ECON 001 Lecture Notes - Lecture 12: Economic Surplus, Market Power, Demand Curve
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In which of the following ways is a monopoly beneficial to an economy?
A. Monopoly profits give firms more reason to invest in the creation of new products through research and development.
B. Firms that are allowed monopoly profits search out innovative technologies that they can bring to market.
C. With natural monopolies, costs may be lower than those that would exist in competitive markets with many producers.
D. All of the above.
Which of the following is a difference between a perfectly competitive market and a monopoly?
A. The market demand curve faced by a perfectly competitive firm is horizontal, while the market demand curve in a monopoly is downward-sloping.
B. The equilibrium price in a perfectly competitive market exceeds marginal revenue, while the equilibrium price in a monopoly equals marginal revenue.
C. The sellers in a perfectly competitive market are price-makers, while a seller in a monopoly market is a price-taker.
D. There are huge barriers to entry in a perfectly competitive market, while there are no barriers to entry in a monopoly.
In the United States in 2011, there were 104 fatalities per 100,000 workers in the logging industry. This is the second-highest rate after the fisheries industry. Although the fatality rate in this industry is so high, many workers still choose to work as loggers.
What could explain this?
A. Workers choose these high-risk jobs because they are willing to bear an occupational risk to earn a higher wage.
B. Low-risk jobs are already taken, so workers must choose their next-best alternative, which in this case is logging.
C. Workers in these industries lack human capital and must choose to work as loggers.
D. Loggers must be indifferent between low-risk and high-risk jobs.
In the case of a decrease in product prices:
A. the quantity effect always dominates the price effect.
B. the price effect always dominates the quantity effect.
C. when the price effect dominates the quantity effect, total revenue decreases.
D. when the quantity effect dominates the price effect, total revenue decreases
