21 Questions
A firm with monopoly power will always charge a price equal to its marginal cost.
False
The Lerner Index of Monopoly Power is calculated as the difference between price and marginal cost divided by price.
False
Measuring monopoly power only involves qualitative terms.
False
The Lerner Index of Monopoly Power can be expressed in terms of the elasticity of demand facing the firm.
True
A monopolist might supply several different quantities at the same price.
True
In a monopolistic market, there is a one-to-one relationship between price and quantity produced.
False
If the demand curve shifts in a monopoly market, the profit-maximizing output will always change.
False
When a tax of $t$ per unit is levied on a monopolist, the firm's effective marginal cost increases by $t$.
True
In a monopolistic market, if the demand becomes more elastic, the price will always decrease.
False
A monopolist can supply the same quantity at different prices.
True
If a firm's demand is elastic, the markup will be small and the firm will have little monopoly power.
True
A single supermarket can raise its prices significantly without losing customers due to the small elasticity of market demand for food.
False
Small convenience stores typically charge lower prices than supermarkets due to their less price-sensitive customers.
False
In a monopsonistic market, the monopsonist purchases quantity Q*m where marginal expenditure and marginal value intersect.
True
In a competitive market, price and quantity are both lower compared to a monopsonistic market.
False
In a monopoly, average revenue exceeds marginal revenue, leading to a situation where price exceeds marginal cost.
True
A monopsonist purchases up to the point where marginal expenditure intersects average expenditure.
False
Monopsony power depends on the elasticity of demand.
False
When supply is inelastic in a monopsonistic market, the price paid by the monopsonist is close to what it would be in a competitive market.
False
Patent laws protect the monopoly positions of firms that developed unique innovations.
True
Predatory pricing is a practice of pricing to drive future competitors out of business and to discourage new entrants in a market.
True
Explore the relationship between pricing, markup, and the elasticity of demand in microeconomics. Understand how different levels of demand elasticity impact a firm's monopoly power and pricing strategies. Example scenarios further illustrate the concept of markup pricing.
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