MONOPOLY 1. If a firm with market power maximizes profits by producing at the elastic point of unity on the demand curve, then a. It has no direct competitors. b. its marginal cost must be zero at the level of production that maximizes profits. C. The demand must be perfectly elastic. d. it cannot be in balance in the long term. 2. Which of the following statements is not always true for a monopoly in short-term equilibrium? a. E 1 b. TR> TVC C. MR = SMC d. P> MR 3. If a company with market power does not make profits (in equilibrium), a. the price will decrease, thus increasing total income because demand is elastic. b. price increases thus increases total income because demand is inelastic C. will exit the industry in the long term if the economic benefit is negative. d. will expand sales until it reaches the unit elastic point on demand. 4. Market power a. it is the ability to increase the price without losing all sales. b. it exists whenever the company faces a downward sloping demand curve. C. is greater the less elastic is the demand. d. the smaller, the more positive is the cross elasticity of demand. e. All of the above. 5. A monopoly is maximizing short-term profits at a point of demand where the elasticity of demand is -3. What is the Lerner index? a. 3 b. 1/3 C. 33.3 d. -3/4 6. Monopolistic competition is similar to monopoly in that both market structures have a. A small number of companies. b. Negative pending lawsuits for companies. C. long-term equilibrium economic benefit. d. Easy entry and exit. e. All of the above. 7. The main difference between perfect and monopolistic competition is that for monopolistic competition a. There is product differentiation. b. Entry is difficult. C. there are a lot of sellers. d. Consumers have perfect information regarding prices. 8. In long-term equilibrium under monopolistic competition, a. the price is equal to the long-term minimum average cost. b. the price is higher than the long-term minimum average cost. C. Businesses earn less than a normal profit. d. companies have the incentive to enter the market. e. both a and d.