On the lower part of a linear demand curve below themidpoint, the demand is________ and raising the price causes total revenue to_________.

A.

inelastic; increase

B.

inelastic; decrease

C.

elastic; increase

D.

elastic; decrease

Suppose that a perfectlycompetitiveindustry becomes a monopoly.

As aresult, consumer surplus will

, producer surplus will

, and deadweight loss will

remain unchanged

remainunchanged

decrease

decrease

increase

increase

.

Oligopolies exist because of barriers to entry. One of the most important barriers to entry is due to economies of scale. Why is thistrue?

It is more likely for an industry to be an oligopoly than competitive in the presence of economies of scale because

A.

afirm's total cost is a large fraction of total revenue when output is low.

B.

afirm's average costs do not change when it produces more output.

C.

minimum average cost occurs when firm output is a large fraction of industry output.

D.

afirm's average costs increase when it produces more output.

E.

economic profits are lower when firm output is a large fraction of industry output.