly over local telephone service. If Ameritech is producing
where marginal revenue is less than marginal cost, the firm... - ANSWERScould
increase profits by reducing output
The only structure in which there is significant interdependence among firms with regard
to their pricing and output decisions is: - ANSWERSoligopoly
The profit-maximizing monopolistic competitor produces where price is... -
ANSWERSgreater than both marginal cost and marginal revenue
There are five firms in the Pool Sweeper market. The sales for each firm are as follows:
Northern Star: $20,000; Hurricane Currents:$16,000; Mr. Clean $10,000; Clear & Shiny:
$2000; and Blue Lagoon: $2000. What is the market share of Northern Star? -
ANSWERS40%
A monopolist is currently maximizing profits. In addition, if P > ATC> MC, then the
monopolist... - ANSWERSearns positive economic profits
